Markets, Planning and Democracy

Markets, Planning and Democracy

Essays after the Collapse of Communism

New Thinking in Political Economy series

David L. Prychitko

The essays contained herein span over a decade and reflect David Prychitko’s thinking about the role of the market system, and its relation to planning and democratic processes. The collection consists of previously published and unpublished articles written not only for economists but also for an interdisciplinary audience.

Introduction: Markets, Planning and Democracy in the Age of Post-Communism

David L. Prychitko

Subjects: economics and finance, austrian economics

Extract

Introduction: markets, planning and democracy in the age of post-communism Contemporary society cannot flourish without markets, and therefore private or separate property rights in the means of production. When Ludwig von Mises and F.A. Hayek advanced this argument in the 1920s and 1930s, they faced waves of criticism from defenders of market socialism, most notably Oskar Lange and Abba Lerner, but also from their Austrian colleague Joseph Schumpeter, in his magnificent but flawed book, Capitalism, Socialism, and Democracy (1950). For the most part Mises and Hayek had geared their critique of socialism to central economic planning. In response, market socialists generally agreed that truly centralized economic planning had little basis in economic theory; instead they promoted a form of socialism that apparently allowed for markets and prices in consumer goods, and the imputation of consumer goods prices through the state-owned capital structure. Their theoretical solution earned the respect of the economics profession for years to come. Market socialism was considered at least consistent with neoclassical economic theory, and the Austrians were viewed as losers in the great socialist calculation debate, as it came to be called. A renewed appreciation for the Austrian position would appear only by the late 1980s, as the problems of ‘really existing socialism’ came to a head. The collapse of the former Soviet Union and other socialist countries throughout Eastern Europe from the Fall of 1989 onward seemed finally to validate the Mises–Hayek case against central planning, and also cast serious doubt on the...

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