Was the Soviet Union an idea ahead of its time? (Boston Globe)


Jim Farmelant
 

The dream of central economic planning died with the USSR. Thirty years later, technologies for matching supply and demand are a reality in America — as is the potential for surveillance Lenin and Stalin could only have dreamed of.



https://www.bostonglobe.com/2021/03/24/opinion/was-soviet-union-an-idea-ahead-its-time/?p1=Article_Feed_ContentQuery


Andrew Pollack <acpollack2@...>
 

could you send the full text?


On Thu, Mar 25, 2021 at 5:52 AM Jim Farmelant <farmelantj@...> wrote:

The dream of central economic planning died with the USSR. Thirty years later, technologies for matching supply and demand are a reality in America — as is the potential for surveillance Lenin and Stalin could only have dreamed of.



https://www.bostonglobe.com/2021/03/24/opinion/was-soviet-union-an-idea-ahead-its-time/?p1=Article_Feed_ContentQuery


Jim Farmelant
 

The dream of central economic planning died with the USSR. Thirty years later, technologies for matching supply and demand are a reality in America — as is the potential for surveillance Lenin and Stalin could only have dreamed of.

By Marcel FafchampsUpdated March 24, 2021, 9:22 a.m.

When the Soviet Union was created, beginning in 1917, its rulers wanted all profits, all returns to capital, to accrue to the state. This would not have been possible with decentralized markets, since the state could not know the profits made by individual entities, regardless of whether they were privately or publicly owned. This, they anticipated, would lead to underreporting of income and defeat the rulers’ objective. To circumvent this problem, they turned to scientific planning to replace the market with algorithms.

Production units were asked to declare their plans and capacities. Retail chains were asked to project the demand for consumer goods. Government ministries were asked to stipulate their needs for investment in various kinds of infrastructure. These numbers were then put together in matrices, and a mathematical method known as linear programming was used to optimize the allocation of workers and productive capacity so as to achieve the objective of the plan at the lowest resource cost.

While this system could more or less handle large planned investments in heavy industry — steel mills, coal mines, and the like — it was woefully insufficient at handling consumers’ demand for varied goods and services once the Soviet economy started to develop. The problem was that the rulers at the time had only simple mathematical algorithms and no computers. Running an entire complex economy via algorithm was simply not feasible. This probably explains why after several Eastern European countries fell into the orbit of the Soviet Union in the late 1940s, some of them did not even attempt to adopt its full-fledged central planning system and instead allowed a modicum of market exchange to remain. By the time the Soviet Union was disbanded in the early 1990s, its central planning system of exchange was judged a failure, and it was rapidly replaced with a decentralized market system.

Spin the clock forward another 30 years, and we are now in a world where a large and increasing fraction of economic exchange is run, quite successfully, by algorithms. Amazon and Alibaba perform essentially the same tasks as the Soviet central planners: They collect information on items available for sale and, by doing so repeatedly over short time intervals, effectively track productive capacity. They collect day-to-day information on consumers’ requests for various goods and services, thereby tracking the evolution of demand over time. They match supply and demand in real time. And they organize the dispatch and delivery of these items to consumers across the globe. If the Soviet Union had had such tools at its disposal, it would no doubt have used it to run its economic exchange system. By observing all transactions and all payments, the rulers would also have observed all profits and incomes and thus been able to appropriate whatever they thought was due to the state.

As a matter of fact, the United States and other Western countries have begun to use sophisticated algorithms for central planning purposes, with a view toward appropriating economic surplus. The best example is the auction sale of bands of the airwaves for mobile-phone and other communications services. Companies interested in buying communications licenses are asked to place bids on the airwave bands they want, and a computer allocates the licenses so as to both minimize the chances of airwave interference and maximize the government’s income from the licenses. Similar auctions have been used to allocate foreign exchange by central banks and the procurement of goods and services by government agencies. Matching algorithms are used to assign medical interns to hospitals, students to schools, and workers to jobs — and even to arrange meetings or marriages between people. Lenin could not have been more pleased.

But such algorithms now do much more than simply matching individuals or firms based on their stated preferences: They also forecast demand. Artificial intelligence and big data make it possible to predict preferences at the individual level in real time, thereby enabling algorithms to facilitate trade by reducing consumers’ search costs. This is achieved by collecting vast amounts of individual data, often without anyone being aware of how revealing this data is about their political views, sexual orientation, health conditions, criminal activity, wealth, and income. Not even the East German Stasi or the Romanian Securitate could have dreamed that such information would be surrendered without resistance.

