Right, but it only worked as far as it did and my point is that I believe it hit a financial barrier.
> Second your discussion of risk sounds like a talking
> point cooked up by some right wing think tank - it is
> really a fetishization of risk. A concepr of risk is
> mainly that of probablity it is a chance of success or
> loss of a particular outcome vis a vis many possible
> outcomes. That concept makes sense only if we assume
> that the goal is to confine certain benefits to a
> narrowly defined group. That is to say, an individual
> capitalist takes a 'risk' because he faces a chance of
> passing his resources to someone else. However, rom
> th epopulation's point of view, such concept of risk
> is virtually meaningless because the resources will
> stay within population whether the capitalist owns
> them or not, and the chance of these resources
> disappearing altogether is rather slim.
Right, this is the Marxist concept, something of the Keynesian concept. And your analysis sounds to me very much like the capitalist Walter Wriston who famously said that a nation would "always own more than it owes". But this was clearly wrong, as history has proved. The idea that a population cannot face economic risk is just not true. The fortunes of nations have risen and fallen dramatically when economic systems have changed. To suggest there is no societal economic risk is almost to suggest that there can't be economic crises. Wriston (and his bank) found out that you cannot be safe from risk just because you are lending to a whole nation.
This is, btw,
> the principle on which the insruance industry
> operates, they turn individual risk i.e. a chance of
> loss into the certainty of a collective gain i.e. the
> insurance company making a surplus. Now imagine that
> this company is collectively owned by the entire
> country, and you have the rough idea how a socialist
> state deals with the concept of risk and that
> Keynesian "assuming risk away" was correct - becaus
> that notion becomes meaningless at the level of
> population (as opposed to individual).
Four words: Long Term Capital Management. They had the same basic idea. Keep spreading (and expanding) your risk across many markets and you can't lose. That didn't go well.
> I think that the concpet of risk that you describe is
> really a justification of capitalist collusion and
> graft to create an impression that they add value.
> This is of course, not to say that finance is all but
> useless speculation. In fact, money play an important
> role as a "signal" i.e. prices indiciating which
> activities and products are more desirbale for the
> system as a whole. For example, you can use price
> signals to change people's behavior to be less
> wasteful by making them pay what they use and thus
> save the environment. But that does not have to do
> anything with th ecapitalist risking lose his profits.
There is a huge difference between the capitalist class assuming risk and individual capitalists assuming risk. Capitalists may have "house odds" as a class but individual capitalists can certainly lose their shirts. So, the capitalist class finds ways of increasing liquidity so individual capitalists can limit their risk. Otherwise capitalists as a class become too risk-averse and restrict the flow of capital to the entire economy, in which case the entire economy loses its shirt. But when they risk more capital there is more money to finance production and the economy grows. More capitalist money buys more cooperation and trust among workers and more economic activity.
> That is the way money was used in the centrally
> planned economy - price was menat to reflect or signal
> the social value of products. Thus necessities were
> priced low while luxuries were priced much higher than
> their actual production cost, because consumption of
> luxuries was considered "detrimental" to the national
> goal of maximizing investment. It makes perfect sense
> - if you want to buy a new house, you do not blow your
> money on frills.
Right, except the Soviet Union claearly risked far too much money on the frills of military expansion and too little on building houses. And they did so not only there were no price signals from which to divine economic direction, but because their underlying economic philosophy denied the importance of price signals, just as you are doing now. At first, they liberated huge amounts of capital. But they had inadequate mechanisms to make sure that capital was not wasted. The more they tried to push money into the system, the more they struggled to artificially limit prices to control inflation. Eventually the wheels started coming off.
> You of course realize that with such pricing the cost,
> but not risk, is being socialized becaouse benefits
> are socialized as well. E.g. cost of public transit
> or health care is socialized because society as a
> whole benefits from it in the form of less pollution,
> greater investment and thus faster development, or
> prevention of epidemics. The element of risk appears
> only at the individual level i.e. I must pay the cost
> of universal health insurance but if I am not exposed
> to the risk of catching a disease, then I risk of
> losing that money.
The Seattle Monorail was approved by the voters. It was then abandoned because it would have cost 11 billion dollars all-in and people realized the cost was too high. Under the Soviet system there would have been no price to signal that the money was being wasted. If a health care system doesn't invest in what people actually need then the whole nation can get a disease - like avian flu, for example.
> As to the arguments that money is slavery, x-USSR lost
> because it was besieged by enemies - I'm pretty much
> with you, I think it is mostly hot air, robin-hoodism
> or utopian socialism if you will, and thus it is not
> the proper framework for discussion marxism or
> central planning. In fact Marx trashed utopianism
> with vengeance.
Right except that he conceived an economy where there was no risk of labor being wasted. Labor created its own value, by definition, and this is clearly not so. Suppose we all decided to go back to subsistence farming. The economy would be destroyed. People have clearly have the ability to make wrong decisions about production. So how do they make right ones? By gathering objective data to judge the benefits - and - by considering the risks and pricing them in. The money system provides a simultaneous means of transmitting data and pricing in risk. The problem, I think, is not money itself but who has it.
boddi