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Premises for Communist Economics:  Contrasted with premises of Neoclassical economics

Henry Flynt                                                                             
2005

© Henry A. Flynt, Jr.

            [Originally “Axioms for Socialist Economics,” February 1976.]

            I drafted this essay in 1976, and at that time I did not define the aim of the essay very well.  It was a study in foundations, but not in axiomatics in a Hilbertian or Gödelian sense.  Neoclassical economics had been axiomatized by Debreu so that the existence of a Neoclassical equilibrium (actually, a saddle-point) could be proved.  It was a topic in mathematical economics which the general economics student did not see — nor was the student encouraged to ponder its social-psychological meaning.  

            I wanted to unfold the most sophisticated formulations of bourgeois economics in words, so that the social-psychological meaning would be nakedly exposed.  My formulations are a critique — as regards the sweeping candor I gave them.  I omitted provisions whose role was to smooth functions so as to make a quantitative solution possible.

            I then proposed contrasting premises for a communist economy.  This section of the essay was original.  Logically, I suppose it was a pre-axiomization.  Key assumptions were stated qualitatively.  There was no assurance that they accounted for the whole subject-matter.  There was no quantitative problem-solving.  I deliberately left the technical level of the society and exact rights and duties in social management undetermined.  For the balance of the commentary on the communist premises, see the later section of the essay.

            It was an imperfect study, but that doesn’t embarrass me.  The published attempts to make socialism economically credible had much in common with Neoclassical economics or were even a special case of the latter.  My supporting paper, “Marx’s Economic Axioms:  Their Compatibility with Bourgeois Economy,” gives further clues on this matter.  In bourgeois civilization, the formulas for allocation derive from selfishness and greed, distilled into such watchwords as scarcity, thrift, maximization, (avoidance of) relative waste.  Then factual interdependence of econonomic actors, indivisibility of products, and so forth are unwelcome and have to be battled.

            The point of communism would be to break the grip of the foregoing watchwords.  It would have premises of resource allocation differing foundationally from those of bourgeois economics — which could then be the premises of scheduling calculations.  The 1976 study made a beginning on a problem which my peers did not see.  Its provisional character would not have mattered if readers had independently seen the intellectual crisis of communism which I saw — If they had realized that intellectual foundations unique to a communist economy had never been announced.

                                                            •            •            •

Premises of Neoclassical economics

            According to Neoclassical economics, the most basic layer of axioms of Neoclassical economics concerns purely physical realities, and does not depend on the existence of prices and markets.^[1]  it is completely non-capitalistic.^[2]  It applies to all possible social systems.^[3]  it is, indeed, the only set of assumptions, about human nature in relation to economic behavior, which is logically possible.^[4]

            In what follows, I will state a number of Neoclassical premises which purport to deal with purely physical realities.  My formulation is itself a critique, as it includes premises which economists make implicitly but do not posit as axioms.  I emphasize the social-psychological content of the assumptions, and omit premises which function largely as mathematical simplifications.  Another reason why my formulations may not correspond point-by-point to existing axiomizations is that there can be different ways of analyzing the total axiomatic content into separate statements.  Finally, the axiomizations of Neoclassical economics have been made more and more sophisticated, logically and mathematically, in an attempt to obscure the capitalist origins of the theory.^[5]  Nevertheless, as long as the purpose of the theory is to prove the optimality of unrestrained private enterprise,^[6] the assumptions will continue to have the same social-psychological import.

            Indeed, the more sophisticated axiomizations are more capitalistic than the earlier ones in that they attempt to bring wider and wider aspects of existence within the scope of a rationale originally conceived for objects of commerce;^[7] and in that they are willing to recognize the possibilities of starvation or non-survival implicit in a private wealth economy.^[8]

            As social science has come to be conceived, economics concerns production/consumption; thus physical economic reality manifests as the processing and transport of use-values.  The investigation by Neoclassical economics of the existence of an efficient equilibrium, as it is called, does not ponder the political, legal, and coercive arrangements which make capitalism possible.  The Neoclassical model presupposes the law of contract, citizenship and citizens’ economic discretion, enforcement of ownership by courts and police:  all without dwelling on these topics.  In this revision, I indicate the legal-political aspect by italicized bracketed comments.

