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The Theory of Socialist Economic Administration

Henry Flynt

2009 notes on Chs. VII, VIII

unexplained one or two-digit numbers are pages in the manuscript. there are a few algebraic indexes and I distinguish them by underlining rather than by formatting them as subscripts.

Chapter VII

7, 8  Assume that a revolutionary junta, for which “socialism” was a principle, had magically gained control of an industrialized nation, and thus had a canvas on which to paint socialism.  Expropriation would be underway or would have been completed.  The draconian schemes of industrialization which “underdeveloped Communism” became known for would not be necessary.

1978 view:  In this initial phase, when there are still markets, “it is easy for an advanced capitalist society to redistribute existing capacity to eliminate poverty.”
2009 reconsideration:  Just this is in question.  The actual socialism of a Czechoslovakia turned out drab and dull and shabby, and then slid “back” to capitalism.  The historical experience presents a pessimistic prospect.
The problem is that in 1978, I wrote as if the “socialist countries” might clean their act up.  I did not envision the wholesale evaporation of Communism.

bottom page 10  I get down to brass tacks.  Some of it follows from the definition of socialism/Communism.  But the whole that I offer may have aspects that repeat the Soviet Union’s unfortunate arrangements.
expropriation of the wealthy.
federations of small nations.  (Czechoslovakia, Yugoslavia?)
12  Here the recommendations look like what the Soviet Union did. 
In a market economy, you don’t tell a factory to <produce its previous output assortment, up to capacity.>  You want to know if it is profitable to do so.
• irrational market socialism
the pencil-and-paper central planners would have to cut back production of consumer goods which were not demanded.  but such corrections would come too slowly, annually.

14  I say, an enterprise can finance expansion from profits.
and yet, an enterprise does not maximize profit.

I beleved that piecemeal automation would result in redundancy and a data-flow burden that would be inordinate.  In other words, it would be needlessly cumbersome.

Some claim to originality:  attenuated hierarchical decentralization.  this prescription allows socialism to abolish markets and menial labor via piecemeal automation.
World federation.  no foreign trade, no production of means of war.

from 25 is where I envision how a really different “system” might be possible on the platform of the present civilization.  especially 26-28
33-34  democratic choice of large-scale capital construction —??

THE MODEL

feasibility programming  [from Ch. VIII]

a. non-negativity of activity scales.
b. capacity constraints on activity scales, derived from levels of stocks of plant and equipment.
c. satisfaction of consumer needs (assumes a pre-planned menu?!)
d. on-loading of natural resources does not exceed amounts available at their sources.
e. use of natural resources in production does not exceed off-loadings of natural resources.
f. for each intermediate good or flow at each production facility, aggregate consumption must not exceed aggregate supplies.

resume with Ch. VII
economy has n goods
time-period variable is t.  t means “at the end of period t.”  t-1 is equivalent to “at the beginning of period t.”

the scale at which process j is run is Xj.  the schedule of scales at which processes are run is therefore the vector X.  We always assume X ≥ 0 and this constraint will not be repeated.  The problem is to find any X, given the constraints.

bij is the flow of the ith good in the jth activity.  the matrix B.

then the net output from running the system at level X is BX.

K^(0) is the n-vector of available capacity at the beginning of year 1.

ckj stock of producer good k required to operate activity j at unit scale.  the matrix C.  total capacity required for level X is CX.

the capacity constraint is CX ≤ K^(0)

the vector R is annually available resources.

dqj quantity of natural resource q required to operate activity j at unit scale.  the matrix D.

abstractly, the resource constraint is  DX ≤ R.

summary, the matrices:
B is consumption of intermediate goods by production
C is capacity use (machines and so forth)
D is raw material consumption

the outputs:

n-vector U of aggregate need-satisfying consumption.

n-vector of yearly capacity replacement is Z ≥ 0.  there is a relationship between Z and K^(0); the coefficients are lifetimes of the stocks.

vector of new capacity construction (with the same technology) is ∆K at time-period t

