Capital Management under Profit-Oriented Market Socialism: An Explicit Function Approach

Abstract

Despite the dramatic collapse of Soviet Communism, predictions of the death of may be premature. The system of Soviet Communism comprised at least five important characteristics: (1) socialism (public ownership of the preponderance of the capital stock); (2) central planning (extensive power over and tight control of the economy by a single bureaucratic agency); (3) political oligarchy (consolidation of power within an authoritarian Communist Party apparatus); (4) strict egalitarianism (implying limited wage and salary differentials, and very high job security among the workforce); (5) international activism (pursuit of worldwide socialist revolution by all means including force). The decline and fall of Soviet Communism might well have been the consequence of the latter four characteristics; socialism in and of itself, in the strict sense of public ownership of capital, might not have been a significant contributor to Soviet weakness. Ever since the negative characteristics of Soviet Communism first began emerging unmistakeably in the 1930s, socialist sympathizers in the West have argued that there are democratic market socialist alternatives to Soviet Communism which would effectively achieve the traditional socialist objective of economic justice without threatening either efficiency or democracy. Oskar Lange's 1936 essay On the Economic Theory of Socialism [15] was a major milestone in the development of the economic component of democratic market socialism. What has since become a consensus verdict on Lange's marginal cost pricing proposal in the Western economics profession was first reached by Abram Bergson in his influential 1948 essay on Socialist Economics [2]: interesting in theory, but unpromising in practice.1 Despite this verdict, comparative systems textbooks almost invariably describe and discuss the Langian market socialist proposal.2 Moreover, it is clear that Langian market socialism is not the only market socialist possibility, and that there may be other possibilities which are more promising. The two possibilities on which the more recent literature has mainly focused are cooperative market socialism (i.e., labor