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Wednesday, December 19, 2012

Collectivist Economic Planning by F. A. HAYEK PSEUDO-COMPETITION


In these circumstances it is easy to understand that Dr. Dobb’s radical solution has not had many followers and that many of the younger socialists seek for a solution in quite the opposite direction. While Dr. Dobb wants to suppress the remnants of freedom or competition which are still assumed in the traditional socialist schemes, much of the more recent discussion aims at a complete reintroduction of competition. In Germany such proposals have actually been published and discussed. But in this country thought on these lines is still in a very embryonic stage. Mr. Dickinson’s suggestions are a slight step in this direction. But it is known that some of the younger economists, who have given thought to these problems, have gone much farther and are prepared to go the whole hog and to restore competition completely, at least so far as in their view this is compatible with the State retaining the ownership of all the material means of production. Although it is not yet possible to refer to published work on these lines, what one has learnt about them in conversations and discussions is probably sufficient to make worth while some examination of their content.
In many respects these plans are very interesting. The common fundamental idea is that there should be markets and competition between independent entrepreneurs or managers of individual firms, and that in consequence there should be money prices, as in the present society, for all goods, intermediate or finished, but that these entrepreneurs should not be owners of the means of production used by them but salaried officials of the State, acting under State instructions and producing, not for profit, but so as to be able to sell at prices which will just cover costs.
It is idle to ask whether such a scheme still falls under what is usually considered as socialism. On the whole, it seems it should be included under that heading. More serious is the question whether it still deserves the designation of planning. It certainly does not involve much more planning than the construction of a rational legal framework for capitalism. If it could be realized in a pure form in which the direction of economic activity would be wholly left to competition, the planning would also be confined to the provision of a permanent framework within which concrete action would be left to individual initiative. And the kind of planning or central organization of production which is supposed to lead to organization of human activity more rational than “chaotic” competition would be completely absent. But how far this would be really true would depend of course on the extent to which competition was reintroduced—that is to say, on the crucial question which is here crucial in every respect, namely of what is to be the independent unit, the element which buys and sells on the markets. At first sight there seem to be two main types of such systems. We may assume either that there will be competition between industries only, and that each industry is represented as it were by one enterprise, or that within each industry there are many independent firms which compete with each other. It is only in this latter form that this proposal really evades most of the objections to central planning as such and raises problems of its own. These problems are of an extremely interesting nature. In their pure form they raise the question of the rationale of private property in its most general and fundamental aspect. The question, then, is not whether all problems of production and distribution can be rationally decided by one central authority but whether decisions and responsibility can be successfully left to competing individuals who are not owners or are otherwise directly interested in the means of production under their charge. Is there any decisive reason why the responsibility for the use made of any part of the existing productive equipment should always be coupled with a personal interest in the profits or losses realized on them, or would it really be only a question whether the individual managers, who deputize for the community in the exercise of its property rights under the scheme in question, served the common ends loyally and to the best of their capacity?

Collectivist Economic Planning

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