--- On Wed, 6/17/09, SA <s11131978 at gmail.com> wrote:
> Of course. But what I find striking is that in every one of
> these countries there were batteries of accomplished and
> dedicated economists and technical experts, some of whom no
> doubt remained devoted to egalitarian and democratic
> economic ideals right up to the end. These economists had
> decades of practical experience dealing with the problems
> and possibilities of planned economies. And yet one almost
> never hears of any who are willing to say - today - that
> from their experience the planned economy could work well,
> it only needed certain political and structural changes,
> here's how it could be done. Maybe there's a whole
> intellectual movement of such ex-planners that I just
> haven't heard about, but anyway I haven't heard about them.
>
[WS:] You are right on that, but yet I wonder whether this silence is a function of the absence of the voices or the shortage of proper amplification devices.
As far as critique of the planned economy is concerned, the accounts by ex-planners that I read are intellectually rather mediocre - a mixture of self-serving rants and setting old scores (we did a great job, but the system sucked) and ideologically tainted platitudes (the system sucked because it did not have free markets.)
I suppose those guys never heard of transaction cost economics (cf. Oliver Williamson) that can provide a sound theoretical grounds for a defense of central planning. The key TOC argument is that "hierarchies" (i.e. vertically and horizontally organizational structures carrying out economic exchanges) are more efficient than markets (i.e. economic exchanges among unaffiliated actors) because they offer substantial savings in transaction costs associated with market exchanges (such as market monitoring, contract negotiation and enforcement, market volatility etc.)
It does not take a long stretch of imagination to conceptualize planned economy as an extreme form of "hierarchy" in TOC. From that pov, planned economy offered potentially superior efficiency to markets in the form of elimination of transaction costs. If those transaction costs saving potential did not materialize, it was a result of a poor execution rather than a bad plan.
Indeed, there is a plenty of evidence in literature that planned economy suffered from poor execution rather than poor design. The key problem was that information vital for the functioning of the economy - the true productive capacity of the production units and monitoring of the implementation of plan objectives by these units - was distorted or not available. The accounts why that happen vary from corruption of production unit personnel to the absence of effective monitoring mechanisms.
Aside of constructing a proper counterfactual that could show whether changing these conditions made the operation of the system more efficient there is a larger question that we need to ask - what was the ultimate goal of central planning?
There is a general tendency of judging central planning by standards devised for capitalist consumerist economies - namely the volume of consumer goods. By those standards, indeed, central planning was a failure.
But I do not think those standards apply. I do not think that the ultimate goal of planned economy was to produce consumer goods. In fact, these economies consciously restricted consumption. Instead, the ultimate goal was to overcome economic backwardness and facilitate accelerated development and industrialization (cf. Gerschenkron's work on economic backwardness) - or as we would say today, limit consumption and increase investment. By these standards, central planning performed quite well - far better than free markets would have done.
Wojtek