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Markets, Planning and Democracy

Essays after the Collapse of Communism

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 The collection consists of previously published and unpublished articles written not only for economists but also for an interdisciplinary audience.
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Chapter 7: The Critique of Workers’ Self-Management: Austrian Perspectives and Economic Theory

Essays after the Collapse of Communism

David L. Prychitko


* Four decades ago Benjamin Ward published the seminal criticism of the labor-managed firm (1958). Since then the economic theory of workers’ self-management has exploded into hundreds of articles, and is now a research field of its own. But disagreement persists in the neoclassical literature: is the labor-managed firm productive? Will worker-managers possess optimal incentives? More generally, is a system of labor-managed firms workable, and if so, is it efficient? These questions have become relevant since 1989, with the collapse of the socialist governments in central and eastern Europe, as reformers consider the panoply of decentralized and market-based alternatives to socialist planning. The critics answer ‘no’ to the above questions, and believe that selfmanagement, in any form, is an impractical alternative for the former socialist countries. It should play no role in efforts toward privatization (see, for example, Pejovich, 1994). Austrians are, of course, prominent in the comparative systems literature. Yet as a group, we have not contributed directly to, nor follow, the theoretical and empirical self-management literature. Nevertheless, I think it is safe to say that Austrian School economists, again, as a group, tend to agree with the standard theoretical criticisms of workers’ self-management.1 This position may be problematic as an a priori condemnation, for is there anything essentially ‘Austrian’ about the standard critique of workers’ self-management? That is, what fortifies the Austrian stance against workers’ self-management? Is it established by Austrian economic theory? If so, how? If not, are there elements of neoclassical theory imported into...

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