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Socialism And The Market:Methodological Lessons FromThe Economic CalculationDebateKamran NayeriPublished online: 13 May 2009.

To cite this article: Kamran Nayeri (2005) Socialism And The Market:Methodological Lessons From The Economic Calculation Debate, Critique: Journalof Socialist Theory, 33:1, 248-262, DOI: 10.1080/03017600509469495

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SOCIALISM AND THE MARKET:METHODOLOGICAL LESSONS FROM THEECONOMIC CALCULATION DEBATE

Kamran Nayeri

1. Introduction

There is a renewed interest in ideas that are broadly known as market socialism.

The relation between socialism and the market has been an issue of contentionamong socialists since Marx's own time. For instance, Marx criticized PierreJoseph Proudhon as "the paradigmatic theorist of petty bourgeois socialism"who "sought to improve society not by abolishing commodity production but,rather, by purifying commodity exchange."' Proudhon offered a vision of asocially regulated network of private small-holdings through the administrationof mutual aid including such means as interest free credit.

The first great debate on the relationship between socialism and the market wasinitiated by Ludwig von Mises in 1920 who claimed that without privateproperty market exchanges could not take place and without them rationalvaluation would cease resulting in economic chaos. The historical background tothis debate was the establishment of the Soviet power in Russia in 1917 and thesubsequent degeneration of the Soviet state and the Communist party afterLenin's death in January 1924. The second period of debates reached itsintensity in the 1960s when market socialist ideas gained significant support inEastern Europe and the Soviet Union, and were implemented to varying degreesin a number of countries, most notably in Yugoslavia since 1952.

McNally, D. (1993) Against the Market: Political Economy, Market Socialism and the MarxistCritique. London, New York: Verso; p139. See also: Karl Marx: (1846) 'Letter to P.V. Annenkov',Brussels: December 28, 1846. (1847) Poverty of Philosophy. New York: International Publishers,1963. And, 'Letter to J.B. Schweitzer', January 24, 1865.

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An important but separate development was the 'Great Debate' in Cuba as theleadership of the revolution was confronting the theoretical and practicalproblem of socialism and the market. The historical context for the currentinterest in market socialism is remarkably different: it is characterized by thelong-cycle stagnation in industrial capitalist economies, the failure of Keynesianpolicies and nationalist projects of import-substitution industrialization inlatecomers, and the demise of bureaucratic central planning in the Soviet Unionand Eastern Europe. 2 These developments aided the neo-liberal ideologicaloffensive and the wholesale shift in attitude among the intellectuals. Thus,Arnold observed:

"Sometime in the middle-to-late 1980s, something approaching alimited consensus began to emerge among the intelligentsia in theWest. This consensus holds that the inefficiencies endemic to anycentrally planned economy are serious to the point of beingcatastrophic and that the only reforms that have any chance of successare those which are part of a process of fundamental change thatreplaces central planning with the market. The view that centralplanning must be replaced by some form of market economy and notjust augmented by the market in some way or other seems to be thedistinctive feature of the new consensus."3

In this context, many socialists began to re-examine the merits of marketsocialism.

The present essay draws attention to the methodological issues in the marketsocialist discourse, in particular those associated with the 'economic calculationdebate' of the 1920s and 1930s. It shows that the participants in this debate usedmethodologies that are alien to the Marxian theory of socialism. Becausesubsequent market socialist literature has continued to employ the same

2 Nayeri, K. (1998) 'The World Economic and Social Situation on the Eve of the 21st Century: areview essay', Review of Political Economy: vol.10; no.2; p233-244.3 Arnold, W. S. (1994) The Philosophy and Economics of Market Socialism. New York/Oxford:OUP; p35

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methodological eclecticism the present essay contributes to the present debateon socialism and the market.4

The economic calculation debate shifted the attention of many socialists fromthe political-ethical terrain to the field of economics. The primary issue in thedebate was the feasibility and desirability of replacing the market mechanismwith central planning as the principal mode of economic organization of thesocialist society. While the participants in the debate focused on economicadvantages or disadvantages of the use of central planning instead of markets,they paid very little attention to the character and goals of the emerging society,or if they did these differed sharply from Marx's theory. The Marxian theory issingularly concerned with the process of socialist transformation of the capitalistsociety through replacing market-based or otherwise alienated and exploitivehuman relations with those consciously formed on the basis of human needs andsolidarity. The key here is the revolutionary potential of the working people totransform capitalist reality and in the process transform themselves.

