Reforms O. KYN: THE ROLE OF PRICES  IN A SOCIALIST  ECONOMY


 


  1.
THE PLACE OF PRICING THEORY   
 

 

UNTIL recently pricing was considered a secondary problem in a socialist economy. This was the result both of practices which had become established in the past, and of a set of generally-accepted theoretical postulates. Very little attention was paid to the theory of prices, the deficiency of which profoundly marked recent economic practice. This neglect of pricing was justified by the assumption that the central problem of the socialist economy was the assurance of planned proportions derived primarily from material balances and their disaggregation as directives for production enjoined upon individual plants. The role of prices was hence no more than as a subsidiary form of cost accounting; to make it independent and related to the market was in fact considered irreconcilable with the system of planning and central management.

 The retention of prices and of Marx’s category of commodity production was ascribed to the remnants of obsolete economic relations, which, however, were doomed as a result of a further development of the economy. This opinion held that socialism left a product exchanged within the state sector with no more than a formal character as a commodity, because the role of the market had been replaced by the central management. A slightly larger role was attributed to the prices of articles sold to households and to and by cooperatives, but, even in this respect, the function of price was to redistribute national income in accordance with planned living standards; it was not envisaged that a price mechanism would provide for a direct feedback between the producer and the consumer.

More recent opinions, however, have favored some rehabilitation of the classical concept of price, and a more intensive employment of the automatically-operating market within the mechanism of a socialist economy. These new ideas arose after economists in the countries concerned had overcome a limited and one-sided interpretation of Marxist theory, and in response to a number of practical problems in socialist planning. The change of view was to a great extent brought about by the rapid infiltration of mathematics into Marxist economics during the past five years, and by the realization that cybernetics could be applied to the processes of economic management.

 

It followed that price problems were basic to socialism and could not be brushed aside as secondary. Price theory, formerly devoted primarily to price calculation in individual branches, became inseparably linked with problems of planning, above all in formulating optimization criteria for output and for the use of scarce resources; it had, furthermore, to the integrated with management techniques, economic information incentives, conflict of interest, distribution and redistribution of the national income etc. The old forms of organization were criticized not only for failing to make a positive use of prices throughout the economy, but even for suppressing their role. Today, by contrast, the socialist countries have at their disposal a substantial theoretical literature on prices and their function in the economic mechanism (1) and gradually, changes are being introduced in practical price policy. The theoretical views which have emerged are by no means uniform and the future use of prices could considerably differ from country to country. This diversity precludes in the present study an analysis of the current price system in all socialist countries and of the criticism to which it has been subjected over recent (and in Yugoslavia many) years. This report hence attempts no more than a sketch of the existing price system, and its shortcomings, a brief review of new theoretical work, and, in conclusion, a personal interpretation of Czechoslovak experience and discussions on the scope for associating the price mechanism with planned management. The constraint of space requires the omission of a detailed history of the price system by country, but an essay is made to identify their common features. All exhibit the same socialist economic relations, under which state ownership prevails in industry and cooperative ownership in agriculture, engendering four types of transaction, with corresponding forms of price:

  1. transactions between state enterprises (predominantly in the supply of raw materials, machinery and equipment, and producers’ goods generally) at wholesale prices;

  2. sales by state agencies of consumers’ goods to households at retail! prices;

  3. sales of farm produce by cooperatives to state agencies at procurement prices;

  4. sales by agricultural cooperatives to households at the so called prices of the cooperative market.

This characterization oversimplifies: a more precise classification would distinguish cooperative enterprises in industry, state enterprises in agriculture, and numerous other exceptions,- and would discuss the problem of traders’ margins. But it is hoped that the present approximation will serve.


 

 

 

 

 

 

 

 

 

 

 

 

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