Apparently rejected by Jacobin, this was originally posted over at Krul’s Notes and Commentaries blog.

In his recent essay on Jacobin, Seth Ackerman makes a number of common arguments in favor of some form of market socialism over and against central planning as well as other designs for non-market, non-capitalist economies. The essay contains much that most socialists could agree with. He rightly cites the failure of the neoclassical argument for general equilibrium to apply in real-world situations under the devastating theoretical impact of the Cambridge capital critique and the so-called ‘theory of the second-best’, and the lack of statistical evidence proving the superior efficiency of market capitalist societies over those of the former Soviet bloc. The historical record of capitalism to achieve general efficiency, equity, and democracy is, in short, atrocious, and neoclassical economics always serves first and foremost as apologetics for this system – we probably need not go into this further.

Also understandable is Ackerman’s negative response to models of a post-capitalist economy along the lines of some form of direct democracy, such as Albert and Hahnel’s “Parecon” approach. For Albert and Hahnel, democratic councils would gather data from individuals regarding their preferences, debate these according to socialist and ecological norms, and process them into a planning system, which would regularly update its information according to the same political processes; all this in order to regulate production for human need. Ackerman is justifiably skeptical of the workability of this proposal, as it would require millions of political debates about millions of input-output processes from wildly divergent sources and for wildly divergent ends. If every aspect of the planning system would have to be truly democratic – in the sense of being up for immediate political input ‘from below’ – any system with more than a rudimentary division of labor would quickly come to a shuddering halt.

For Ackerman, this is proof of the validity of the so-called calculation problem, an old argument from liberal critics of Marxism (in particular the Austrian school of economics), alleging that it is a priori impossible for centrally planned economies of any kind to operate: only prices, the argument runs, are accurately able to convey the necessary decentralized and distributed information that makes up the relative exchange value of goods. Therefore, in any system seeking to replace prices (and by implication, profits) with some form of central management, there necessarily follows a shortage of information in the decision-making process in production and exchange, with the familiar results of shortages, gluts, famines, and failures of supply. Continue reading →