Section two briefly reviews the contending claims in the economic calculationdebate focusing on their methodological underpinnings. The essentialconclusion here is that market socialist ascendancy in the economic calculationdebate resulted from its ability and willingness to use the neoclassical theory andmethodology to argue for socialistic values. As such the modern market socialistclaim that markets are consistent with and indeed necessary for socialism isbased on methodologies alien to the Marxian theory.

Section three outlines the essential methodological underpinning of theneoclassical and Austrian critiques of central planning. It is argued that thesetheories — themselves not methodologically robust — criticize central planning

4 I do not substantiate this claim in this paper but for a recent examples of it see Milonakis whoexamines the recent models of Bardhan and Roemer and Nayeri who discusses the methodologies ofLawler and Schweickart. Milonakis, D. (2003) 'New Market Socialism: A Case for Rejuvenation orInspired Alchemy?' Cambridge Journal of Economics: vol 27; p97-121. Nayeri, K. (2003) Reviewof 'Market Socialism: the Debate among Socialists,' in press, Review of Radical PoliticalEconomics.

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based on assumptions that a priori preclude socialist transformation of thecapitalist societies.

The argument that Mandan socialist theory is methodologically different fromthese and all other pro-market theories, including market socialist theories, isoutlined in sections four and five. Section six offers some concluding remarksand directions for future research.

2. The Emergence of Neoclassical Socialism

There are conflicting histories of the economic calculation debate. Early surveysby eminent economists such as Joseph Schumpeter, Abram Bergen and PaulSamuelson5 took the position that in large measure the proponents of marketsocialism — Oscar Lange, H.D. Dinkinson, Fred Taylor, Abba P. Lerner, andE.F.M. Durbin — offered the wining arguments against the Austrians, Ludwigvon Mises, Friedrich A. Hayek, and Lionel Robbins.

Since the early 1980s, this view has been effectively challenged. ° The mostextensive of these re-interpretations is Lavoie's restatement and defense of theAustrian position. Lavoie's major criticism is that the early interpretations wereinfluenced by the neoclassical readings of the Austrian arguments. Thus he isable to recast the debate in terms that state and leave unanswered certain well-know claims of the modern Austrian theory centered on the virtues of privateproperty and the market process.

5 Schumpeter, Joseph. (1954) History of Economic Analysis. New York: Oxford University Press,1986. Bergen, A. (1948) 'Socialist Planning,' in: Howard, S. E. (ed) A Survey of ContemporaryEconomics. Homewood, Ill: Richard D. Irwin; vol 1; p412-48. Samuelson, P. (1948) Economics.Cambridge: MIT Press.6 Ramsey Steele, D. (1981) 'Posing the Problem: the Impossibility of Economic Calculation UnderSocialism,' Journal of Libertarian Studies Vol. V. 7-22., Lavoie, D. (1985) Rivalry and CentralPlanning. Cambridge: Cambridge University Press. Temkin, G. (1989) 'On Economic Reforms inSocialist Countries: the Debate on Economic Calculation Under Socialism Revisited.' CommunistEconomies: vol 1; p31-59.

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The critiques of central planning employed marginalist methodology from theonset. ? In the 1880s, Friedrich von Wiser and Eugene von Bohm-Bawerk8

claimed that categories of the marginalist theory were universally applicable toall socioeconomic formations. Therefore, they saw these as essential to anyeconomic system concerned with efficiency. Enrico Barone,1908,argued from aWalrasian perspective that the conditions necessary for an efficient allocation ofresources (Pareto Optimality) were the same for any economy. However, it wasalso believed that accomplishing the requirements of the competitive generalequilibrium was formidable in an actual planned economy. Ludwig von Mises,in 1920,9 argued a stronger case against socialism. He claimed that withoutprivate property market exchanges could not take place and without themrational valuation would cease resulting in economic chaos. It is generallyagreed that Mises' argument was very poorly stated and most also agree that hisoriginal attack on central planning was not sufficiently differentiated from theneoclassical critique. However, it is also true that Mises gradually developeddistinctively Austrian arguments against socialism. I°