W is consumption by nonindustrial organs of government, i.e. by central administration.  (war, if this socialism is confined to a nation facing hostile nations)

SO:

the net output we want at end of period t is
∆K + Z + U + W

capital construction
capacity replacement
aggregate consumption
consumption of supplies by administration

for period t,

BX ≥ ∆K + Z + U + W

CX ≤ K^(t-1)  [the only inequality that shows a period other than t]

DX ≤ R

NEVER USED
list of target capacities is an n-vector F ≥ 0.  desired terminal stock vector.  (when a good is not a producer good, the corresponding component of F will be zero)

Chapter VIII
human servicing environment for a constant-population society?
in this context, “the worth of everything is quantifiable in money” becomes an impossible fiction.

totalistic, mechanistic rationalization of the economic aspect of life.

abolish the rationale for servility and menial work. 
abolish “necessary labor.”

no foreign trade and no military production in the model.

4 ecology
5 people consent to constant population:  steady state
6 I wanted everyone to qualify as a professional — assumption about human nature
7 I wanted education of children to become an unspecialized adult activity
there is no reason to divide productive enterprises by ownership
9 scheduling of consumer goods production not determined by moment-to-moment consumer demand.  WRONG, it can and should be done

I divided consumption between guaranteed minimum, and first-come, first-served distribution.  this model is set up to give a mandatory floor of consumption.  then unused capacity can be used to please consumers.  first-come first-served.

11  I ruled out real “retooling” because it would require labor.  standardized labor.  thus, the question I should have asked, how to incorporate “service,” negotiated assignments of standardized labor.

22 mindful extravagance.  not to seek the “optimum.”

challenge to the depreciation concept.  producer goods as privately owned machines not the right approach.  rate at which [producer] parts wear out.  if fast, then a flow.  if slow, then a capacity constraint.

rudimentary control theory mathematics

u(t) is the control inputs, e.g. applied heat.
time-dependent y(t) is the indicators of the process
time-dependent r(t) is the reference input, e.g. ideal values for y(t) [also:  the  norms]

open-loop control:
u(t) is a function of y(0), r(t), t

feedback control:
u(t) is a function of y(t), r(t), t

S, cumulative deviation from ideal activity.

Optimal control consists in the choice of u(t) to minimize S.
Hewing to a norm is minimizing?—is that a snag for me?  In the existing (bourgeois) doctrine, qualitatively variegated performance aspects ARE reducted to a single aspect to be driven to a minimum. 

[versus qualitatively specific maximization.  my anecdote of the cat on the table (in the Sixth Avenue apartment) pushing the mail off in order to lie in direct sunlight.]

very troubling feature of Ch. VIII.
I assumed passive humans, and economy run by one big computer.
I wanted total automation relative to a steady-state society, and it would be rather like a zoo.

which question to ask is all-important.  have to ask the wisest question.

I refer to Ch. VII to discuss how to build the totally automated economy, the human servicing environment.
humans input trial designs to a computer which meshes them.  the final design is not surveyable by a human and is known only to the computer.
possible economic precepts  (may be mere platitudes)
avoid absolute waste
utilize incresing returns to scale
produce a product near raw materials sources:  if it requires heavy fuel and loses weight in processing.
produce a product near the point of consumption if it gains weight in processing.

politically chosen boundaries of acceptability
[traditional economics:  extravagance is the enemy of virtuous thrift.]

note: so-called conservative approach to piecemeal automation.  assume system can be decomposed into independent facilities.  build the new alongside the old and let the old rust.

Chapter VIII ends with a qualitative discussion of values
pp. 40, 41, 43, 46, 51, 59 good material

capitalism 
selfishness and  (conflict (competition) are the only legitimate interpersonal postures.
capitalist ideology:  compulsive quantitative aggrandizement  is the purpose of life throughout.
the worth of everything can be measured in gold, dollars, Coca-Cola.
everybody else is to be used by me, otherwise they are a useless burden to me.

Communism
open-ended exploration of human possibility.
the individual resists being forced into crippling specialization.
the individual is not forced to engage in competitions whose goals he or she does not respect.