So where do we stand? We are at a crossroads. The technology necessary to put in place a centrally planned police state is now a reality. Whether this technology is used for this purpose is but a matter of time. At the end of last year, Jack Ma, the creator of Alibaba, went missing for three months. We later learned that he had been chastised by the Chinese authorities for announcing an ambitious plan that would have strengthened Alibaba’s position in the economy. This warning shot only serves to remind us that algorithms of exchange can one day fall under direct or indirect government control. Alternatively, private interests could just as easily capitalize on this technology for huge private gain.

The question then is: How can we protect civil liberties in the face of these enormous challenges while continuing to enjoy the benefits that all these algorithms generate? This is the biggest question facing us today. How we resolve it will determine how we — and our children — will live tomorrow.

Marcel Fafchamps, an economist at Stanford University, is senior fellow at the Freeman Spogli Institute for International Studies.

 

This article was updated on March 24 to clarify the reference to the Soviet Union’s creation.




Joseph Green
 

Just as computers and just-in-time manufacturing haven't eliminated cut-throat
competition and anarchy of production in Western capitalism, so the problem with
the Soviet economy under Stalin and subsequently wasn't mainly lack of
computational ability. The article by Marcel Fafchamps says that "this system
could more or less handle large planned investments in heavy industry", but in
fact the anarchy manifested itself sharply in heavy industry as well as elsewhere.
There was an anarchy of production due to the competing interests of the
different sections of the bureaucracy; this has occurred over and over again
under state-capitalism. And this is why the greater the computational ability in the
Soviet Union, and the more sophisticated the mathematics, the more the anarchy
persisted.

See "The anarchy of production behind the veneer of Soviet revisionist planning"
(March 1997) at http://www.communistvoice.org/12cSovAnarchy.html.


On 25 Mar 2021 at 6:03, Jim Farmelant wrote:


The dream of central economic planning died
with the USSR. Thirty years later,
technologies for matching supply and
demand are a reality in America - as is the
potential for surveillance Lenin and Stalin
could only have dreamed of.
By Marcel FafchampsUpdated March 24, 2021, 9:22 a.m.

But such algorithms now do much more than simply matching
individuals or firms based on their stated preferences: They also
forecast demand. Artificial intelligence and big data make it
possible
to predict preferences at the individual level in real time, thereby
enabling algorithms to facilitate trade by reducing consumers´
search
costs. This is achieved by collecting vast amounts of individual
data,
often without anyone being aware of how revealing this data is about
their political views, sexual orientation, health conditions,
criminal
activity, wealth, and income. Not even the East German Stasi or the
Romanian Securitate could have dreamed that such information
would be surrendered without resistance.
So where do we stand? We are at a crossroads. The technology
necessary to put in place a centrally planned police state is now a
reality. Whether this technology is used for this purpose is but a
matter of time. At the end of last year, Jack Ma, the creator of
Alibaba, went missing for three months. We later learned that he had
been chastised by the Chinese authorities for announcing an
ambitious plan that would have strengthened Alibaba´s position in
the
economy. This warning shot only serves to remind us that algorithms
of exchange can one day fall under direct or indirect government
control. Alternatively, private interests could just as easily
capitalize
on this technology for huge private gain.

The question then is: How can we protect civil liberties in the face
of
these enormous challenges while continuing to enjoy the benefits
that all these algorithms generate? This is the biggest question
facing
us today. How we resolve it will determine how we - and our
children -will live tomorrow.
Marcel Fafchamps, an economist at Stanford University, is senior
fellow at the Freeman Spogli Institute for International Studies.
 
This article was updated on March 24 to clarify the reference to the
Soviet Union´s creation.





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Roger Kulp
 

n
 
 
IDEAS

Was the Soviet Union an idea ahead of its time?

The dream of central economic planning died with the USSR. Thirty years later, technologies for matching supply and demand are a reality in America — as is the potential for surveillance Lenin and Stalin could only have dreamed of.

By Marcel FafchampsUpdated March 24, 2021, 9:22 a.m.
A Soviet poster from 1918 that urged women to work on cooperative farms.
A Soviet poster from 1918 that urged women to work on cooperative farms.WIKIMEDIA COMMONS

When the Soviet Union was created, beginning in 1917, its rulers wanted all profits, all returns to capital, to accrue to the state. This would not have been possible with decentralized markets, since the state could not know the profits made by individual entities, regardless of whether they were privately or publicly owned. This, they anticipated, would lead to underreporting of income and defeat the rulers’ objective. To circumvent this problem, they turned to scientific planning to replace the market with algorithms.