Oskar Lange (1938) refuted the marginalist critique while providing aneoclassical case for realization of values of equality, rationality, planning andelimination of waste." Lange's model even provided room for workers'participation or self-management. As such it has served as the prototype forsubsequent models of market socialism. Lange's essential insight was thatneoclassical theory ignored capital-labor relations such that it makes noanalytical difference whether capitalists hire workers or workers hire the

7 Howard, M.C., King, J.E. (1992) History of Marxian Economics: vol II, 1929-1990. London:Macmillan.

Weiser, F. (1956) Natural Value. New York: Kelley and Millman. Bohm-Bawerk, E. (1959)Capital and Interest. South Holland, Illinois: Libertarian Press.9 Mises, L. (1920) 'Economic Calculation in the Socialist Commonwealth.' In: von F. Hayek, F.A.(ed) Collectivist Economic Planning. London: Routledge and Kegan Paul.10 Barone, E. (1908) 'The Ministry of Production in the Collectivist State.' In: Nove A., Nuti, D.M.(eds) (1972) Socialist Economics. Harmondsworth: Penguin, 1972. Chaloupek, G. K. (1990) 'TheAustrian Debate on Economic Calculation in a Socialist Economy.' History of Political Economy:vol 22; no 4; p659-675.11 Lange, O. (1938) 'On the Economic Theory of Socialism.' In: Nove A., Nuti, D.M. (eds) (1972)Socialist Economics. Harmondsworth: Penguin, 1972.

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management. Thus it was possible, Lange argued, to use the price mechanism toplan the economy in the context of public ownership of the social means ofproduction.

Lange and the market socialists adapted to marginalist methodologies. Langeadopted the curious position that neoclassical theory was of far greater relevanceto socialism than Marx's theory; his dictum was that Marx's theory was asessential for understanding capitalism as neoclassical theory was for socialism.In essence, Lange argued that markets are compatible with and necessary tosocialism. This has become the central thesis of market socialists of every type.

3. Methodologies of the Neoclassical and Austrian Critiques

It is now necessary to examine the methodological underpinnings of themarginalist critiques of central planning. Marginalist critiques are essentiallyarguments for the virtues of private property and the market that socialistplanning will undermine. Noted Austrian economists Buchanan and Vanberg 12

propose and discuss three types of virtues for private property and the market.

The neoclassical theory emphasizes the efficient allocation of marketprocesses. 13 In this view, distorted incentive structures in a planned economyresults in alternative choices that do not correspond to an individual's ownpreferences. Similarly, resources do not flow to their most highly valued usesbecause individual decision makers do not find it in their own interest to shiftallocation in ways that meet this conceptually definable, and desirable, result.

This critique of central planning is based on the notion of competitive generalequilibrium. However, the very notion of general equilibrium involves a host ofpresuppositions, practically all which are objectionable. Buchanan and Vanbergparticularly object to the neoclassical notion of rationality. Perfect rationality

12 Buchanan, J. M., Vanberg, V. J. (1991) 'The Market as a Creative Process.' Economics andPhilosophy: vol 7; p167-86. Reprinted in Hausman, D. M. (ed) (1994) The Philosophy ofEconomics: An Anthology. Cambridge: Cambridge University Press.13 Arrow, K.J., Hahn, F.H. (1971) General Competitive Analysis. San Francisco: Holden Jay.

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presupposes perfect information and that includes knowledge of theconsequences of actions. However, the consequence of actions is at bestpartially known at the moment of choice. Thus, direct knowledge of objectiveand publicly assembled consequences of still available options for action islogically impossible. Perfect rationality belongs only to the timeless equilibriumin which all actions conform to a general simultaneous solution of the pooledstatements of the preferences and resources of all participants. "When economictheory elects to bring in imperfect competition and to recognize uncertainty,there is an end of the meaning of general equilibrium." 14 This criticism is valideven for the less presumptive neoclassical views such as rational expectations orBayesian adaptive rationality. 15

