Decentralized price system under social ownership
McMullen also defends the social form of ownership required by a classless post-capitalist society from claims that it would be unable to effectively use a price system based on decentralized bids and offers. This argument is mainly associated with Austrian School economists who argue that such a system requires market exchanges between enterprises. (See Socialist Calculation Debate and Economic Calculation Problem ).
McMullen believes workers in enterprises and work units, motivated by work satisfaction and the desire to contribute to an efficient and dynamic economy, would drive a better price system than one based on the profit motive. They would bid for resources on the basis of least cost alternatives and an honest expectation of demand for the resulting output. They would offer output at prices that reflect cost and ensure that products go to the highest bidders in the case of excess demand. All demand for intermediate production would be derived from the expected demand for final individual and collective consumption. Such pricing would guide both the more day-to-day decisions and longer term investment. Many of the decisions being made would be quite entrepreneurial in nature involving new products and services, new methods, and new entrants, be they existing enterprises or start-ups. Access to funding for investment could be through numerous assessment agencies that have been allocated funds for that purpose.
McMullen stresses that the use of a decentralized price system would not involve so-called "market socialism". Under social ownership, the transactions between enterprises would not be market exchanges. They would be the transfer of custody of social property not of ownership. An enterprise would not be the owner of inputs and outputs, it would be their custodian. And no individual involved with an enterprise would receive any net revenue nor incur any loss from transactions between enterprises.
He also argues that the cooperative environment would lead to a better price system because of the greater honesty, the better flow of information due to the removal of property barriers between enterprises and the fact that income equality would remove the equity concerns currently associated with reliance on pricing.
Capitalism is an economic system based on non-personal private ownership of the means of production and their operation for profit. Characteristics central to capitalism include non-personal private property, capital accumulation, wage labor, exchange, a price system and competitive markets. In a capitalist market economy, decision-making and investments are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.
A planned economy is a type of economic system where investment, production and the allocation of capital goods take place according to economy-wide economic plans and production plans. A planned economy may use centralized, decentralized or participatory forms of economic planning.
The economic calculation problem is a criticism of using economic planning as a substitute for market-based allocation of the factors of production. It was first proposed by Ludwig von Mises in his 1920 article "Economic Calculation in the Socialist Commonwealth" and later expanded upon by Friedrich Hayek.
A market economy is an economic system in which the decisions regarding investment, production and distribution are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.
A mixed economy is variously defined as an economic system blending elements of market economies with elements of planned economies, free markets with state interventionism, or private enterprise with public enterprise. As such, there is no single definition of a mixed economy. One definition is about a mixture of markets with state interventionism, referring specifically to capitalist market economies with strong regulatory oversight and extensive interventions into markets. The other definition is apolitical in nature, strictly referring to an economy containing a mixture of private enterprise with public enterprise.
Participatory economics, often abbreviated ParEcon, is an economic system based on participatory decision making as the primary economic mechanism for allocation in society. In the system, the say in decision-making is proportional to the impact on a person or group of people. Participatory economics is a form of socialist decentralized planned economy involving the common ownership of the means of production. It is a proposed alternative to contemporary capitalism and centralized planning. This economic model is primarily associated with political theorist Michael Albert and economist Robin Hahnel, who describe participatory economics as an anarchist economic vision.
Private property is a legal designation for the ownership of property by non-governmental legal entities. Private property is distinguishable from public property, which is owned by a state entity; and from collective property, which is owned by a group of non-governmental entities. Private property can be either personal property or capital goods. Private property is a legal concept defined and enforced by a country's political system.
An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area. It includes the combination of the various institutions, agencies, entities, decision-making processes and patterns of consumption that comprise the economic structure of a given community. As such, an economic system is a type of social system. The mode of production is a related concept. All economic systems have three basic questions to ask: what to produce, how to produce and in what quantities and who receives the output of production.
Criticism of socialism is any critique of socialist models of economic organization and their feasibility as well as the political and social implications of adopting such a system. Some critiques are not directed toward socialism as a system, but rather toward the socialist movement, parties or existing states. Some critics consider socialism to be a purely theoretical concept that should be criticized on theoretical grounds while others hold that certain historical examples exist and that they can be criticized on practical grounds. Because there are many models of socialism, most critiques are focused on a specific type of socialism and the experience of Soviet-type economies that may not apply to all forms of socialism as different models of socialism conflict with each other over questions of property ownership, economic coordination and how socialism is to be achieved. Critics of specific models of socialism might be advocates of a different type of socialism.
