Thursday, January 08, 2009

More on socialist economics

DBB drills down into the gory details of socialist economics:
Ok, I understand now your price setting for widgets, but what about the ad agency? Or IT work? Or anything else where what you make is a unique entity, rather than a mass produced item?
Most service industries can operate on a straight time-cost basis.

And as for materials - it seems the labor cost would not necessarily be appropriate in terms of hours - what about scarcity? If the material is gold, for instance, the labor cost first varies on the quality of the mine - it takes more labor to get gold out of an old one. But then I suppose that is covered by your formula. But what about the fact that you can use all of the hours you want, if there is no gold left in the mountains, you can't get any more. Then you are stuck with the finite amount of gold in existence, and there is no labor aside from shipping costs if you want to buy it. How, then, is the price set if you can't use labor hours to set it? Labor hours to move a lead brick are probably identical to the hours to move a gold brick, and yet you really can't price the two the same, can you?

Gold is not really a good example, since its use-value is limited; useful only in electronics and jewelry. And the issue is not paying for transportation per se.

Under socialist economics decisions about allocating scarce resources are generally made politically, not economically. I'll talk about specific political mechanisms in another series, but the fundamental premise of socialist economics is that by and large people get together like grown-ups and make social decisions about how to allocate scarce, finite resources.

Under capitalism, economic decisions about how to allocate scarce resources optimize profit, the ability to exploit surplus labor. The profit optimization is only indirectly related to maximizing use-value; near equilibrium (or under adverse disequilibria, such as depressions) the profit motive doesn't optimize use-value at all. Only socialized, political allocation of resources has a chance of systematically optimizing use-value, even near equilibrium.

DBB has more questions.
I understand better the notion of how prices can be calculated, but I still wonder how you can come to the ultimate number. Is it the average of all shoemakers or just some ideal shoemaker?
I assume we're still talking about the extended economy; in the extended economy there is no "ultimate" number. Each individual producer's price is capped by his own actual labor time (or the actual labor time of the group). We can also use more sophisticated price-setting mechanisms, such as marginal cost, to provide temporary, limited incentives for efficiency.

An endeavor can be part of the subsistence (or fully socialized) economy only where the socially necessary labor time, a statistical abstraction, can be calculated. There are a number of statistical tricks, but basically it's going to be something near the mean of all individual producers.

I mean, what if basically every shoemaker takes five hours to make a shoe, but there's some mutant shoemaker out there that actually can make one in an hour that is of the same quality. So it ends up that the price is set to a maximum of five hours (is each hour a "dollar"?) for a shoe.

Now this mutant shoemaker can, in secret, spend five hours making five shoes and then lie and tell the government inspector that he really took him 25 hours to make those shoes. Now he spent five hours of his own labor and he, after selling his shoes, has 25 hours of labor he can spend on other items. So in essence he just got to charge five times the labor he expended on a shoe. Is that ok in the system? Or is there somehow that could be stopped?

This is indeed the central "problem" of a labor-time-based extended economy. But how much of a problem is it really? Our mutant shoemaker has to at least pretend to work the extra hours: We can still have auditors and various political/legal checks to ensure basic factual honesty.

If everyone is "slacking", then first of all it's at least fair. But even a few non-slackers will tend to have a positive feedback effect, since their products will be cheaper than their competitors: the biggest slackers (with the highest prices) will be the first to go out of business.

There will always be a few people slacking. Not optimal, but limited by definition.

Also, I wonder generally about wealth - even with a tight communist system, some people could save up their currency of hours, invest it, earn interest on it, while others could blow it all on WWF Pay Per View or whatever. So while no one would be dirt poor, in that everyone would have all of the necessities in life, you could still have rich or even filthy rich people, if not within one generation, within several, as those who save pass on their wealth through inheritance and so on. Would that present a problem?

You're getting a little ahead of yourself; we're talking about early-stage socialism here, not late-stage communism. So forgive me if I'm a little vague.

Generally speaking, saving is considered hoarding under communism; savings are kept not individually, but as a society, with political controls. Interest is one of the three great evils of capitalism (along with rent and profit), and is likely to be eliminated even in early- or mid-stage socialism. And inheritance is right out.

More importantly, early-stage communism rests on having conditions of substantial abundance and surplus, precisely those conditions which undermine the scarcity mechanics of capitalism and which early-stage socialism can create more effectively. At a certain point, hoarding material wealth will become as ridiculous as hoarding air.

2 comments:

  1. There's so much here, it will probably take several comments to respond to it, but might as well start somewhere.

    First, looking at it again (I've read it a few times) I wonder, how is being efficient "slacking"? I mean, if one person makes a shoe in an hour and another person takes five hours, it just seems odd to me to call the first person a slacker. Both did the same amount of work. One just is more efficient.

    I also wonder how you handle private property if there is no inheritence - how do you stop that? In this country, the majority of the wealth for the non-rich is in a person's home. But not all homes are alike. Some people have nice big houses, some people live in crappy trailers. If wealth is mostly in your home and you can't pass it on when you die, do you throw kids out of their parents' homes when their parents die? Can kids in general not live in the same home lived in by their parents? If they can, isn't that inheritence?

    The other thing I wonder is, how big are these committees to allocate resources? Practically speaking, once you have a certain number of people, you can't all get together and decide things. Either you break into smaller groups or you have representatives, but once you have reps, then individuals give up power to them, and isn't that what you want to avoid?

    What do you do if you disagree with the committee's choices? What if the committee plays favorites (and it seems like some will)?

    And my last question for now is, isn't this expecting an awful lot? At least 30% of the people on your committee will be the same people who think Palin is the second coming - the RWA's - unless you have extermination camps for RWAs, what do you do about them?

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  2. First, looking at it again (I've read it a few times) I wonder, how is being efficient "slacking"?

    Doing something in less time is not slacking. Claiming more hours than is actually true is slacking.

    The idea under socialism is that the community — not the producer — should benefit as the socially necessary labor time to produce a commodity decreases: economic efficiency should be socialized, not privatized.

    I also wonder how you handle private property if there is no inheritence - how do you stop that?

    Inheritance taxes and direct expropriation of the estate at death.

    If wealth is mostly in your home and you can't pass it on when you die, do you throw kids out of their parents' homes when their parents die?

    Under socialism, even in the early stages, most people would not own their homes; they would, rather, more-or-less rent their homes from the government. The difference between socialist rent and capitalist rent is that a) surplus value is taken from the renter only under political control (and only to keep housing in line with population) and b) renters would have more political rights.

    See my post on socialized housing for more detail.

    The other thing I wonder is, how big are these committees to allocate resources? Practically speaking, once you have a certain number of people, you can't all get together and decide things. Either you break into smaller groups or you have representatives, but once you have reps, then individuals give up power to them, and isn't that what you want to avoid?

    I'll go into this aspect in more detail when I talk about the political aspect of socialism.

    One important feature of the Paris Commune was that representatives were subject to immediate arbitrary recall.

    And my last question for now is, isn't this expecting an awful lot? At least 30% of the people on your committee will be the same people who think Palin is the second coming - the RWA's - unless you have extermination camps for RWAs, what do you do about them?

    No extermination camps. The best we can do is try to get the economic side (and some broader aspects of the social and psychological sides) of the dialectic on a better track and let social evolution work itself out over time.

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