Thus modern Austrian theorists recognize the fatal flaw of the neoclassicalcritique of central planning and put forward their own arguments. Israel Kizner(1985) argues for the virtue of the market as a discovery process. 16 In this view,only a decentralized market structure can capture and fully utilize the knowledgeof localized circumstances required for a definition of the ultimate valuation thatis placed on resource use. Only the market can allow individuals effectiveliberty to discover the particularities of local needs that form their preferences.However, Kizner's notion of the market as a discovery process "fails to escapethe subliminal teleology of the equilibrium framework" as does his notion ofentrepreneurial "discovery of opportunities or error" when the analysis movesfrom a cross-sectional to an inter-temporal framework."

14 Shackle, G.L.S. (1967) The Years of High Theory: Invention & Tradition in Economic Thought,1926-1939. Cambridge: Cambridge University Press; p295.15 Buchanan, J. M., Vanberg, V. J. (1991) 'The Market as a Creative Process.' Economics andPhilosophy: vol 7; p167-86. Reprinted in Hausman, D. M. (ed) (1994) The Philosophy ofEconomics: An Anthology. Cambridge: Cambridge University Press. p318.16 Kizner, I. M. (1985) Discovery and the Capitalist Process. Chicago: Chicago University Press17 Buchanan, J. M., Vanberg, V. J. (1991) 'The Market as a Creative Process.' Economics andPhilosophy: vol 7; p167-86. Reprinted in Hausman, D. M. (ed) (1994) The Philosophy ofEconomics: An Anthology. Cambridge: Cambridge University Press. p320-321.

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Therefore, basing themselves on the methodology of radical subjectivismassociated with Shackle, 18 Buchanan and Vanberg propose the notion of marketas a creative process. The basic insight of this new paradigm is that nature andsociety are creative and genuinely unpredictable outcomes are generated as theevolutionary process unfolds over time. A characteristic of such as system is thatsmall changes can have large effects. Thus, Shackle ° holds that every person'schoice among alternative courses of action can be seen as "making history, onhowever small scale, in some sense other than mere passive obedience to theplay of all-pervasive causes." Wiseman concludes: "The essence of the radicalsubjectivist position is that the future is not simply 'unknown,' but is`nonexistent' or 'indeterminate' at the point of decision." 2° To radicalsubjectivist Austrians, private property and the market process represent theinstitutional settings most compatible with the flourishing of the creativepotentials of human beings. This implicit teleological and normative positionundermines their claim to a non-teleological and purely scientific methodologyand theory. Thus, even though 'indeterminate' change in the individual'sbehavioral over time is admitted in principle, any social change in an anti-capitalist and pro-socialist direction is precluded by definition or at most viewedas an aberration. As such, the radical subjectivist position is evolutionary onlywithin the bounds of the capitalist system, which is claimed to provide theultimate form of social organization for humanity. This implicit teleological andnormative position undermines their claim to a non-teleological and purelyscientific methodology and theory. Thus, the radical subjectivist case for thevirtue of the market process and against central planning and socialism is alsobased on questionable methodological grounds.

Therefore, all three marginalist theoretical claims for the virtues of privateproperty and the market seem to suffer from internal contradictions and theirobjections to central planning and socialism based more on normative judgment

IS Shackle, G.L.S. (1979) Imagination and the Nature of Choice. Edinburgh: Edinburgh UniversityPress.19 Shackle, G.L.S. (1983) 'The Bounds of Knowledge.' In: Weisman, J.(ed) Beyond PositiveEconomics. London: Macmillan; p28-37.20 Weisman, J. (1989) Cost, Choice, and Political Economy. Aldershot: Edward Elgar; p230.

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than scientific or logical merit. In fact, since marginalist theories are organizedon grounds of methodological individualism; they exclude the desirability andfeasibility of socialism by definition. Jevons, Menger, and Walras representedthe continuation of the individualistic, utilitarian premises of Say, Senior, andBastiat. That is how economics came to be defined as "the science which studieshuman behaviour as a relationship between ends and scarce means which havealternative uses."21 It is on this basis that marginalist categories are developedand held to be universally valid. Thus all marginalist theories, including theradical subjectivist variety, tend to be too restricted to allow for any seriousstudy of transition from one mode of production to another, and in particular,they are useless by design for study of transition from capitalism to socialism.Rather these theories are designed for analysis of what they hold to be commonto all modes of production. In contrast, planning in the Marxian theory is anessential means to inform and affect the process of socialist transition based onself-activity and self-organization of workers who gradually shed all forms ofexploitation, oppression and alienation to bring about the society of AssociatedProducers.