            In the Neoclassical model, if the stock of consumer goods will supply the population for no more than a year or two, and production is labor-intensive, then large numbers of people must agree to work.  Workers are motivated to work because they have no wealth in the colloquial sense; unless they earn wages, they cannot provision themselves, and they starve.  (Some of this, at least, is delicately inlaid in the Neoclassical model.)  So large numbers of people are needed to have little or no wealth.

            It is important to be clear on how work is motivated in the model (even though particular cases of solutions are not my topic here). 

            1.  All conceivable “goods” or desirable states or entities are within the scope of economic calculation.  All conceivable “desirables” are capable of individual possession and transfer between individuals.  [Private property and trading.]

            2.  Each individual’s utility, satisfaction, or happiness can be represented by a number which depends on the quantities of “desirables” which he or she appropriates.  In other words, there exists a mathematical function giving the order of his or her preferences among alternate assortments of “desirables.”

            a.  The individual’s tastes (preferences) are absolutely autonomous.  (Atomistic separation.)

            b.  All conceivable desirables can be ranked (by preference) — a denial of their qualitative individuality.  Further, the individual’s preference map is infinitely detailed and arithmetically determinate.

            c.  One individual’s happiness is independent of the happiness of all other individuals.  (Atomistic separation.)

            d.  The individual has a limitless desire for each desirable.

            e.  Individual utility can be kept constant as one desirable is substituted for another — again a denial of the qualitative individuality of desirables.

            3.  The supply of desirables is limited:  society has a fixed endowment of desirables.  Or in other words, attainable satisfaction is not open-ended.  The endowment is distributed entirely among private owners:  each individual has a wealth endowment (which may be zero).  [Private property requires a juridical system.]

            4.  Behaviorally, the individual is a utility maximizer.  Utility maximization is constrained by the individual’s wealth; and barter is legal.  Thus, the individual augments his or her utility by surrendering a desirable to someone else in order to get a desirable in return.  [Again, trading and the juridical system.  Individual discretion, a legal right.]

            5.  Production is defined not in terms of goods or processes, but in terms of privately owned institutions called business firms.  [Legal relation of a firm to its owner(s).]  A mathematical function specifies the firm’s possibilities of transforming inputs into output.

            a.  The firm’s activity does not directly affect consumer happiness or the activity of other firms.  (Atomistic separation.)

            b.  It is physically possible for firms to waste inputs, that is, to use absolutely more input than necessary to produce a given output.  (Absolute waste is evident to inspection on the spot.)

            6.  Firms produce at full capacity, employing resources fully.  Here again we have the assumption of a fixed total of “attainable desirables.”  It follows that one firm can obtain additional input to increase production only by denying that input to other firms.

            7.  The firm’s activity yields profit (loss) — a single number depending on the complete ensemble of trading ratios (prices) for its definition.  All profit shares, like desirables, are privately owned, and contribute to the private wealths which constrain utility maximization.  [Again private property and the juridical system.]  So firms maximize profits to enrich themselves (their owners); they are thereby thrown in competition with each other.  Behaviorally, each firm will seek to produce without absolute waste because that is a precondition for profit-maximization.^[9]

[2005.  Premises (5)-(7) do not draw a key inference:  that the system makes relative waste definable.  Relative waste is not evident on the spot; it is defined only by the way the system meshes.  In Neoclassical economics, avoidance of relative waste is an imperative.]

                                                                        °

            Such are the assumptions which, according to Neoclassical economists, are completely non-capitalistic and constitute the only logically possible account of human nature in relation to economic behavior.

            A few comments are in order.  These assumptions present a picture of humans as atomistically separate, absolutely antagonistic, and absolutely greedy.  The relation of happiness to human potentialities is pictured as the functional relation of a single number to appropriations from a fixed total of objects of commerce.  Admittedly, this picture does correspond to the mentality fostered by capitalist society.

            Everyone is placed atop a personal pile of possessions which may be great or miniscule.  Everyone is made the slave of the commodity or of money.  In any case, the individual is free to acquire; correspondingly, everyone else is free (as the superior competitor “steals their lunch”) to sink to the bottom and remain there.  In its own eyes, bourgeois economy is supremely responsive to “needs.”  It allows luxuries and it allows the private satsifaction of whimsical tastes.  It produces an abundance of goods.  The slogan “satisfaction of needs,” of itself, does not militate against bourgeois economy.

            But there are easily three catches. 

—In reality, bourgeois economies can be depressed or desolate.  Whether the society is “viable” or desolate may depend on “social measures” which obstruct the sought-for efficiencies.

