Decisive for the question of the feasibility of various versions of market socialism is the issue of the basic cognitive function markets are expected to provide. Three increasingly comprehensive interpretations of the cognitive function of markets, labeled computation, incentives, and discovery, are described and contrasted. Depending on how the basic cognitive role of markets is interpreted, very different judgments are possible on the feasibility of market socialism. Two types of market socialism are examined in terms of these approaches, and their shortcomings are attributed to their incomplete appreciation of the way knowledge is created, discovered, and conveyed in market processes.
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References
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1. Space will not permit me to take up the empirical issues here, but I would point out that when the theoretical controversy began, it was already tainted by Soviet experience. Mises's original 1920 challenge was shaped by his interpretation of empirical events in Lenin's unsuccessful experiment with “war communism.”
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2. Elsewhere I have discussed this theoretical debate at more length. See Don Lavoie, Rivalry and Central Planning (New York: Cambridge University Press, 1985).
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3. Alec Nove, The Economics of Feasible Socialism (London: George Allen & Unwin, 1983), pp. 213-214.
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4. F. A. Hayek, “Competition as a Discovery Procedure,” in New Studies in Philosophy, Politics, Economics and the History of Ideas (Chicago: University of Chicago Press, 1978), pp. 179-190.
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5. Henry Douglas Dickinson, “Price Formation in a Socialist Community,”Economic Journal, 43:242 (1933).
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Lionel Robbins , The Great Depression (New York: Macmillan, 1934), pp. 148-159.
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7. Oskar Lange, “On the Economic Theory of Socialism,” reprinted in On the Economic Theory of Socialism, ed. Benjamin E. Lippincott (New York: McGraw-Hill, 1964), pp. 57-143.
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8. Oskar Lange, “The Computer and the Market,” in Socialism, Capitalism and Economic Growth: Essays Presented to Maurice Dobb, ed. C. H. Feinstein (New York: Cambridge University Press, 1967), p. 158.
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9. Mark S. Miller and K. Eric Drexler, “Markets and Computation: Agoric Open Systems,” in The Ecology of Computation, ed. B. A. Huberman (New York: North-Holland, 1988), pp. 133-176.
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10. Richard J. Bernstein uses this distinction between monological and dialogical approaches in the context of the philosophy of science in his Beyond Objectivism and Relativism: Science, Hermeneutics, and Praxis (Philadelphia: University of Pennsylvania Press, 1983).
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11. I have discussed the idea of social intelligence in my book National Economic Planning: What Is Left? (Cambridge, MA: Ballinger, 1985).
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12. Of course, this may be taking the idea of social ownership rather too seriously. What happens in practice when ownership is nationalized is not some sort of mysterious unification of interests aimed at applying flows of resources to commonly agreed-upon social expenditures. State ownership does not mean an elimination of the private pursuit of competitive advantage among separate individuals but a rechanneling of competitive struggle from market to political strategies.