4 . Homo Economicus or Socialist Women and Men?

The overall case against central planning is that non-market mechanisms ofeconomic organization lack, impede or distort information, incentives andentrepreneurial activities necessary for efficiency and growth. However, themarginalist critiques of socialist planning are based on questionablemethodological and theoretical grounds. Still, issues raised by the economiccalculation debate merit careful attention and the non-market socialist literatureprovide a host of responses to each of them. The more recent English languagecontributions include full-scale models for socialist planning22 and responses to

21 Robbins, L. (1994) 'The Nature and Significance of Economic Science.' In: Hausman, D. M. (ed)(1994) The Philosophy of Economics: An Anthology. Cambridge: Cambridge University Press; p85.22 such as Devine, P. (ed) (1998) Democracy and Economic Planning: The Political Economy of aSelf-Governing Society. Oxford: Polity Press. Michael, A., Hahnel, R. (1991) The Political Economyof Participatory Economics. Princeton: Princeton University Press. Cottrell, A., Cockshott, W. P.(1993a) Towards a New Socialism. Nottingham: Spokesman.

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specific marginalist objections. 23 This essay does not discuss any of the specificeconomic issues raised by the 'economic calculation debate' nor does it suggestthat they are satisfactorily solved either in theory or in practice. Rather, it aimsto expose the methodological divide between the Marxian theory of socialismand the pro-market critiques of socialist planning. These importantmethodological issues are not usually confronted directly in the literature onnon-market socialism.

From a methodological perspective the issues raised by the economic calculationdebate can be divided into essential and technical ones. The essential issues dealwith the nature of human activity such as the essence and structure ofmotivations and incentives. The technical issues involve limits imposed onhuman activities by the existing level of knowledge and the given set oftechnologies. The two sets of arguments can be invoked independently.However, it is important to note their interdependence. The level of knowledgeand technical possibilities depends on the dynamics of society's social relations,and in turn, conditions them. The essential characteristics are primary but theycan also be shaped by society's level of knowledge and technological matrix.

To bring the Marxian methodology into focus, it is useful to indicate howradically it differs from marginalist economic theories. The underlying premiseof all pro-market theories is the liberal notion of human nature and society thatdeveloped between the sixteen to eighteenth centuries as a market economy tookhold with the emerging capitalist mode of production in Western Europe. 24 Acentral characteristic of this new mode of thinking was bourgeois individualismthat attributed naturalized (eternalized) qualities to economic, hence social

23 such as Cottrell, A., Cockshott, W. P. (1993b) 'Calculation, Complexity and Planning: theSocialist Calculation Debate Once Again,' Review of Political Economy: vol 5; no 1, pp. 73-112.;(1989) 'Labour Value and Socialist Economic Calculation,' Society and Economy: vol 18; no 1; p71-99. Adaman, F., Devine, P.(1996) 'The Economic Calculation Debate: lessons for Socialists,'Cambridge Journal of Economics: vol 20; p523-537. Devine, P. (ed) (2002) 'Building SocialismTheoretically.' Science and Society: vol 66; nol ; spring.24 The term liberal and liberalism take on different meaning in different countries and across time(see, Cranston 1967). I am particularly interested in their most general shared characteristics,especially as they relate to economic theory and policy.

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relations. 25 Thus Adam Smith imagined a calculating savage, with his inborn oracquired "propensity to truck, barter, and exchange one thing for another." 26

Bentham's `homo economicus' and the philosophy of utilitarianism followed.Liberal theory holds that the bourgeois notion of human nature and societyemerged only because inborn human 'propensities' at last found their suitableoutlet in a market economy. Pro-market theories, including those that purport tobe socialist, share this methodological foundation centered on homoeconomicus.

