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Socialist Calculation and Market Socialism

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  • Jael, Paul

Abstract

This paper focuses on the debate held in the twenties and thirties of the last century between libertarian economists and socialist economists, following the denial by the first ones of the feasibility of a socialist economy. This controversy is well known to specialists and has been widely commented. It seemed to me useful to initiate non-specialists in an original way: by having the controversy speaking by itself. We review the main contributions and summarise their arguments with, initially, the bare minimum of personal comments. Walrasian general equilibrium serves as a reference for the defenders of market socialism in the controversy. But the concept of competition behind this theory is very incomplete; it is purely passive. It follows that the market socialism which emanates from it is not really a MARKET socialism. It is lacking the competition which innovates. Markets for capital goods are also lacking in theses models. Our paper then turns to a new generation of socialist models involving this real competition. We review two models proposed by Bardhan and Roemer and then exhibit a personal model. This type of model is facing a modern criticism whose central concept is the "soft budget constraint".

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  • Jael, Paul, 2015. "Socialist Calculation and Market Socialism," MPRA Paper 64255, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:64255
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    References listed on IDEAS

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    1. Pranab Bardhan & John E. Roemer, 1992. "Market Socialism: A Case for Rejuvenation," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 101-116, Summer.
    2. Maurice Dobb, 1935. "Economic Theory and Socialist Economy: A Reply," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 2(2), pages 144-151.
    3. Hayek, F. A., 2012. "Hayek on Hayek," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226321202 edited by Kresge, Stephen & Wenar, Leif, December.
    4. János Kornai, 2014. "The soft budget constraint," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(supplemen), pages 25-79, November.
    5. Andrei Shleifer & Robert W. Vishny, 1994. "The Politics of Market Socialism," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 165-176, Spring.
    6. Auerbach, Paul & Sotiropoulos, Dimitris P., 2012. "Revisiting the socialist calculation debate: the role of markets and finance in Hayek’s response to Lange’s challenge," Economics Discussion Papers 2012-6, School of Economics, Kingston University London.
    7. A. P. Lerner, 1936. "A Note on Socialist Economics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(1), pages 72-76.
    8. Pranab Bardhan & John E. Roemer, 1994. "On the Workability of Market Socialism," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 177-181, Spring.
    9. Oskar Lange, 1936. "On the Economic Theory of Socialism," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(1), pages 53-71.
    10. A. P. Lerner, 1934. "Economic Theory and Socialist Economy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 2(1), pages 51-61.
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    More about this item

    Keywords

    planning; market socialism; socialist calculation; soft budget constraint; Barone; von Mises; Hayek; Lange; Roemer;
    All these keywords.

    JEL classification:

    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General
    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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