—Whimsical gratification may be available only to the superior competitor who has stolen everybody else’s lunch (the plutocrat). 

—There is a side of life, of human possibility, which is not available even to the superior earner, because the mercenary imperative extinguishes it.  An “authentic quest” is not possible to anyone in bourgeois society, except a person who drops out and agrees to be called a failure.

            Once these axioms are marshalled, if one can read high-level abstractions closely and understand how they filter down to observable situations, the shape of contemporary Western society becomes predictable.

                                                            •            •            •

Proposed premises of communist economics

            I now propose premises for a communist theory of resource allocation.  ‘communist’, for example, means non-mercenary and collectivist — so that individuals are provisioned according to their needs, and so that authentic quests are enabled.

            Communism inherits an existing economy and has to rebuild the ship while at sea.  All the same, the premises to follow do not define a “transition,” but an attained communism.  (The Neoclassical premises, too, imagined a pure or unmixed case.)

            The prospect of communism poses political issues which are a necessary context for our model, but are not a part of the production/consumption of use values as such.  Communism would demand a profoundly new political relationship between society at large and some executive which has their consent.  I don’t see how a sophisticated civilization, with the knowledge to exterminate the human race, could fail to have executive institutions with a systemic purview; and in turn, that implies a juridical system.  So there is a social executive with a systemic purview, to which a fraction of the society belongs, which is institutionally under review by the society at large.  (“Democracy.”)

            This implies a roster of rights and duties which have not yet been envisaged.  The society-wide executive co-implies a state and a juridical system which enforce the legitimate (i.e. collective) property concept. 

            The notion of Marx and Lenin of the disappearance of the state at the end of history was based, I assume, on some notion that “socialism” would regress to a rudimentary society, or be a federation of employee-owned factories (acting in their separate interests).  In this connection, Marxism was a syndicalist fraud.

            An economy which is a productive pyramid resting on a base of menial labor is an obstruction to communism.  There are two reasons why menial labor is a hindrance.

i. As Bukharin and Rakovsky brilliantly observed (in writings which are nearly suppressed), menial workers cannot be a sovereign class.  Members of the society at large are not wanted to be less smart or shrewd than members of the social executive.

ii. The promise of communism is to make necessary labor less of a burden and to afford more discretionary time.

A context of shifting technological possibility is assumed, allowing production to be restructured away from menial labor.  The phrase ‘working class’ is not apposite:  because the social obligation is universal, and because the system evolves away from a menial base.  (The Marxist notion that it’s going to be the working class was a syndicalist fraud.)

            We arrive at the conclusion that education is a benefit which the child or person is required to consume.

—Communist use-values often straddle the benefit/obligation boundary.  So the very notion of a consumer good as a use-value to satisfy a whim starts to dissolve.

            How will specific tasks required by production techniques find people to perform them?  That has everything to do with the social executive and rights and duties of members of society in relation to it — because a social obligation concept comes into play here.

            At any given time, a productive technology has been implemented — and there is a wider knowledge capable of being implemented.  Available technological knowledge denominates materials, plant and equipment, and activities as:  natural resources, throughputs, stocks, labor.  A context of shifting technological possibility is assumed:  allowing the moderation of absolute scarcity.

—The notion of scarcity starts to dissolve; it has to be rethought.

As for waste, absolute waste is definable in all social systems and the injunction to avoid absolute waste is in force.  

            Communism will solve major allocation problems by explicit central calculations.  The programming would not assume a maximand, would not subject the system to a maximand.  There is no injunction to avoid relative waste; that injunction is superseded by the role of planners as referees.  In this persepctive, technical advances express extravagance, not thrift.  [There are profound philosophical questions here which we cannot treat at this time.]  Consumer production in the core economy is not individually commanded.  Programming would assign collective interests to consumers; it would allow for cross-effects in production processes.^[10]

            It would be out of the question to imagine that one giant computer processed all economic information and assigned everyone their tasks.  The fantasy of central planning in which a central computer at the apex issues marching orders to almost everybody, so that most people become peons of the central computer, is absurd.  For there to be a thin layer of order-givers at the top and everyone below them to be order-takers would be intolerable.

            The central calculations have to exchange with local modules which accommodate initiative and community “scheduling.”  In the first draft of this manuscript, all this was hidden under (6); now some of it is separated as (7).

