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Was Communism Doomed? pp 105–134Cite as

Palgrave Macmillan

The Coordination Problem

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Abstract

Economists have sometimes claimed that communism could never work well because it is impossible to coordinate a complex society through central planning. This is looked at from two somewhat different viewpoints, both deriving from the critiques of F.A. Hayek. Could central coordination ever be efficient because of the enormous amount of information involved? Can a government ever come close to satisfying the very different aims that individual people have? It is clear that communist governments in practice did not operate very efficiently, but whether this is really an impossible task or not remains to some extent open. If one looks at the ability of elected governments in market societies to satisfy their citizenry with the range of services they currently provide, then one has to question whether a central authority that tried to provide a much greater range of goods and services could ever succeed.

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Notes

  1. 1.

    Hayek, Road to serfdom; Hayek (1945).

  2. 2.

    Overy, The morbid age, especially Chaps. 2 and 7. For the views of economists, see Walker, Theory of the firm, pp. 112–115.

  3. 3.

    Hayek, Road to serfdom, p. 11.

  4. 4.

    Ibid., p. 11.

  5. 5.

    Ibid., Chap. 2.

  6. 6.

    Ibid., p. 26. Hayek (1945), pp. 520–521.

  7. 7.

    Hayek, Road to serfdom, p. 37.

  8. 8.

    Ibid., p. 58.

  9. 9.

    Ibid., Chaps. 6, 7, 8 and 9.

  10. 10.

    Ibid., pp. 100–109.

  11. 11.

    Ibid., p. 151.

  12. 12.

    Ibid., p. 174.

  13. 13.

    For example, Yeagar and Leland (1994).

  14. 14.

    Hayek (1945), p. 524.

  15. 15.

    Hayek (1945), p. 530.

  16. 16.

    Coase (1937).

  17. 17.

    Hill, Extreme engineering.

  18. 18.

    For example, Kemp (1999).

  19. 19.

    Kahneman et al. (1986), Kemp (1996), Olmstead and Rhode (1985).

  20. 20.

    Walker, Theory of the firm, p. 3.

  21. 21.

    Ibid., pp. 21–25.

  22. 22.

    Ibid., pp. 66–95.

  23. 23.

    Heath and Staudenmayer (2000).

  24. 24.

    Ibid., p. 157.

  25. 25.

    Ibid., pp. 161–166.

  26. 26.

    Ibid., pp. 173–182.

  27. 27.

    For example, Camerer, Behavioural game theory. Cooper, Coordination games.

  28. 28.

    Van Huyck et al. (1990).

  29. 29.

    Chaudhuri et al. (2009).

  30. 30.

    Brandts and Cooper (2007). If the groups are not fixed, then performance bonuses may become more important: Chaudhuri and Paichayontvijit (2010).

  31. 31.

    Riedl et al., Efficient coordination in weakest-link games.

  32. 32.

    Weber et al. (2001).

  33. 33.

    Weber et al. (2001).

  34. 34.

    Ibid., p. 529.

  35. 35.

    Lenin, The state and revolution, p. 473.

  36. 36.

    For example, Ellman, Socialist planning; Kornai, Socialist system.

  37. 37.

    Kantorovich, Best use of economic resources.

  38. 38.

    Ellman, Planning problems in the USSR; Ward (1960).

  39. 39.

    This is a simplified version of the problem outlined in Kantorovich, Best use of economic resources, Chap. 1, pp. 1–5.

  40. 40.

    Kantorovich, Best use of economic resources, for example, p. 148.

  41. 41.

    Ibid., Sect. 3.

  42. 42.

    For example, Kantorovich, Best use of economic resources, pp. 8–9, 138. It would perhaps have been unproductive and unwise to advocate this.

  43. 43.

    Ibid., pp. 151–152.

  44. 44.

    Kornai, Socialist system, Chap. 17. Hanson, Rise and fall of the Soviet economy, pp. 92–96. Ellman, Planning problems in the USSR, writing in 1973, expected the use to increase, although noting (e.g. p. 118, 127) that its use had been limited to date.

  45. 45.

    Kantorovich, Best use of economic resources, p. 149.

  46. 46.

    Gerovich (2008).

  47. 47.

    Gerovich (2008).

  48. 48.

    Keizer (1994). For similar views, see Yeagar and Leland (1994), p. 93, or Kornai, Socialist system, especially Chaps. 21, 22 and 23.

  49. 49.

    Caldwell (1997).

  50. 50.

    For example, Cottrell and Cockshott, Information and economics.

  51. 51.

    Grossman and Stiglitz (1980).

  52. 52.

    See, for example, Turner, Between debt and the devil, Chaps. 2 and 6.

  53. 53.

    For example, Herman, Freedom’s forge.

  54. 54.

    Hayek, Road to serfdom, pp. 152–153.

  55. 55.

    Ford, My life and work, p. 72.

  56. 56.

    Nove, Economics of feasible socialism.

  57. 57.

    Ellman, Socialist planning, pp. 201–207.

  58. 58.

    Kornai, Socialist system, Chaps. 11, 12 and 13.

  59. 59.

    For example, 2015 Index of economic freedom.

  60. 60.

    Kemp, Public goods and private wants, Chap. 3; Samuelson (1954).

  61. 61.

    Mahoney et al. (2005), Thompson and Elling (2000).

  62. 62.

    Kemp and Bolle (1999).

  63. 63.

    Ferris (1983); Kemp, Public goods and private wants, Chaps. 5, 6, 7 and 8.

  64. 64.

    For example, Chanley et al. (2000), Van de Walle and Bouckaert (2003).

  65. 65.

    Harris and Seldon, Over-ruled on welfare; Kemp and Burt (2001).

  66. 66.

    Kemp ( 2003 ).

  67. 67.

    Kemp, Public goods and private wants, Chap. 8.

  68. 68.

    Kemp (1998), Kemp et al. (1995).

  69. 69.

    De Groot and Pommer (1989).

  70. 70.

    For example, Alvarez et al. (2000).

  71. 71.

    Feld and Kirchgässner (2000), Frey (1994), Pommerehne (1978).

  72. 72.

    De Groot and Pommer (1989), Kemp and Willetts (1995).

  73. 73.

    Mahoney et al. (2005).

  74. 74.

    Hanson, Rise and fall of the Soviet economy, pp. 147–148. A state of Pareto efficiency is reached when a group of individuals or economic entities has completed all possible free trades, and other exchanges are possible only if someone loses.

  75. 75.

    For example, Bateman (2010), Skidelsky, Keynes.

  76. 76.

    Kornai, Socialist system, p. 117.

  77. 77.

    Marx’s views on how the development of productive capacity in capitalism was accompanied by impoverishment of the proletariat suggest he might have argued on the other side. Marx, Capital, Vol. 1, Part 7.

  78. 78.

    The question of whether SOEs can attain the efficiency level of privately owned firms remains a tricky one. For the most part, they seem not to (Walker, Theory of the firm, pp. 109–127). A common problem is that governments may feel obliged to support failing SOEs (Kornai, Socialist system, ch. 21; Walker, Theory of the firm, pp. 109–127, 157–158). But then, governments sometimes do this for privately owned firms as well. And governments do not always bail out SOEs: For example, in 2015 the New Zealand government refused a financial bailout for the coal-mining SOE, Solid Energy.

  79. 79.

    Kornai, Socialist system, Part 3.

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  1. Dept of Psychology, University of Canterbury, Christchurch, New Zealand

    Simon Kemp

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Kemp, S. (2016). The Coordination Problem. In: Was Communism Doomed?. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-32780-8_6

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