Post-capitalism is a state in which the economic systems of the world can no longer be described as forms of capitalism. Various individuals and political ideologies have speculated on what would define such a world. According to some classical Marxist and some social evolutionary theories, post-capitalist societies may come about as a result of spontaneous evolution as capitalism becomes obsolete. Others propose models to intentionally replace capitalism. The most notable among them are socialism and anarchism.
The Lange model is a neoclassical economic model for a hypothetical socialist economy based on public ownership of the means of production and a trial-and-error approach to determining output targets and achieving economic equilibrium and Pareto efficiency. In this model, the state owns non-labor factors of production, and markets allocate final goods and consumer goods. The Lange model states that if all production is performed by a public body such as the state, and there is a functioning price mechanism, this economy will be Pareto-efficient, like a hypothetical market economy under perfect competition. Unlike models of capitalism, the Lange model is based on direct allocation, by directing enterprise managers to set price equal to marginal cost in order to achieve Pareto efficiency. By contrast, in a capitalist economy managers are instructed to maximize profits for private owners, while competitive pressures are relied on to indirectly lower the price to equal marginal cost.
Economic planning is a mechanism for the allocation of resources between and within organizations based on a computational procedure to solving a constrained maximization problem. Planning is an iterative procedure used to obtain a solution, and as a resource allocation mechanism, it is contrasted with the market mechanism. As an allocation mechanism for socialism, economic planning replaces factor markets with a procedure for direct allocations of resources within an interconnected group of socially owned organizations which comprise the productive apparatus of the economy.
Calculation in kind or calculation in-natura is a way of valuating resources and a system of accounting that uses disaggregated physical magnitudes as opposed to a common unit of calculation. As the basis for a socialist economy it was proposed to replace money and financial calculation. Calculation in kind would value each commodity based only on its use value, for purposes of economic accounting. By contrast, in money-based economies, a commodity's value includes an exchange value.
Production for use is a phrase referring to the principle of economic organization and production taken as a defining criterion for a socialist economy. It is held in contrast to production for profit. This criterion is used to distinguish socialism from capitalism, and was one of the fundamental defining characteristics of socialism initially shared by Marxian socialists, evolutionary socialists, social anarchists and Christian socialists.
A decentralized-planned economy or decentrally-planned economy is a type of planned economy in which the investment and allocation of consumer and capital goods is explicated accordingly to an economy-wide plan built and operatively coordinated through a distributed network of disparate economic agents or even production units itself. Decentralized planning is usually held in contrast to centralized planning, in particular the Soviet Union's command economy, where economic information is aggregated and used to formulate a plan for production, investment and resource allocation by a single central authority. Decentralized planning can take shape both in the context of a mixed economy as well as in a post-capitalist economic system.
The socialist mode of production, also referred to as the lower-stage of communism or simply socialism as Karl Marx and Friedrich Engels used the terms socialism and communism interchangeably, is a specific historical phase of economic development and its corresponding set of social relations that emerge from capitalism in the schema of historical materialism within Marxist theory.
Social ownership is any of various forms of ownership for the means of production in socialist economic systems, encompassing state ownership, employee ownership, cooperative ownership, citizen ownership of equity, common ownership and collective ownership. Historically social ownership implied that capital and factor markets would cease to exist under the assumption that market exchanges within the production process would be made redundant if capital goods were owned by a single entity or network of entities representing society, but the articulation of models of market socialism where factor markets are utilized for allocating capital goods between socially owned enterprises broadened the definition to include autonomous entities within a market economy. Social ownership of the means of production is the common defining characteristic of all the various forms of socialism.
Market socialism is a type of economic system involving the public, cooperative or social ownership of the means of production in the framework of a market economy. Market socialism differs from non-market socialism in that the market mechanism is utilized for the allocation of capital goods and the means of production. Depending on the specific model of market socialism, profits generated by socially owned firms may variously be used to directly remunerate employees, accrue to society at large as the source of public finance or be distributed amongst the population in a social dividend.
Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems.
The socialist calculation debate, sometimes known as the economic calculation debate, was a discourse on the subject of how a socialist economy would perform economic calculation given the absence of the law of value, money, financial prices for capital goods and private ownership of the means of production. More specifically, the debate was centered on the application of economic planning for the allocation of the means of production as a substitute for capital markets and whether or not such an arrangement would be superior to capitalism in terms of efficiency and productivity.