Production units were asked to declare their plans and capacities. Retail chains were asked to project the demand for consumer goods. Government ministries were asked to stipulate their needs for investment in various kinds of infrastructure. These numbers were then put together in matrices, and a mathematical method known as linear programming was used to optimize the allocation of workers and productive capacity so as to achieve the objective of the plan at the lowest resource cost.

While this system could more or less handle large planned investments in heavy industry — steel mills, coal mines, and the like — it was woefully insufficient at handling consumers’ demand for varied goods and services once the Soviet economy started to develop. The problem was that the rulers at the time had only simple mathematical algorithms and no computers. Running an entire complex economy via algorithm was simply not feasible. This probably explains why after several Eastern European countries fell into the orbit of the Soviet Union in the late 1940s, some of them did not even attempt to adopt its full-fledged central planning system and instead allowed a modicum of market exchange to remain. By the time the Soviet Union was disbanded in the early 1990s, its central planning system of exchange was judged a failure, and it was rapidly replaced with a decentralized market system.


Roger Kulp
 

The Soviet Union was simply the greatest country that ever existred,period.


Michael Meeropol
 

Dear Roger -- I don't think the criticisms by folks on this list of the Soviet Union is because we are "liberals" --- some come out of the Trotskyist movement -- some (like me) are red-diaper babies (Communist parents) who have become disillusioned ---

I will give the Soviet Union credit for defeating the Nazis -- even though there were terrible blunders before the German invasion which left the Soviet Union horribly vulnerable --- and for developing a strong enough military (including atomic weapons) to "deter" American imperialism from using nuclear weapons against the Vietnamese and the Koreans --- and from invading Cuba with US regular army troops in 1962 ---

That said, the REALITIES of what the Soviets called "actually existing socialism" were so negative for the people of the Soviet Union that it set back the cause of socialism world wide for generations --- 

Maybe the ability of European socialism to survive depended on a successful German Revolution after WW II -- when that was defeated, the necessity of building up an industrial base in the fledgling Soviet Union necessitated the authoritarianism of Stalin --- MAYBE --- but if so that meant the "socialism in one country" was doomed from the get go --- IF there were an alternative (whatever Trotsky would have done if he had beaten Stalin in the power struggle) that would have "worked" --- well --- then the triumph of Stalin is a double tragedy ---

AFter WW II, the Soviet effort to "win" the competition with capitalism failed miserably --- but luckily they were there long enough to protect the Koreans, Vietnamese and Cubans from total American conquest ....

On Thu, Mar 25, 2021 at 2:28 PM Roger Kulp <leucovorinsaves@...> wrote:
The Soviet Union was simply the greatest country that ever existred,period.
_._,_._,_


Jim Farmelant
 

It should be noted that the Polish economist Oskar Lange was writing about this issue back in the 1960's. in fact his very last paper was on this topic. Back in his day there were basically just mainframe computers. Computer networking barely existed and the Internet was several years away. Nowadays, the British computer scientist and economist Paul Cockshott is probably the leading authority on this subject,


https://www.calculemus.org/lect/L-I-MNS/12/ekon-i-modele/lange-comp-market.htm

THE COMPUTER AND THE MARKET  

OSKAR LANGE

I

  Not quite 30 years ago I published an essay  On the Economic Theory of Socialism.1 Pareto and Barone had shown that the conditions of economic equilibrium in a socialist economy could be expressed by a system of simultaneous equations. The prices resulting from these equations furnish a basis for rational economic accounting under socialism (only the static equilibrium aspect of the accounting problem was under con­sideration at that time). At a later date Hayek and Robbins maintained that the Pareto—Barone equations were of no practical consequence. The solution of a system of thousands or more simultaneous equations was in practice impossible and, consequently, the practical problem of economic accounting under socialism remained unsolvable.

In my essay I refuted the Hayek—Robbins argument by showing how a market mechanism could be established in a socialist economy which would lead to the solution of the simultaneous equations by means of an empirical procedure of trial and error. Starting with an arbitrary set of prices, the price is raised whenever demand exceeds supply and lowered whenever the opposite is the case. Through such a process of tatonnements, first described by Walras, the final equilibrium prices are gradually reached. These are the prices satisfying the system of simul­taneous equations. It was assumed without question that the tatonnement process in fact converges to the system of equilibrium prices.

Were I to rewrite my essay today my task would be much simpler. My answer to Hayek and Robbins would be: so what’s the trouble?

Let us put the simultaneous equations on an electronic computer and we shall obtain the solution in less than a second. The market process with its cumbersome tatonnements appears old-fashioned. Indeed, it may be considered as a computing device of the preelectronic age.