Thus, these theories rely on a fundamentally different foundation than theMarxian theory. Furthermore, despite the marginalist claim to positive science,we know of no proof for the existence of the ahistorical homo economicus. Infact, recent research using anthological, ethnographic and experimental methodshas found large and consistent deviation from textbook representation of homoeconomicus. Roth and his co-authors, Fehr and Cdchter, and Camerer27 havefound that in addition to their own material payoffs, many of their experimentalsubjects seemed to care about fairness and reciprocity, and willing to change thedistribution of material outcomes at personal cost. The subjects seemed willingto reward those who act in a cooperative manner while punishing those who didnot, even when these actions are costly to them. Using game theory incombination with anthropological and ethnographic research methods in 15small-scale societies, Henrich and his coauthors 28 found that universal patternsof behavior deviated strongly from the homo economicus model. Further, theyfound that a combination of economic and social factors appeared to conditioneconomic behavior in these societies.

25 Karl Marx (1986) "Introduction to Economic Manuscripts of 1857-58 (Grundrisse)" Marx andEngels Collected Works: vol 28. New York: International Publishers; p17-26.26 Adam Smith. (1776) The Wealth of Nations. New York: Modern Library, 1937; p13.27 Roth, A. E., et al. (1991) 'Bargaining and Market Behavior in Jerusalem, Ljubljana, Pittsburgh,and Tokyo: An Experimental Study' The American Economic Review: vol 81; no 5; p1068-95. Fehr,E., Cdchter, S. (2000) 'Fairness and Retaliation . The Economics of Reciprocity.' Journal ofEconomic Perspectives: vol 14; no 3; p159-181. Camerer, C.F. (2001) Behavioral Economics.Princeton: Princeton University Press.28 Henrich, J., Boyd, R., Bowles, S., et al. (2001) 'In Search of Homo Economicus; BehavioralExperiments in 15 Small-Scale Societies.' The American Economic Review: vol 91; no 2; p73-78

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Thus, recent research tends to support the historical materialist conclusion that

Bentham's homo economicus was shaped in tandem with bourgeoistransformation of traditional ways of life and consistent with the requirement ofthe new capitalist mode of production. Further, it lends support to the hypothesisthat 'human nature' itself can be shaped by human action to transform theirenvironment, including a given social mode of production.

The Marxian theory of socialism recognizes the historical fact that capitalistsocieties function on the basis of ethical values and material incentives firstgeneralized through what economic historians call the 'commercial revolution'and has since been become institutionalized and constantly reinforced anddeepened among individuals. The capitalist order requires sustained insecuritynot only through the threat of unemployment and destitution, but also throughfetishism of commodity and in the constant struggle 'not to fall behind' or thehope of 'getting ahead.' These permeate bourgeois consciousness, not onlyamong capitalists and managers, but in the very pores of the working peoplethemselves. Greed, self-interest and competition, not solidarity and socialharmony, lay at the base of the capitalist society. However, these very samecapitalist social relations that form the bedrock of a historically unprecedentedepoch of economic growth is also the root cause of mounting social andenvironmental crises that threatens the very foundation of life on the planet.These crises and the ongoing class contradictions of the capitalist order generatesocial protests that can gradually take a class form with the potential totranscend the bounds of capitalist mode of existence. The theoretical andpractical challenge is to begin from these actual, ongoing struggles, to generalizethem, and to build independent mass organizations of workers and their allies totake power and chart a course to a society built on socialist values.

5. The Transition Period

As we have seen, the goals and methods of the Marxian theory differfundamentally from the marginalist theories. While Marxian theory hascontributed significantly to the development of a number of fields of human

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interest, it is first and foremost a theory of socialism. Marx's critical study of thecapitalist mode of production and the classical political economy was to lay thetheoretical foundation for the working class movement to enable it to establish aworkers' government and begin the process of socialist transition. Moreover,Marx's critique of political economy is methodologically similar to his critiqueof Hegel who placed logic before experience and philosophers of theEnlightenment who treated abstractions as actualities. Marx showed how underthe capitalist system animated abstraction of capital, including powers attributedto the market by pro-market theorists, assumed priority over nature andhumanity. Thus he related Hegel's philosophy and political economic theories tothe deep structures of the rising capitalist order. From these analyses, Marxarrives at his vision of socialist transformation of the capitalist mode ofproduction centered on withering away of value as a social reality and for a newattitude towards nature and work embodied in a new form of production. ToMarx, socialist planning was one powerful policy mechanism to affect thistransition.

