David R. Henderson  

Henderson on Red Plenty

Women, Liberty, Marketing, and... Pax Libertaria...
Francis Spufford has pulled off a marvelous stunt. His book, Red Plenty, is not quite a documentary, although it's full of verified facts and actual historical figures, and not quite a novel, although it contains fictional characters. The British Sunday Telegraph called it "faction." Whatever one calls it, here's what it is: a work of art that sympathetically blows the whistle on Soviet Communism, pointing out its contradictions and its brutality, showing, gently and non-propagandistically, why it couldn't and didn't work.

Spufford, who teaches writing at Goldsmith's College in Britain, is not an economist but he has a real grasp of what economists call the "calculation problem." Early in the last century, Ludwig von Mises and later Friedrich Hayek pointed out that in a centrally planned economy, the planners lack the information they need to plan a successful economy. They argued that only a decentralized price system--i.e., the free market--can provide that information, but, of course, abolition of the price system was the essence of Communist economics. Ultimately, Mises and Hayek won the "socialist calculation debate," as even lifelong socialist Robert Heilbroner admitted in two stunning articles in the early 1990s.

Spufford weaves this lesson into a series of vignettes that track the fictional and non-fictional characters from 1938 to 1970. The last book on the economics of Communism that I enjoyed even close to as much was Scott Shane's Dismantling Utopia: How Information Ended the Soviet Union.

This is from my just-published review of Red Plenty in Regulation, Winter 2012-13.

Another excerpt, on how value was measured in the Soviet economy and how that perversely affected economic decisions:

As Spufford points out in a footnote, industrial growth "in the USSR did not carry over into general prosperity." A big part of the reason is that value was often measured by weight. One of the characters in the book doesn't want to sell a machine that another factory desperately needs because the factory that produces the new machine will be paid less than for the old inferior machine. The reason? Equipment is priced mainly according to weight. The new superior machine weighs less.

HT to Sarah Skwire for alerting me months ago to this book.

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COMMENTS (5 to date)
Ken B writes:

The very last thing I need is more to read but this sounds good. I really liked the Russ Roberts novel I read, which was also an Econ lesson novel.

Joe Williams writes:

I'm about halfway through the book as "light reading" between quarters. I've smiled on numerous occasions as I encountered topics that we discussed in class. So far, it's an enjoyable read.

Chris Koresko writes:

This is a bit off-topic, but it's something I've been wondering about for a while, and which I haven't come across any reference to:

Suppose that with modern or future technology you can solve the knowledge and calculation problems. For example, you put cameras and sensors everywhere, connected to a vastly powerful computer network that knows what people desire and can work out the optimal system of specialization and trade to produce it. What then?

It strikes me that there's a good chance the optimized solution is very much like the one the free market would find. So your experiment in socialism would have little practical value.

But maybe you want a solution which is deliberately sub-optimal in a market sense, but which accords better to a sense of justice or has some other characteristic you value. The question then becomes, who are "you" to decide what the economy should look like? In other words, who makes the decision and how? Through the political process, with all its rather severe imperfections? Wouldn't justice be at least as likely to suffer as to benefit?

James writes:


I think Bryan had a student (Adam something?) who wrote a paper about your question saying that in your scenario, a self serving government would maximize the surplus that it extracts from the population so that they are almost indifferent between continuing on as slaves vs suicide. A social welfare maximizing government would see that the optimal course of action would be to let loose the market. In practice, no camera can capture a revealed preference absent a market.

If you poke through the econlog archives, you may find a post about this.

Tom West writes:

A social welfare maximizing government would see that the optimal course of action would be to let loose the market.

Does that depend upon your social welfare function? If, for example, your social welfare function is maximizing income for the second percentile, I'm not certain you'd end up with a free market solution.

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