            For better or for worse, a viable communism would be extremely counter-intuitive (interdependent and technical) by today’s standards.  Behaviorally, communism is a satisficing system which permits and thrives on extravagance.  [That is a way of interpreting biological life.]  Such a behavioral perspective has been eradicated in bourgeois consciousness.  As for the procurement and provisioning of labor, the only collectivist experiences we have had concern citizens’ public obligations, state enterprises (post office and schools), the government services menu.  Little weight can be given to these examples as precedents.

            1.  For each individual, it is possible to determine an assortment of qualitatively specific benefits (including leisure) which is acceptable to the individual and to his or her peers:  in that it yields physiological health and other constituents of individual satisfaction.

Remark.  The assortment may be chosen arbitrarily, so long as it is merely acceptable or adequate.  It neither maximizes nor minimizes.   The English idiom which most nearly denotes an acceptable assortment of economic benefits is the awkward phrase “a living.”

            2.  Behaviorally, individuals demand the provision of “a living” both to selves and to peers.

            Remark.  Human happiness requires the provision of “a living” as per (1) and (2); but the content of happiness is not exhausted by the provision of a living.  The further content of happiness — or of the gratification which human potentialities can yield­ — is open-ended and not necessarily subject to the rationale of routine production or useful activity.  So it is that the scope of economic activity is limited to the provision of “a living.”

            3.  Institutions of ownership, production, and distribution are constituted so as to ensure that the population will produce and appropriate “a living.”

            a.  All means of production, consumer durables, and inventories of consumer goods are collective property.  Barter is forbidden (which presumably means that it is illegal).

            b.  Consumer benefits are distributed, for example, through social consumption institutions which distribute individual benefits and also supply public goods.  Distribution is by individual allotment, optional draw-downs, etc.  (Think vaccinations, public education, public libraries, etc.  Not ration coupons.)  For the other avenue of consumption, see (7).

            4.  Economic activity is directed by executive agencies, having society-wide scope, which are accountable to the whole population through majority-rule democracy or the like.  Delegated authority, via central planning, will

            a.  Police socially hazardous technology and skills.

            b.  Prevent gross regional inequality in distribution.

            c. Make society-wide capital construction decisions: on physical considerations of availability and input requirements.

            5.  Labor service.  The availability of labor and the match of labor to resources is not separate from political rights and duties.

            a.  Education is a benefit to, and requirement on, individuals.  In turn, that implies the disciplining of children.^[11]  People are instructed to want and to demand “a living” for themselves and their peers.  Also, education is directed to producing a skilled population; a population able to review what administrators do.  [The details of education are not addressed here.]

            b.  Everyone has to choose a role which gives back to society—a role accredited by the social executive.

            c.  There is an ongoing restructuring of production to reduce menial labor:  via automation, and via change in the way work is packaged.  This restructuring will be well-advanced at the inception of communism.

            6.  Production possibility and scheduling.  A combination of productive technologies and natural-resource availabilities can be found which renders the provision of “a living” technically feasible.

            a.  Production is defined in terms of processes, stocks, “plants,” labor, etc.  Quantitative physical schedules specify the possibilities of transforming inputs into outputs.  A first step in the transition would be to model and track the economy electronically — that involves establishing hierarchies of detail.    This information is the basis of systemic scheduling calculations.

            b.  Absolute waste is physically possible; it is avoided.

            c. Choices have to be made regarding the building of stocks.  These choices are less, or more, modular.  Infrastructure decisions have to be made regarding

power plant type and location

transportation modes

repair vs. replacement

(to give illustrations familiar to us).  Such decisions are made in use-value terms, on the basis of refereed desirability, versus the project’s draw-down of resources that could be otherwise utilized.  So impact and sensitivity calculations, economy-wide, are called for.  Refereed decisions will claim resources and capacity, and will mandate the procurement of resources and the building of capacity.   

            7.  Scheduling and allocative delegation.  Competing projects, claims on resources, are sorted at two levels.  The members of society are served and participate in both avenues.

i. Central decisions made by experts on the basis of use-values.

ii. Local projects realized with discretionary supplies.

To explain:  Given a system which circulates economic products and information.  To divide it into (regionally dispersed) subsystems which originate requests, and disaggregate “bulk shipments,” for themselves:  such that the resulting circulation balances to avoid ruinous shortages or absolute waste, while meeting various system-wide aims.  Our phrase for reconciling local decisions via a signaling system will be allocative delegation.^[12] 

So:  The center has the task of receiving requests from the periphery and meshing and prioritizing them.  The meshing process arrives at the plan’s final draft either locally, or in a back-and-forth between center and periphery.

            a. Stocks are prepared for local allocation [which includes local infrastructure construction?].  Ensuing local uses become givens in the central calculations.  So:  the center has supplies which it will distribute upon request.  People can innovate products outside central production.

            b.  Groups or communities are enabled to introduce new goods, to be given away.  If a new product arises in this way, and everybody wants it, it should be added to the central menu.