The efficacy of socialist planning is a function of the degree of organization andconsciousness of the direct producers, the level of culture and technologyalready attained, and the balance of class forces internationally. A central task ofsocialist planning is to replace the bourgeois structure of incentives withsocialist norms and motivations, which involve replacing accidental value drivenmarket exchanges based on private gain with planned interchanges of use valuesbased on human needs and solidarity. While the goal and the general direction ofthis movement are known, its precise course will depend on many factors. It is ahistorical process that depends on the self-activity, self-organization, andcreativity of the direct producers themselves who emerge from the womb of theold society and carry with them limitations imposed by the bourgeois culture. Ina world dominated by capital, it also depends on the extension of workers powerinternationally, especially to the capitalist centers. While much of the humancharacter is shaped by circumstances of our existence, human beings have thecreative capacity to remake the world in their own image. Therein lays thesocialist aspiration.

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While economic concerns, especially the development of forces of production,are important to the Marxian concept of socialism, the central challenge in thetransition period is a fundamental change in social relations predicated on thedevelopment of what Che Guevara called new women and men. Thus,economics of the transition period must always be framed by socialist politicaland ethical goals. In fact, a central goal of the transition period is the witheringaway of the law of value, and with it, the withering away of economics as thescience of how a market economy functions as the emerging new society willincreasingly rely on conscious planning by the working people themselvesthrough their organizations.

6. Summary Conclusion

This brief survey of the economic calculation debate set aside important topicalissues and instead focused attention on the broader theoretical andmethodological context. Neoclassical and Austrian arguments for the virtues ofprivate property and the market process are not convincing on their own groundsand their critiques of socialist planning are framed on the basis ofmethodological presumptions that are questionable. In particular, these theoriesand their methodologies are not suitable for a socialist examination of theproblems of transition from the capitalist mode of production to socialism.Lange and the market socialist response attempted to refute marginalistcriticisms on their own grounds. The result was a neoclassical defense ofeconomic planning that breaks fundamentally with the Marxian theory. Thistype of methodological eclecticism is widespread but usually not acknowledgedin the literature on socialism and the market, and socialist planning. Thus, boththe standard account of the 'economic calculation debate' and its recent Austrianreinterpretation mistakenly claim that the Marxian view was presented alongsidethe neoclassical and Austrian theories. This is far from the truth. In fact, the riseof the modern market socialist theory registers a new strand of reformistliterature characterized by substantial theoretical and methodologicalconcessions to marginalist economic theories in particular and bourgeois valuesand aspirations in general.

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Socialism and the Market

The historically informed Marxian theory of socialism requires a theory oftransition that is distinguished by policies that gradually replace capitalist andpre-capitalist modes of social existence, including monetary and marketrelations, with self-activity and self-organization of the direct producers. Whilethis essay has outlined the methodological contours of the Marxian theory toshow how radically it differs from the marginalist and other pro-market theories,it is important to stress that it has not offered any validation of this theory.Clearly, the critically important theory of the transition period can benefit fromconsidered response to all criticisms and careful assessment of the historicalexperiences of all post-capitalist societies based on Marx's own methodology. Inparticular, it is essential to base any such theory on the practical movement ofthe working people themselves as it is their liberation that the theory purports tofacilitate. The final liberation of the working class is the task of the workingclass itself. Still, this review of the 'economic calculation debate' uncovered notheoretical or methodological reason to abandon the Marxian theory that isdeveloped to inform and advance the cause of workers' and socialist movementsin their effort to eradicate the exploitive, reified, and alienated human relationsbased on private property and the market society.

This article was presented at "The Work of Karl Marx and Challenges for theXXI Century" conference, Institute of Philosophy, Havana, Cuba, May 5-7,2003. An earlier draft of this papa- was presented at a meeting of the Unionfor Radical Political Economics, Allied Social Sciences Associations, NewOrleans, January 4-7, 2001.

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