Table Of ContentMarkets, Planning and Democracy
NEW THINKING IN POLITICAL ECONOMY
Series Editor:Peter J.Boettke
George Mason University,USA
New Thinking in Political Economy aims to encourage scholarship in the intersection of
the disciplines of politics,philosophy and economics.It has the ambitious purpose of
reinvigorating political economy as a progressive force for understanding social and eco-
nomic change.
The series is an important forum for the publication ofnew work analysing the social
world from a multidisciplinary perspective.With increased specialization (and profes-
sionalization) within universities, interdisciplinary work has become increasingly
uncommon.Indeed,during the 20th century,the process of disciplinary specialization
reduced the intersection between economics,philosophy and politics and impoverished
our understanding ofsociety.Modern economics in particular has become increasingly
mathematical and largely ignores the role ofinstitutions and the contribution ofmoral
philosophy and politics.
New Thinking in Political Economy will stimulate new work that combines technical
knowledge provided by the ‘dismal science’and the wisdom gleaned from the serious
study ofthe ‘worldly philosophy’.The series will reinvigorate our understanding ofthe
social world by encouraging a multidisciplinary approach to the challenges confronting
society in the new century.
Recent titles in the series include:
Explaining Constitutional Change
A Positive Economics Approach
Stefan Voigt
Ethics as Social Science
The Moral Philosophy ofSocial Cooperation
Leland B.Yeager
Markets,Planning and Democracy
Essays after the Collapse ofCommunism
David L.Prychitko
Markets, Planning and
Democracy
Essays after the Collapse of Communism
David L. Prychitko
Department of Economics,Northern Michigan University
Program on Markets and Institutions,James M.Buchanan
Center for Political Economy,George Mason University
NEW THINKING IN POLITICAL ECONOMY
Edward Elgar
Cheltenham,UK • Northampton,MA,USA
© David L.Prychitko 2002
©
All rights reserved.No part of this publication may be reproduced,stored in
a retrieval system or transmitted in any form or by any means,electronic,
mechanical or photocopying,recording,or otherwise without the prior
permission of the publisher.
Published by
Edward Elgar Publishing Limited
Glensanda House
Montpellier Parade
Cheltenham
Glos GL50 1UA
UK
Edward Elgar Publishing,Inc.
136 West Street
Suite 202
Northampton
Massachusetts 01060
USA
A catalogue record for this book
is available from the British Library
ISBN1 84064 519 9
Printed and bound in Great Britain by MPG Books Ltd,Bodmin,Cornwall
Contents
Acknowledgements vii
Introduction:markets,planning and democracy in the age of post-
communism 1
PART ONE THE POSSIBILITY OF ECONOMIC DEMOCRACY:
SELF-MANAGED SOCIALISM VERSUS THE
SELF-MANAGED FIRM
1 Comparative economic systems 11
2 Marxism and decentralized socialism 17
3 Did Horvat answer Hayek? The crisis of Yugoslav
self-management 35
4 Perestroika in Yugoslavia:lessons from four decades of
self-management 44
5 Marxisms and market processes 56
6 Marx,postmodernism and self-management:reply to Abell 63
7 The critique of workers’self-management:Austrian
perspectives and economic theory 70
8 Hayekian socialism:rethinking Burczak,Ellerman and Kirzner 89
PART TWO CAPITALISM AND THE QUEST FOR UTOPIA
9 Formalism in Austrian School welfare economics:another
pretense of knowledge? 103
10 Expanding the anarchist range:a critical reappraisal of
Rothbard’s contribution to the contemporary theory of
anarchism 123
11 The welfare state:what is left? 145
12 Does market socialism have a future? From Lange and Lerner
to Schumpeter and Stiglitz 156
v
vi Contents
13 Socialism as Cartesian legacy:the radical element within
F.A.Hayek’s The Fatal Conceit 168
14 The collapse of communism – a decade later 180
15 Thoughts on Austrian economics,‘Austro-punkism’,and
libertarianism 186
References 191
Index 205
Acknowledgements
Over the past decade my research has been financially supported by the
Earhart Foundation, the J.M. Kaplan fund, and the Atlas Foundation. I
am indebted to them, for they have made it possible for this backwoods
professor to enjoy scholarly pursuits,in addition to fish and game.
