Round 2 on the comments

Socialism an “organization” rather than an “organism”?

Indeed, Hayek had things upside down.

If, as Hayek believed, it is better for humans to live in organic societies, spontaneous or unplanned, because dispersed knowledge responding to local contexts is less costly and more agile, overall superior (providing for a social arrangement that is more robust) to aggregated and generalized knowledge, then the optimal Hayekian society would be one where all knowledge would be dispersed.

In this Hayekian world, all “knowledge” would be reduced to raw, unprocessed sensorial snippets with no meta-sensorial, rational connections.  No need for rational thought, abstractions, or generalizations.  No need for anticipating outcomes.  Outcomes would just happen to us and we would respond to them after the fact.  No need for language then.  We would “communicate” that knowledge to one another via grunts, bare fangs, and claw blows.

Hayek said that building socialism was “the road to serfdom.”  In fact, not building socialism, accepting as individuals that our social life is to be buffeted by the forces of social elementality, the blind aggregate consequences of what we do or omit to do, is a road to slavery vis-a-vis the rest of nature, it’s the road to animality (with all due respect to our fellow animals).

How is your argument connected to the notion of transaction costs and the sociology of organizations?  Why don’t you mention the literature in organizational theory?

I am only partially familiar with the literature in organizational theory.  I suppose there is much in it that can be critically appropriated.  I am working my way through all that.

I have some familiarity with some of so-called new institutional economics.  I notice that it overlaps with many other strands in the literature.  The connection with external economies, incresing returns, endogenous growth, and public goods is fairly evident. I can also mention works in the economics of large teams, collective choice, contracts, incentive mechanism design, etc.  Listing and discussing all that here would make this even more difficult to read.  Most of that material is yet to be unified or synthesized.  I am trying to see the connections.  A conjecture I’m exploring is the connection (close, I believe) between the Coasian notion of “transaction costs” and Marx and Engels’ notion of “socialization of production.”  This is no accident.  Coase admitted that his idea was inspired by his reading of Maurice Dobb’s book on Soviet planned industrialization.  In turn, it is evident to me that Dobb drew the description that inspired Coase from Marx’s Capital, vol. I, chapter 14 (Marx’s contrast between the division of labor within a manufacturing facility and in society as a whole).  But I’m working on clarifying this to myself, so I should leave it at that.

Soviet planning was not as different from “capitalism” as propaganda on both sides claims. The Soviets used a lot of organizational borrowings from capitalism (cf. Gerschenkron, Economic backwardness in historical perspective).  There is also plenty of case studies.

There were similarities between Soviet and capitalist intra-firm planning.  It is not surprising that they existed.  However, in my view, they were formal.  I am not saying they were unimportant.  The difference is subtle but substantive nonetheless.  The difference lies in the direction of motion of each society.  Either we are reinforcing the status quo or we are promoting freedom, dismantling exploitation and all the garbage.  Of course, most things (e.g. most of the things we do individually) are a mixture of both.  In the case of the Soviet experience, which side predominated?  At least to the extent its original plebeian impetus endured, the Soviet experiment was a wondrous collective attempt to consciously leap ahead in human history.  We know it wound up terribly botched.  But insofar as its rebellious seed remained alive, even phenomena such as the NEP capitalism of the mid 1920s (private and state capitalism) should be viewed as significantly different (because the difference in the overall political context mattered) from capitalism in — say — today’s U.S.  Of course, there’s a reason why both of them are called capitalism.

That said, I should repeat that the formal similarities are of practical importance.  There are issues with organizations that are indeed general.

The main problem of Soviet planning was not that they tried to do too much, but internal problems with allocation of resources due mainly to factors identified by organizational sociology.

I do not have a conclusive diagnosis regarding the main factor leading to the collapse of the Soviet Union.  I am not saying that the main problem of Soviet planning was overreaching.  To the extent it can be isolated from the other factors, I believe overreaching was a real and big problem.  I believe that Nove had a point.  But I don’t have much organized material at this point to substantiate the claim that overreaching was primus inter pares, in empirical or historical terms.  The disputes on the precise role that each separable factor played in the demise of the Soviet Union has to be settled empirically and/or historically.

