Re: Participatory Planning <01H9J0RCNKIQ8WX7WX@csdvax.csd.unsw.EDU.AU>

[wpc@xxxxxxxxxxxxxxx 3 Mar 94 11:54 GMT]

Steve Keen raises a good point about innovation.

We regard one of the key failures of the Soviet planning system to
have been its lack of any objective system of cost accounting. Prices
were set in an adminstratively arbitrary way which made it effectively
impossible for local units of production to innovate in a cost cutting
fashion. You can only have directed innovation if there is a clear
metric that you try to maximise or minimise.

Our argument, following Marx, is that minimisation of labour content
is the best such metric. It is superior to minimising monetary costs
since the latter are subject to distortions arising from the wage level.
If wages are low, it appears to be socially beneficial to use a lot
of direct labour and little machinery. The effects of this in
capitalist production are obvious, but they also applied in the USSR.
There, the bulk of the state budget arose from the profits of state
enterprises. Since this state budget covered the costs of subsidising
many consumer goods like fuel and bread, the wage in the USSR was
less than the necessary labour time. Given that the capitalist
cost calculus is already a disincentive to innovation since it only
includes perhaps 50 to 60% of the labour costs of production in
advanced countries ( and far less in Indonesia or Thailand etc),
the Soviet monetary calculus was even more of a disincentive to innovate
than that under capitalism.

This gave rise to the notorious tendancy of the factory
managers to hoard labour whether they needed it or not, and
generally held back labour saving innovations.

On the other hand Keen is probably mistaken in expecting any
cost minimising calculus to be environmentally friendly. All such
calculi are a reflection of human social relationships onto the
domain of things. The environment as a collection of things only
enters into such calculi insofar as it is property, and not
on its own right. It would be a very bold claim to make to say that
on a world scale, market economies have been more environment friendly
than socialist ones at equivalent stages of development.