1. In his excellent introductory textbook on socialist planning, Ellman analyses various forms of waste and inefficiencies in centrally planned economies.[1] According to Ellman, the reason for these must be sought in the inadequacies of the Marxist-Leninist tradition:

The fundamental cause of waste and inefficiencies […], in the author’s opinion, is a theoretical one, namely the inadequate nature of the theory of decision making implicit in the Marxist-Leninist theory of planning. In the USSR, there is a long tradition of publishing critical articles describing particular examples of waste and blaming them on particular bureaucrats. Experience has shown, however, that the publication of critical articles, or the replacement of one bureaucrat by another, are entirely inadequate to eliminate the problem. The difficulty lies deeper. As E.G. Liberman […] has argued:

We sometimes wrongly, without the necessary bases, blame gosplans, ministries and supply-marketing organization for annoying misunderstandings, disproportions, losses in production and the violation of the interests of consumers. When one encounters so many people making mistakes, it is necessary to look for the reasons not only in their individual qualities, but in that system, or more precisely in that “theory,” which conceives of planning as the management from the center of an all-embracing extremely detailed nomenclature of commodities.[2]

The theory of decision making implicit in the Marxist-Leninist theory of planning is inadequate because it ignores the fundamental factors of partial ignorance,[3] inadequate techniques for data processing and complexity. The limitations of Marxist-Leninist theory are different from, but parallel to, those of neoclassical theory. Marxist-Leninist theory concentrates on vertical links and instructions, while neoclassical theory concentrates on horizontal links and prices. Neither theory, by itself, is adequate as a basis for economic policy, although both theories have much to say that is of interest.[4]

By implication, the problem can be solved by revising the theory. The real causes must be sought deeper, however, since we must ask the prior question: What prevents the Soviets, for example, from revising their planning theory by introducing “partial ignorance” into the picture? It is safe to claim that the Soviet society makes them reluctant to renounce their right to govern the economy as best they can. Even the slightest crack in the self-confidence of those who make decisions may have a disastrous effect from the point of view of their capacity to sustain their position and status.

2. The real reason for partial ignorance, as no doubt many Soviet leaders know, is that the relationship between the center and periphery of the planning system is antagonistic in character. The real objectives, capabilities, and resources of the two antagonists are therefore hidden, and must remain hidden. Information is not a value-free concept, but a social phenomenon. When the particular interests of the antagonistic parties may be endangered by transparent relationships, they will do everything to misrepresent the actual situation. Dissimulation will become the order of the day.

Naturally, the stochastic, as opposed to deterministic, processes indeed play a part here, but this aspect of the problem is nevertheless of minor importance. The Soviet brand of determinism, the rigidity of the whole system in view of the obvious need for flexibility in an uncertain environment, is an expression of the underlying tension that continuously threatens to burst into the open. The fact that the social relations of production in the USSR are potentially much more transparent than in a capitalist society is obvious primarily in the widespread control of communication, where information is tacitly recognized as potentially damaging to the social fabric. Secrecy is an index of transparency.

3. Socialist planning no doubt requires an explicit treatment of uncertainty. But uncertainty can be acknowledged and taken into account only in a transparent society, where the social relations of production are devoid of mysteries and of particularistic motives that underlie them. In other words, the revision of Marxist-Leninist theory of the Soviet type requires a socialist society. And that is precisely what Ellman neglects when he tacitly assumes that he is theorizing about socialist planning. He thus unwittingly propagates a myth.

Footnotes

1. Ellman, M., Socialist Planning, Cambridge, London, New York, and Melbourne: Cambridge University Press, 1979.

2. Liberman, E.G., Ekonomicheskie methody povyshenia effektivnosti proizvodstva, 1970, p. 74 (the English translation is Economic Methods and the Effectiveness of Production, New York, 1972).

3. Ellman mentions that the term “partial ignorance” is taken from B.J. Loasby (Choice, Complexity and Ignorance, Cambridge, 1976). According to Ellman, it is preferred to “uncertainty” because of the restricted, technical, interpretation that the latter already has in economics.

4. Ellman, M., op. cit., pp. 65-66.