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

 


   5. CRITIQUES WITHIN THE SOCIALIST COUNTRIES    
 

 

The price system described in the framework of administrative economic management became the subject of general criticism, which may be roughly divided into two groups. One criticized incorrect price relations (including the dual price level) and led to the call for a uniform basis. Discussions continue on the type or formula of uniform pricing, e.g. value, average value, production price, etc. The other criticized the centralized and administrative methods of price regulation, and resulted in pleas for the rehabilitation of the market mechanism throughout the socialist economic system. Two problems remain in debate: how to organize the system of planned management so that the functioning of the market mechanism does not conflict with planning, and the manner of transition to a new system while the old disproportions and disequilibria persist.

The problem of a uniform price system has been most intensively discussed in the Soviet Union, and chiefly connected with the application of the mathematical methods (structural analysis and linear programming) to compute such prices; the names of Kantorovich, Novozhilov, Nemchinov, and Belkin were particularly prominent.(2) Initially, Soviet views (and those in Hungary) concentrated on the correction of price relatives, without impugning the method of central price-fixing. The mathematical procedures suggested were to improve the decision-making of central agencies. Recently, attention has been focused even in the U.S.S.R. on the necessity of restoring the role of the market mechanism: it is of interest that such a conclusion was made by none other than the advocates of mathematical methods (Nemchinov, Novozhilov, etc.), because they adopted the cybernetic view of automated economic regulation. In this connection also the mathematical problems of market analysis (demand elasticity), long neglected in the U.S.S.R., started to be taken up.

 

In some other socialist countries, however, theoretical and practical concern was first concentrated more on the role of the market than on the formula of price. This was undoubtedly true in Yugoslavia where not only a theoretical criticism, but also a practical introduction, of the market mechanism had taken place. It was also the case in Poland, as the work of Brus testifies,(3) and in Czechoslovakia, where the theoretical analyses were made by Sik, Kozusnik, and Komenda,(4) and where - at present - intensive preparations are under way for a new system of economic management, based on a broad employment of the market. Many Czechoslovak economists consider the restoration of the market much more important than the problem of a price formula, even though it is essential to the successful functioning of a market and could play an important part in resolving the conflict of group interests. This order of priorities is supported by the work of Novozhilov,(5) who shows that dual prices may be used without risk under decentralized decision-making, because they ensure that an optimal plan for an enterprise, prepared by decentralized decisions, conforms to a social optimum. Other prices would, however, result in an irrational utilization of resources.

 

 

 

 

 

 

 

 

 

 

 

 

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