Problems of Planning in Socialist Countries

Producers’ goods by definition embody the complex interrelationship of productive branches. The socialist ownership of such goods permits interbranch relations to be established by an ex ante system of balances — in precise form for the most significant goods and in a general fashion for aggregate flows. Each detailed balance exhibits availabilities and major requirements. This long-established planning practice can be described in the well-known equation, the application of which follows the work of Leontief: X i = Σ a i j X j + Σ b i j X j + Y i $${X_i} = \Sigma {a_{ij}}{X_j} + \Sigma {b_{ij}}{X_j} + {Y_i}$$ wherein X is the quantity of output, 1,2, … i, j, … m, the different products; a ij the expenditure of product i for a unit of product j; and b ij production funds from product i for a unit of j. In the balance of product i, a ij X j are the quantities which are allocated for use in material product; b ij X j the quantities of i for fixed and working capital; and Y i is the part devoted to consumption, to requirements other than for material production and to export. The national economic planning already practised for several decades is in fact an uninterrupted process of solving a system of equations, and the present search for better methods is essentially for refinements of the traditional solution. Four specific problems can be enumerated.