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An economy is a machine for taking inputs from nature (energy, raw materials) and its prior incarnation (existing machines and skilled workers) and returning goods to satisfy consumers and to build the next iteration of the economy. At this level of abstraction we do not consider the relations of production: how is this complex, distributed, synchronous entity meant to self-coordinate?
Post-feudal economies, economies where the mass of people are estranged from their means of livelihood (where the mass of people no longer subsist by hunting/gathering or by agriculture/pastoralism), know two means of economic coordination: capitalism and 'socialism'/'communism' (the scare quotes are there to distinguish actually-existing reality from utopian concepts and hopes).
At first sight planning an economy by rational calculation seems the obvious answer. The inputs to firms form a column vector of entries (measures might include number, or weight, or value or price) . The outputs constitute another vector, a list measuring the quantities - in some measures - of what is produced as output by each production-unit.
The economy is then a matrix which maps the input to the output. So what do we know and what do we want?
We wish to adjust the input and output targets for each factory so that the totality of transformational processes constituting the economy, over say a year, cohere properly. And we want to do so by minimising something - perhaps wastage or inefficiency - if we just knew how to measure it.
Leonid Kantorovitch was the soviet genius who in 1939 invented the maths of linear programming. By using linear programming on the massed ranks of the thousands of equations which are encoded in the transformation matrix described above, and later leveraged by computers, the decisions of the central planning authority would bootstrap and steer the soviet economy towards Marx’s conception of communism (Plenty), overtaking the Capitalist West in the process.
And how the central planners looked down on capitalism! In the West, with decentralised ownership and decision making, all production was mediated by profitability determined through market prices. These would only be finally determined after the fact - once products hit the market. What a way to organise an economy - so tentative; so uncertain; always subject to trial-and-error, under- or overproduction and crises!
The superiority of central planning seemed obvious, and at first, during the nineteen-thirties through the nineteen-fifties, results seemed to confirm it. The means might have been brutal, but industrialisation proceeded apace. And then, despite ever-more-sophisticated mathematics and ever-more-powerful computers, it all went wrong. The economy stalled and eventually seized up. Why?
It turns out that people are not simply disinterested transfer-functions with no self-interests. Instead they needed to be individually motivated by carrots and sticks. The promise of reward and the fear of dire punishment led to systematic gaming of the planning constraints. Managers would over-order their inputs and under-promise their outputs, making sure they'd get their bonuses. Failure was unthinkable.
There was a quip in central planning circles: is planning driven by the problem or the photograph? Unfortunately the photograph was all the central planners ever got to see ... and it was based on a tissue of self-serving lies. The central plan - so high-level, so remote from real needs - was unresponsive to real demand. The quota of shirts was achieved, but nowhere did it say they had to be wearable. How would that be measured?
In 'Red Plenty', acclaimed author Francis Spufford illuminates the great arc from utopian hope to bleak defeat through a series of beautifully-written vignettes. His episodes are snapshots of individual experiences through the crucial decades. A thinly-disguised Leonid Kantorovitch, brilliant and unworldly, walks a tightrope between acclaim and disgrace as he completely misses the dire political implications of his work. A geneticist, forced to operate under the Lysenko dogma (inheritance of acquired characteristics and no role for genes), fails to watch her sharp tongue, challenging the po-faced silence around her; disgrace and exile beckon. Young people, on their way up in the Komsomol (young-communist organisation), find their dogma grating against inconvenient and unavoidable realities - and their glorious futures shattering.
The website 'Marginal Revolution' flagged this book as one of the best novels ever written with a theme of economics. It is, in truth a gentle novelisation of real history, perhaps the clearest account I have read about the real experiences of earnest, sincere people really, really trying to make a post-capitalist economy work. Don't say it hasn't been tried - because it has.
The strength of Francis Spufford's book is not, in the end, the enormous research and scholarship he exhibits; it's the wonderful portrayal of characters which draw you in, which make you as frightened, frustrated and exasperated as they are by the way the system - because it is constituted by real human beings - simply won't let global, impersonal rationality have its way.
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