                                                                        •

            These premises comprise an outline of economic activity which is specifically and uniquely noncapitalistic and communist.  Only for a highly technified society which can produce abundantly is any of this thinkable.

            The premises have a special significance if there is a future demand to implement a system of resource allocation for the non-mercenary and collectivist satisfaction of needs.  The premises point up the absurdity of any attempt to carry on production on Neoclassical premises and then divert the outcome until it yields communist results.  If one wants a perspective of economic scheduling for the non-mercenary and collectivist satisfaction of needs, then, in formalizing scheduling, communist satisfaction of needs should inform all premises.

            If capitalism should prove to be the only economic system observed in the future, it will mean that a thinkable opportunity to escape social Darwinism was not exercised.

^[1] “Another point of great importance is that the conditions for efficiency and optimal comportion are technical conditions in terms of marginal rates of transformation and substitution and do not depend on prices.”  Kelvin Lancaster, Introduction to Modern Microeconomics, Second Edition (Chicago, Rand McNally, 1974), p. 314.  Such statements about the conclusions of Neoclassical theory are also true of its axioms (if they are true at all).

^[2] “Markets and market prices there need not be, but starting from a completely non-‘capitalistic’ definition of a welfare optimum, we show that things must organize themselves or be organized as if there were a set of universal prices or exchange ratios.”  Robert Dorfman, Paul Samuelson, and Robert Solow, Linear Programming and Economic Analysis (New York, McGraw-Hill, 1958), p. 412.

^[3] “The three sets of marginal conditions developed above state the necessary conditions for welfare maximization in any type of society … .”  C.E. Ferguson, Microeconomic Theory, Revised Edition (Homewood, Irwin, 1969), p. 444.  “The optimality conditions, being simply technical requirements, contain no ideological implications.  They apply equally well to capitalism, socialism, or any other ‘ism.’”  Lancaster, op. cit., p. 315.  Further support on this point came from John Roemer, who claimed to transfer mathematical value theory directly to the description of socialism, reducing socialism to a case of universal capitalist principles.

^[4] To the uninitiated, this claim will seem grandiose.  But see Lionel Robbins, An Essay on the Nature and Significance of Economic Science, Second Edition (London, Macmillan, 1946), pp. 78-80.  Also, Ludwig Von Mises, Epistemological Problems of Economics (Princeton, Van Nostrand, 1960), especially p. 12 ff.; and Human Action (New Haven, Yale University Press, 1959).

^[5] Thus Vivian Walsh seeks to replace the theory of consumer choice in the market with a general theory of pure choice, to replace the traditional insatiability axiom with an axiom which allows partial satiation, and to replace profit maximization with output maximization.  Vivian Walsh, Introduction to Contemporary Microeconomics (New York, McGraw-Hill, 1970), pp. 80-7, 138-42, 240-1.

^[6] The sole reason for the convexity axioms is that theorems such as the existence of equilibrium in a private ownership economy cannot be proved without them.  Gerard Debreu, Theory of Value:  An Axiomatic Analysis of Economic Equilibrium, Cowles Foundation Monograph 17 (New York, John Wiley & Sons, 1959), pp. 41, 53.

^[7] Vivian Walsh examines women, Nobel prizes, and experiences (sounds, textures) as possible consumer goods.  Walsh, op. cit., pp. 83, 87, 141.  See also Human Values and Economic Policy, ed. Sidney Hook (1967).

^[8] For a concise discussion of starvation as an aspect of Neoclassical equilibrium, see Tjalling Koopmans, Three Essays on the State of Economic Science (New York, McGraw-Hill, 1957), pp. 62-3.  Debreu, op. cit., p. 52 gives a mathematical analysis of non-survival consumption.

^[9] Here is where adjustment of the firm’s purchases of inputs is implied.

^[10] It would address a problem which Neoclassical economics’ hypothecated market transactions could not solve.

^[11] The circumstance that humans undergo a transformation of perspective as they grow from children to adults is not explored here.  The social code on such matters belongs in law.