I thank my friend and colleague Pete Boettke for suggesting that I
publish this particular collection of essays in his New Thinking in Political
Economy series. Pete and I share the same vision of what an Austrian-
inspired political economy ought to be, but we disagree on some of the
details, such as the theoretical validity and normative value of self-
managed enterprise. That he has supported my efforts all along speaks
volumes for his kind-heartedness and intellectual generosity.I also wish to
thank Alan Sturmer and Karen McCarthy at Edward Elgar Publishing for
guidance in the production of this book,and Laura Kramer at Northern
Michigan University for her secretarial support.
I wrote these essays over a twelve-year period,and have greatly benefited
from the encouragement, comments, and support of several colleagues
during that time. In particular, I wish to thank Jaroslav Vanek, who cor-
rected a number of my illusions about workers’self-management,while I
visited as a junior fellow in his Program on Participation and Labor-
managed Systems at Cornell University in 1988,and for the decade that fol-
lowed.I also gained a great deal from my experience as a Fulbright Grant
recipient at the Philosophical Faculty at the University of Zagreb,during
the Spring and Summer of 1989,and as a participant in several colloquia
at the Inter-University Centre for Postgraduate Studies in Dubrovnik,par-
ticularly the sessions on ‘Political Theory and Political Education –
Anarchism:Community and Utopia’.I thank Dusˇko Sekulic´ for sponsor-
ing me during my research in the former Yugoslavia.I also thank Robert
Hefner and Peter Berger, who organized the Second Annual Summer
Faculty Seminar on Economy,Values,and Culture,at The Institute for the
Study ofEconomic Culture at Boston University,22 June–10 July 1992;my
colleagues in the Economics Department at SUNY-Oswego, where I had
been on the faculty from 1989–1997; and my present colleagues in the
Economics Department at Northern Michigan University.My office door
was often closed while I hammered away on this project,but it was still open
for their warm conversation.
vii
viii Acknowledgements
I appreciate the comments and criticisms provided by several people
while I first circulated the essays in this book: Scott Beaulier (George
Mason University), Pete Boettke (George Mason University), the late
Kenneth Boulding (George Mason University), Ted Burczak (Denison
University), Jeffrey Friedman (Barnard College), Steve Horwitz (St.
Lawrence University),William Kern (Western Michigan University),John
Kane (SUNY-Oswego),Israel M.Kirzner (New York University),the late
Don Lavoie (George Mason University), Larry Moss (Babson College),
Steve Pressman (Monmouth College), Mario Rizzo (New York
University), Howard Swaine (Northern Michigan University), Karen I.
Vaughn (George Mason University),and a host of anonymous referees.
My wife Julie,and our children Sonja Joanne,Emily Rose,and Anthony
David, remain the unending fountain of love and joy in my life. I thank
them for their patience while I worked on this project.
Finally,I dedicate this book to the memory of Don Lavoie,‘my’profes-
sor.
David L.Prychitko
Introduction: markets, planning
and democracy in the age of
post-communism
Contemporary society cannot flourish without markets, and therefore
private or separate property rights in the means of production.
When Ludwig von Mises and F.A.Hayek advanced this argument in the
1920s and 1930s, they faced waves of criticism from defenders of market
socialism,most notably Oskar Lange and Abba Lerner,but also from their
Austrian colleague Joseph Schumpeter,in his magnificent but flawed book,
Capitalism,Socialism,and Democracy(1950).
For the most part Mises and Hayek had geared their critique of social-
ism to central economic planning.In response,market socialists generally
agreed that truly centralized economic planning had little basis in economic
theory;instead they promoted a form of socialism that apparently allowed
for markets and prices in consumer goods, and the imputation of consu-
mer goods prices through the state-owned capital structure.Their theoret-
ical solution earned the respect of the economics profession for years to
come.Market socialism was considered at least consistent with neoclassi-
cal economic theory,and the Austrians were viewed as losers in the great
socialist calculation debate,as it came to be called.
A renewed appreciation for the Austrian position would appear only by
the late 1980s,as the problems of ‘really existing socialism’came to a head.
The collapse of the former Soviet Union and other socialist countries
throughout EasternEurope from the Fall of1989 onward seemed finally to
validate the Mises–Hayek case against central planning, and also cast
serious doubt on the market–socialist hybrid.
It was during this time, a couple years before the Fall, that I began
working in comparative political economy,using the Austrian theory ofthe
market process. My first book, Marxism and Workers’ Self-Management:
The Essential Tension(1991),grew out ofmy George Mason University dis-
sertation.There,I attempted to apply the Austrian argument to the theory
of decentralized socialism,a theory championed especially by a group of
Marxist academics in the former Yugoslavia, who disdained Soviet-style
central planning and showed little appreciation for the neoclassical models
1
