----- Original Message ---- From: andie nachgeborenen <andie_nachgeborenen at yahoo.com>
Three problems seem to have faced central planners in this area in this are -- here I rely on the analyses of former or then current central planners and analysts in the FSU and the ex-block, like Kornai, Brus, Lange himself, the
[WS:] This precisely the problem of this kind of analysis and the conclusions built on it - they use wrong units of analysis (states instead of smaller institutional units) and end up comparing apples and oranges. A better way would be to compare instittutional units of the same or similar kinds, e.g. firms to firms, governments to governments.
On the government-to government level of comparison, two observations are in order. In both, centrally planned and market countries, governments played similar roles as major engines of innovation, and both were pretty good in that role. Sputnik is a prime example. So we need to analytically separate the government effect in both types of countries to be able to discern the difference, if any, in the propensity to innovate between market and centrally planned systems.
The second distinction that need to be made is that between actual invention and dissemination of that invention. The argument put forth by economic historians like Gerschenkron is that centrally planned economies were extremely good at innovation dissemination - in fact central planning itself was the adaptation of organziational inventions made elsewhere (be it GErman cartels, or Fordist "scientific management.") And it makes intuitive sense, a centrally controlled system is far more conducive for innovation dissemination than a looselu coupled market system. This is at least what transaction cost economists argue.
Only after making those distinctions we can concentrate on comparing propensity toward innovation among firms in the planned vs. market environments. I cannot cite any empirical comparisons of that kind of the to of my head, but I have read arguments that management of firms under central planning had to show high degree of innovativeness to be able to overcome numerous snags that existed in their instituional environment. In any case, this is anecdotal.
In sum, I would refrain from making sweeping generalizations about "market" and "centrally planned" countries becaouse they confound very different realities under the convenient buut misleading labels.
An one more comment - innovation is not necessarily what wins competition or for that matter wars. The American Civil war is a good example. The South's generals far more innvative as far as tactict is concerned than their Northern counterparts (who tended to be dull bureaucrats.) But the despite their brilliance they lost the war, succumbing to attrition by materially superior North. So the outcome of a conflict is not necessarily a good indicator of how brilliant and innovative any particular side was.
Wojtek