I’ve been dabbling with the idea of communism for quite some time now, but one thing has always prevented me from being fully convinced. How do you allocate the inherently scarce resources. I strongly believe that a local person/company knows better how to allocate resources efficiently than a central government 100s km away. For example food. A central government will never be able to know the area as well as locals. How do you solve this?
Nobody has given a good answer yet (including me, mine was lazy), so let’s get into this.
-
What is “efficiency”? This is often left undefined in discussions (not always). Can we say resources are allocated efficiently or inefficiently without defining what we mean and how to measure it?
-
Let’s clear up the misconception that communism is always very pro-centralisation. A state will have to design its economy intelligently, which includes an appropriate use of decentralisation. To take your example of local government having budgetary discretion; it’s not part of communist ideology to smack that down and say “No! Every decision is made in the capital!”
- Paper: ‘Can neoclassical economics underpin the reform of centrally planned economies?*’ by Peter Murrell PDF. A classic paper from 1991, highly cited. Two relevant quotes from it –
Inefficiency from planning: “With plausible values for the elasticity of substitution, he found that the efficiency loss could be as low as 1.5 percent. Desai and Martin (1983) generalized the methodology and provided time-series estimates of efficiency losses. Their estimate of the efficiency loss for 1960 was consistent with that of Thornton, but they also found such losses rising to 10 percent by 1975. When these estimates were presented, they were interpreted as a serious indictment of central planning.”
Toda (1976, p. 263) examined statistical significance, and summarized his results with the same sense of paradox evinced in earlier quotations: “The Soviet institutional setting, where the industries are under various governmental regulations in acquiring the factors of production and where the price of finished goods and intermediate products are arbitrarily set, makes one suspect that the use of primary factors must be in disequilibrium. In large part, however, empirical results [examining the statistical significance of differences between factor price ratios and marginal rates of technical substitution] fail to verify our expectations.”
- To bang home my second bullet point a bit more, not only can socialist economies have decentralised decisions, this can mean market-based decentralised decisions. Most successful AES countries use market-based decentralised planning (Hungary, Vietnam, China, the NEP). My very short notes on a very simple system might be illustrative, but there is a lot to say about Market Socialism: https://hexbear.net/post/282048?scrollToComments=false – This is what I meant when I said “what signals does the central government use to plan?” It’s a misconception that a bureaucrat in the capital guesses what demand for fur coats will be in the provinces; they use demand as an input to the plan same as capitalism does. Even medium-sized companies in capitalism make projections of next year’s demand. So just because the inputs feed into a plan, doesn’t mean there are not decentralised inputs, like supply-demand figures.
- Capitalism tends towards centralisation in monopolies and oligopolies. This is intuitive because look around you. https://www.weforum.org/agenda/2016/05/joseph-stiglitz-are-markets-efficient-or-do-they-tend-towards-monopoly-the-verdict-is-in/
I strongly believe that a local person/company knows better how to allocate resources efficiently than a central government 100s km away.
Do you consider this an efficient allocation of resources (skilled labour)? Thousands of engineers working in competing companies to come up with a product that is practically identical? And then thousands of other support staff and marketers and more working on shilling that product against one another?
You’re looking at the question of the distribution of resources in an incredibly simple way, and not considering what taking tens of thousands of skilled workers away from these wasted projects and putting them towards progress can achieve. You’re not looking at capitalism critically and asking yourself what parts of it are inefficient and wasteful.
The USSR went from feudal backwater to #2 world power in 30 years, and then first into space. It did so because it is vastly more efficient and this kind of allocation of resources.
Have you seen capitalist resource allocation? The bar to beat isn’t very high.
local officials exist and are elected from local populations in a communist society. Unlike Amazon and other corps who ship in fresh mangement with no links to the community. This seems pretty straight forward.
Capitalism isn’t efficient at allocating resources. There’s a massive amount of waste in everything from food (insert Grapes of Wrath oranges excerpt) to overproduced clothes that are destroyed because they’re ”last season” (see Abercombie & Fitch or Burberry).