II

  The market mechanism and trial and error procedure proposed in my essay really played the role of a computing device for solving a system of simultaneous equations. The solution was found by a process of iteration which was assumed to be convergent. The iterations were based on a feedback principle operating so as to gradually eliminate deviations from equilibrium. It was envisaged that the process would operate like a servomechanism, which, through feedback action, automatically eliminates disturbances.2

The same process can be implemented by an electronic analogue machine which simulates the iteration process implied in the tátonnements of the market mechanism. Such an electronic analogue (servo-mechanism) simulates the working of the market. This statement, how­ever, may be reversed: the market simulates the electronic analogue computer. In other words, the market may be considered as a computer sui generis which serves to solve a system of simultaneous equations. It operates like an analogue machine: a servo-mechanism based on the feedback principle. The market may be considered as one of the oldest historical devices for solving simultaneous equations. The interesting thing is that the solving mechanism operates not via a physical but via a social process. It turns out that the social processes as well may serve as a basis for the operation of feedback devices leading to the solution of equations by iteration.

III

  Managers of socialist economies today have two instruments of eco­nomic accounting. One is the electronic computer (digital or analogue), the other is the market. In capitalist countries too, the electronic com­puter is to a certain extent used as an instrument of economic account­ing. Experience shows that for a very large number of problems linear approximation suffices; hence the wide-spread use of linear programming techniques. In a socialist economy such techniques have an even wider scope for application: they can be applied to the national economy as a whole.

It may be interesting to compare the relative merits of the market and of the computer in a socialist economy. The computer has the un­doubted advantage of much greater speed. The market is a cumbersome and slow-working servo-mechanism. Its iteration process operates with considerable time-lags and oscillations and may not be convergent at all. This is shown by cobweb cycles, inventory and other reinvestment cycles as well as by the general business cycle. Thus the Walrasian tatonnements are full of unpleasant fluctuations and may also prove to be divergent. In this respect the electronic computer shows an unchal­lenged superiority. It works with enormous speed, does not produce fluctuations in real economic processes and the convergence of its iterations is assured by its very construction.

Another disadvantage of the market as a servo-mechanism is that its iterations cause income effects. Any change in prices causes gains and losses to various groups of people. To the management of a socialist economy this creates various social problems connected with these gains and losses. Furthermore, it may mobilise conservative resistance to the iteration process involved in the use of the market as a servo-mechanism.

  IV

All this, however, does not mean that the market has not its relative merits. First of all, even the most powerful electronic computers have a limited capacity. There may be (and there are) economic processes so complex in terms of the number of commodities and the type of equations involved that no computer can tackle them. Or it may be too costly to construct computers of such large capacity. In such cases nothing remains but to use the old-fashioned market servo-mechanism which has a much broader working capacity.

Secondly, the market is institutionally embodied in the present socialist economy. In all socialist countries (with the exception of certain periods when rationing was used) consumers’ goods are distributed to the population by means of the market. Here, the market is an existing social institution and it is useless to apply an alternative accounting device. The electronic computer can be applied for purposes of prognosti­cation but the computed forecasts have later to be confirmed by the actual working of the market.

An important limitation of the market is that it treats the accounting problem only in static terms, i.e. as an equilibrium problem. It does not provide a sufficient foundation for the solution of growth and develop­ment problems. In particular, it does not provide an adequate basis for long-term economic planning. For planning economic development long-term investments have to be taken out of the market mechanism and based on judgment of developmental economic policy. This is because present prices reflect present data, whereas investment changes data by creating new incomes, new technical conditions of production and frequently also by creating new wants (the creation of a television industry creates the demand for television sets, not the other way round). In other words, investment changes the conditions of supply and demand which determine equilibrium prices. This holds for capitalism as well as for socialism.

For the reasons indicated, planning of long-term economic develop­ment as a rule is based on overall considerations of economic policy rather than upon calculations based on current prices. However, the theory and practice of mathematical (linear and non-linear) pro­gramming makes it possible to introduce strict economic accounting into this process. After setting up an objective function (for instance, maximizing the increase of national income over a certain period) and certain constraints, future shadow prices can be calculated. These shadow prices serve as an instrument of economic accounting in long-term development plans. Actual market equilibrium prices do not suffic here, knowledge of the programmed future shadow prices is needed.

Mathematical programming turns out to be an essential instrument of optimal long-term economic planning. In so far as this involves the solution of large numbers of equations and inequalities the electronic computer is indispensable. Mathematical programming assisted by electronic computers becomes the fundamental instrument of long-term economic planning, as well as of solving dynamic economic problems of a more limited scope. Here, the electronic computer does not replace the market. It fulfils a function which the market never was able to perform.

