[OPE-L:2246] Re: Re: Re: Re: Re: Re: socialism in a single moon?

[Steve Keen <s.keen@xxxxxxxxxx>]

Kornai does treat the soft budget constraint as universal, and you're right
that Fel'dman's is a different beast. I don't know whether it derives from
Lenin; having read his original paper, I'm inclined to think it was an
engineer's valiant attempt to make sense of Marx's reproduction schema. But
it may have been influenced by Lenin.

The key problems with Fel'dman's model were:

(a) he assumed an infinite labor supply;
(b) he assumed that, while Dept II (consumer goods) needed Dept I (capital
goods) inputs, Dept I didn't need Dept II inputs.

Assumption (a) meant that, even if (b) were correct, a Dept I-focussed plan
would only lead to the eventual nirvana of limitless commodity goods output
if labor supply *were* infinite. Of course it is/was not, so as soon as
this constraint was hit--as soon as full employment was reached--growth
came to a standstill (except for that due to population and productivity
growth, the latter of which Feldman ignored).

If the planners reacted to the output constraint imposed by full employment
by continuing with a Dept I focussed policy, then the only way to do this
was to *take workers away* from Dept II, thus reducing consumer goods
output and therefore the real wage. In my paper (citation below), I argue
that this is a moderately accurate description of what actually happened.

Assumption (b) means that, in Sraffa's terms, consumption goods are treated
as non-basics. In fact, the actual division was effectively between heavy
industry and light industry, and heavy industry *does* need some inputs
from light industry to produce. Thus this policy would have led to resource
constraints on Dept I output, further stymying growth.

Cheers,
Steve

* "Fel'dman's structural model of economic growth: comment", in Groenewegen
& McFarlane 1995, *Socialist Thought in the post cold war era*, Journal of
Contemporary Asia Publishers, Manila; I'm willing to send a (badly
formatted!) electronic copy to anyone who's curious
At 11:04 AM 1/19/00 -0800, you wrote:
>At 01:14 PM 1/18/2000 +1100, Steve wrote:
>
>>I have argued in the past that Kornai's explanation wasn't the whole
>>story--even though the resource constrained analysis made sense, it was
>>also the case that Stalinism and specific policies, like the heavy
>>industrialisation focus, made the outcome worse. But I've seen them as
>>relatively independent forces, and now Kornai has effectively argued they
>>are causally linked: vanguard party leads to the other two.
>>
>
>	In one respect, Feldman's model (which is an elaboration of Lenin, if I
>remember correctly) may point in a different direction to Kornai. The
>former implies that Department I will always have priority in resource
>allocation (subject, of course, to the need to reproduce existing
>productive relations) and that Department I enterprises then logically
>would face soft budget constraints *but* that Department II enterprises
>would face hard budget constraints. My recollection (which I'll need to
>refresh soon for classes) is that Kornai tends to treat the soft budget
>constraint as universal in the resource constrained economy.
>
>	in solidarity,
>	   mike
>Michael A. Lebowitz
>Economics Department
>Simon Fraser University
>Burnaby, B.C., Canada V5A 1S6
>Office: Phone (604) 291-4669
>        Fax   (604) 291-5944
>Home:   Phone (604) 872-0494
>        Fax   (604) 872-0485
>Lasqueti Island: (250) 333-8810
>
>
Dr. Steve Keen
Senior Lecturer
Economics & Finance
University of Western Sydney Macarthur
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