I mentioned in Tuesday's post that one of my favorite passages from Scott Shane's Dismantling Utopia is the passage about shoes. Commenter Bill asked me for the passage. Here it is:
My informal survey suggested that some of the longest lines in Moscow were for shoes. At first I assumed that the inefficient Soviet economy did not produce enough shoes, and for that reason, even in the capital, people were forced to line up for hours to buy them. . . . Then I looked up the statistics.
I was wrong. The Soviet Union was the largest producer of shoes in the world. It was turning out 800 million pairs of shoes a year--twice as many as Italy, three times as many as the United States, four times as many as China. Production amounted to more than three pairs of shoes per year for every Soviet man, woman, and child.
The problem with shoes, it turned out, was not an absolute shortage. It was a far more subtle malfunction. The comfort, the fit, the design, and the size mix of Soviet shoes were so out of sync with what people needed and wanted that they were willing to stand in line for hours to buy the occasional pair, usually imported, that they liked.
And now the "money" paragraph:
At the root of the dysfunction was the state's control of information. Prices are information--the information producers need in order to know what and how much to produce. In a market for a product as varied in material and design as footwear, shifting prices are like sensors taped to the skin of a patient in a medical experiment; they provide a constant flow of information about consumer needs and preferences. When the state controlled prices, it deprived producers of information about demand.
Later, Shane writes, "Indeed, the factory's real consumer was the state, not the consumer." He goes on to say, "The shoes Soviet industry produced might end up in a landfill, but comrade, it could produce shoes."
Incidentally, he begins the chapter, "What Price Socialism? An Economy Without Information," with the following Soviet joke from 1988:
Customer in Meat Store: Miss, can you slice 100 grams of ham for me?
Saleswoman: Certainly, citizen, if you bring me the ham.