What is a market socialist economy

Market socialism

(= Competitive socialism) theoretical concept of a socialist economic order (socialism) in which the means of production are socialized, but the allocation of resources follows the rules of the market. Only the instruments of macroeconomic planning and global control are open to the state. The development of market socialist models is a direct reaction to the criticism of Ludwig von MISES (1920) and Friedrich A. von HAYEK (1935), who considered an efficient socialist economic order to be fundamentally impossible. The core of the problem was the valuation, i.e. the pricing of the means of production, and the entrepreneurial behavior of the socialist managers. The solutions offered by Abba P. LERNER (1934-1937) and Oskar LANGE (1936-1937) focused on the first part of the criticism and neglected the second. The basic idea behind the solution is to assign the role of auctioneer in Walrasian equilibrium to the central planning office. Farm managers are instructed to minimize average costs and equate marginal costs to price. The central planning office reserves the right to distribute the social dividend and determine the growth rate. The market socialist models were exposed to numerous critical comments. The main problem from the point of view of the Austrian School is LANGES 'complete misunderstanding of the market as a competitive system and search process. This is also shown in the fact that LANGE (1965) saw market socialism only as a preliminary stage to central planning, which will ultimately be possible through electronic data processing: The market is a calculation system of the pre-electronic age. After the reforms of 1965, Yugoslavia was the only socialist country to introduce an economic system that did not implement the market socialist model, but used the market and competition as the central coordination system. Ownership of the means of production was largely in the hands of the unified labor organizations. The workers' self-management was responsible for the appointment and control of the managers. The role of the state was subsidiary and corrective, its planning essentially indicative. Despite some successes in economic growth, this system struggled with typical problems. There is no capital market. The property rights of the workers are tied to employment, i.e. they expire when they leave the company. This led to undesirable behavior in decisions about profit distribution and investments with inflationary consequences. After all, the Yugoslav system was characterized by large inter-company and, above all, interregional income differences. Literature: Feucht, M. (1983). Leman, G. (1976). Long,
0., Taylor, F.W. (1938)

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