The Socialist Theory

This chapter provides a thorough analysis of Oskar Lange’s socialist theory, tracing its development across three key works: “The Way to the Socialist Planned Economy” (1934), “On the Economic Theory of Socialism” (1936–1937) and “The Economic Operation of a Socialist Society” (1942, published posthumously in 1989). The 1934 model advocates for a rapid transition to socialism through expropriation, centralised banking and self-managed industrial trusts. The model emphasises automatic rules to prevent bureaucratic distortions while accommodating small private producers. In contrast, Lange’s 1936 work directly engages with the socialist calculation debate, using Walrasian equilibrium theory to counter Mises’ critique. In this work, Lange introduces decentralised market mechanisms within a planned economy, arguing that socialism can achieve optimal resource allocation while preserving consumer choice and labour mobility. The 1942 seminar transcript reveals continuities with earlier models, particularly in its rejection of paternalism and its defence of markets as tools for economic democracy that predate capitalism. Despite claims that Lange abandoned his earlier socialist vision, textual evidence—including his reaffirmations of the 1936 model in 1944 and 1945—suggests a persistent commitment to democratic socialism as the optimal framework for achieving universal economic objectives: rational allocation, full employment and welfare maximisation.