Thoughts on Market Socialism
By Arnold Kling
I am reading a draft of The Clash of Economic Ideas, by Lawrence H. White. (Googling for it landed me here). One of its topics is the socialist calculation debate, which revolved around the idea of “market socialism,” an idea associated with Oskar Lange.
One way I think of market socialism is that you could have government play the role of a Walrasian auctioneer, calling out prices to firms and letting them reach an efficient allocation of resources by maximizing “profits.” However government would distribute all the output. Yes, there are incentive problems. Lots of other big issues. I will get to as many of them as I can in a subsequent post. Be patient.
A point that White makes is that nobody has every tried to implement market socialism in practice–not even in Poland, where Oskar Lange had a high position. I would suggest that market socialism represents an intellectual bait-and-switch, where the reality is that socialism reverts to command and control. Note that as the political process grinds on, the approach to reducing carbon has evolved away from carbon taxes and even from cap-and-trade to more command-and-control style.
I see health care policy on the same track. If you search carefully, you will find some prominent Obama people who once supported using consumer cost-sharing as a market incentive to “bend the cost curve.” No more. Even “pay for performance” is fading into the policy background. Instead, increasingly, the evolution is toward price controls, which in turn will mean command-and-control allocation of medical services.
What I am saying is that whatever the theoretical merit of having government use decentralized market mechanism to implement collectivist ideals, the trend in practice is that centralized ends wind up being pursued by command-and-control means. Again, I will explore this more in a subsequent post. What I would claim is that it is not simply a matter of people trying market mechanisms, having them fail, and reverting to command-and-control. Instead, they revert to command-and-control without trying market mechanisms. I want to speculate on why that is the case.