Footnotes:

1 The Review of Economic Studies, London 1936 and 1937. Reprinted in O. Lange and F. M. Taylor, On the Economic Theory of Socialism, edited by B. E. Lippincott, Minneapolis 1938--- back to the text

2 Cf. Josef Steindl, Servo-mechanisms and Controllers in Econom


Roger Kulp
 

Michael Meeropol,
The criticisms you ,and others, raise about the Soviet Union, gets us into a debate among leftists, that may never be resolved. That being, were the seeds of the failures of the Soviet Union sown during the Stalin years, or were they largely the result of the reforms enacted under Krushchev, and continued under Breshnev. I am firmly in the latter camp, and it would take an awful lot to change my mind.

BTW, The Kulaks had it coming. 


Michael Meeropol
 

I think Stalin's rule created an incredible loss of faith in Socialism for the generation that experienced his dictatorship --- Did Bukharin, Tuckachevsky and Preobrazhenski (I could go on and on) etc. "have it coming"?   Did a bunch of Jewish doctors really plot to kill Stalin??

Guess we have to agree to disagree 


On Mon, Mar 29, 2021 at 2:50 PM Roger Kulp <leucovorinsaves@...> wrote:
Michael Meeropol,
The criticisms you ,and others, raise about the Soviet Union, gets us into a debate among leftists, that may never be resolved. That being, were the seeds of the failures of the Soviet Union sown during the Stalin years, or were they largely the result of the reforms enacted under Krushchev, and continued under Breshnev. I am firmly in the latter camp, and it would take an awful lot to change my mind.

BTW, The Kulaks had it coming. 


Vladimiro Giacche'
 

I wonder if the right answer couldn’t be “both hypotheses are right ”. 
That is: Stalin’s economic model was at first very effective: so effective that it enabled the most impressive economic catching up in the world history; but in the following phase the same model wasn’t apt to guarantee anymore an adequate growth (Kalecki hinted at possible reasons for this), so the return on investment became lower and lower.
But Kruschev wasn’t apt to substitute anything meaningful to that model: on the contrary, the reforms made things worse. 
VG

Inviato da iPhone

Il giorno 29 mar 2021, alle ore 20:50, Roger Kulp <leucovorinsaves@...> ha scritto:

Michael Meeropol,
The criticisms you ,and others, raise about the Soviet Union, gets us into a debate among leftists, that may never be resolved. That being, were the seeds of the failures of the Soviet Union sown during the Stalin years, or were they largely the result of the reforms enacted under Krushchev, and continued under Breshnev. I am firmly in the latter camp, and it would take an awful lot to change my mind.

BTW, The Kulaks had it coming. 
_._,_._,_



Michael Meeropol
 

The "problem" with Stalin's economic model is that it requires energetic participation rather than routine rote following the "letter of the plan" --- The end of "faith" in the "promise of socialism" due to Stalin's crimes against the Soviet people meant that workers and managers and party members, etc. did not believe that they were living in a workers' and peasants' state --- but in a country dominated by top leaders of the party with virtually nothing but cosmetic bottom up "participation" --- it was the end of idealism that was the main "fruit" of Stalinism --- not the creaky model which worked when the goal was producing steel but not when the goal was producing furniture, televisions, restaurant meals, etc.


On Mon, Mar 29, 2021 at 4:01 PM Vladimiro Giacche' <vladimiro.giacche@...> wrote:
I wonder if the right answer couldn’t be “both hypotheses are right ”. 
That is: Stalin’s economic model was at first very effective: so effective that it enabled the most impressive economic catching up in the world history; but in the following phase the same model wasn’t apt to guarantee anymore an adequate growth 


Dayne Goodwin
 

On Thu, Mar 25, 2021 at 12:28 PM Roger Kulp <leucovorinsaves@...> wrote:
The Soviet Union was simply the greatest country that ever existred,period.
Is this what the Party for Socialism and Liberation taught you?


Louis Proyect
 

On 3/29/21 8:37 PM, Dayne Goodwin wrote:
Is this what the Party for Socialism and Liberation taught you?

I am afraid that Roger might not get what Marxmail is all about. I have been patient with him but as comrades know I am a 76-year old crank. The other day Roger posted an earlier huzzah for Grayzone and I urged him to read David Brophy, a long-time Marxist who not only speaks Chinese and Uighur but has visited Xinjiang. No evidence that Roger engaged with Brophy and yet another huzzah to Grayzone. The clock is ticking.