By the some token, I think that Hayek, in spite of his adversity towards socialism, made a valuable contribution to socialism by highlighting the issues of knowledge (or information) and incentives in the particular way he did.  Oskar Lange wrote tongue in cheek that we should build statues to Mises and Hayek to honor their contributions to the cause of socialism.  Indeed.

In any case, trying to do too much was a real and significant problem.  And it is a problem that keeps appearing.  I’m not talking about the issue that people in capitalist managerial literature call “stretch,” the regular pains that go with any growth or transition.  “Stretch” goes with the territory of dealing with the world.  I’m talking about a systematic bias to overreach.

Having some sense of when and how it is judicious to expand the scale of what you produce, manage, or own (reasonable “stretch”) without overreaching is practically important.  On this, I’m not saying anything new.  All this has been studied, even if it hasn’t yet been absorbed by socialists.

You write too much to show that technology is a public good.  That you can say in one paragraph.

Guilty as charged!



  1. from your discussion of Hayek’s vision of society. it appears that you’re implying that our current society isn’t planned. would you dispute that claim or accept it?

  2. Right. For the most part, we live in a society in which human design is limited to parcels of the social totality counter-posed to one another — in competition, conflict, etc. with one another. Overall, modern human society continues to evolve as an organism, without any conscious direction. This is particularly disturbing as we realize the consequences of climatic change, and — more generally — the gigantic destructive potential of modern technology and industry.

  3. I find this problematic. it appears to me that this economy is incredibly planned. it is true that their are competitive, social, ontological,epistemological and political limits to this planning, but many of those same limits exist for a socialist centrally planned economy. a series of Multinational corporations and Financial institutions have spent decades directed our economy to the construction of assets like homes, condominiums and other buildings in order to gain more financial size, power and wealth. While they have had to do this within the limits of capitalist competition, their cultural homogeneity and thinking processes have led them to compete by exploiting our natural resource wealth and labor power. a relatively small set of corporations own the vast majority of our capital assets and productive wealth. the difference is not planning, but in whose interest the planning is being done. Finance has been able to plan the economy in such a way as to exploit and abuse everything, even industrial capitalists (that is, capitalists interested in real production of commodities). I find it very difficult to see this is as a “natural” or “organic” process. i will leave you with this quote from marx:

    “Talk about centralization! The credit system, which has its focus in the so-called national banks and big money-lenders and usurers surrounding them, constitutes enormous centralisation, and gives to this class of parasites the fabulous power, not only to periodically despoil industrial capitalists, but also to interfere in actual production in a most dangerous manner — and this gang knows nothing about production and has nothing to do with it.

  4. I am not sure where you see that the problem lies.

    Is it that planning — determining collectively and consciously (as opposed to letting things take a course without one’s involvement) how our social relations should be structured, what kind of wealth we want to produce, how much of it, etc. — is inherently bad?

    Or is it that you think it is wrong to say that — considered as a whole — capitalist societies (no matter how much individuals, households, individual capitals, individual businesses, and even states may plan their actions) are fundamentally unplanned, if they are compared to the type of comprehensive planning that a socialist society would put in place?

    I think you’re right that there is a fair amount of planning going on by individuals, households, businesses (small, large, and very large) , as well as states, but that is not comprehensive planning — it is definitely not planning of, by, and for society as a whole.

    As I said at the EEA, what would J.P. Morgan reply to a Misean or Hayekian admonishing him: “Sir, it is impossible for you to plan the operations of the entire U.S. railroad system. The amount of knowledge and the calculations required for you do to do so overwhelm your capacity to plan. That aside from the incentive problem — why would anybody be motivated to share their topical and local knowledge with you?” Morgan would have laughed at that person. “Just wait and watch! I’ll show you how it can be done. As for the incentives: I’ll use carrots and sticks!” Etc.

    However, even if these individual planners try to smuggle their goals as representative of the public good, theirs are not general interest. They are special interests, without meaning this in a necessarily derogatory way. The planning that is required in socialism is premised on the elimination of class and group conflicts of interest. It is intended to be planning of, by, and for the associated producers.

    Easier said than done, of course.

  5. In this Hayekian world, all “knowledge” would be reduced to raw, unprocessed sensorial snippets with no meta-sensorial, rational connections.

    which is empiricist error

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