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THE ROLE OF PLANNING IN SOCIALIST ECONOMY
By Oskar Lange1
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2 OSKAR LANGE
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THE ROLE OF PLANNING IN SOCIALIST ECONOMY 3
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4 OSKAR LANGE
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THE ROLE OF PLANNING IN SOCIALIST ECONOMY 5
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6 OSKAR LANGE
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THE ROLE OF PLANNING IN SOCIALIST ECONOMY 7
to the fundamental
In addition aspects of the plan which
determine the pace and the direction of development of the
economy, economic planning must be concerned with the co-ordi?
nation of the activities of the various branches of the economy?
There is, first of all, the coordination of the financial aspects of the
plan and of the real aspects of the plan?in particular, coordination
of the total purchasing power at the disposal of the population and
the amounts of consumer goods which are provided for individual
distribution. The plan must also in some way and by some means
be interested in the coordination of the output of the various
branches of the national economy- Otherwise, the determination
of the directions of development established by the plan may
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8 OSKAR LANGE
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THE ROLE OF PLANNING IN SOCIALIST ECONOMY 9
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10 OSKAR LANGE
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THE ROLE OF PLANNING IN SOCIALIST ECONOMY II
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12 OSKAR LANGE
hampered the realisation of the plan and the central authority did
not know of their existence.
Thus it is important in practice to know how many of the
decisions are made in the central economic plan and how many
are delegated to lower economic units, e.g., enterprises or organi?
sations of enterprises in the industry, etc. This is particularly
important with regard to the investment plans. In Poland, for
instance, we are now developing a scheme which provides central
planning of what we call fundamental investments?for instance
building a new plant or enlarging substantially an existing plant.
We shall give the enterprises the right to undertake the subsidiary
investments autonomously without asking anybody for approval.
The latter has proved to be necessary in order to assure great
flexibility of investment decisions such as when the enterprise needs
to put up funds for unforseen repairs, or if itwants to buy machines
to increase output quickly, or to make some technical improve?
ment. Our experience was that before it got the approval of the
central authority to undertake the necessary investments the whole
situation had altered radically. This made for inflexiblity. The
financial resources for such subsidiary investments would consist
of a part of the amortisation fund of the enterprise and of bank
credits it could take up for the purpose of such investments. Invest?
ments of small enterprises are to be entirely financed by bank
credits, without appearing at all in the central economic plan.
Now, of course, one thing should be kept inmind. The fact
that a part of the investment is financed by bank credits does subject
them in an indirect way to central planning, because obviously the
bank can refuse to give the credit. The bank acts on the basis of
certain general economic policy : how much credit it is going to
give and for what purpose and on what conditions it will give it ?
Through policy decisions here the central authority can indirectly
influence subsidiary investments.
A similar economicproblem, and a more acute one, exists
with regard to the planning of production. In the former period
even the smallest product had to be in central economic plan. Now,
however, only the basic production of enterprises is in the central
economic plan and the enterprises have the right to undertake
what is called
subsidiary production outside the plan. There is
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THE ROLE OF PLANNING IN SOCIALIST ECONOMY 13
ting prices.
Unless distribution of consumers
goods is done by rationing,
the market price must obviously be such as to establish equilibrium
on the market, to equalise demand and supply. The same holds
also for prices of the means of production when administrative
allocation is removed and enterprises freely buy and sell their
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14 OSKAR LANGE
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THE ROLE OF PLANNING IN SOCIALIST ECONOMY 15
something to cover all the fixed costs in the industry. This may
be zero, because the large profits of the enterprises which produce
at lower cost may be sufficient for this purpose. If not we must
add something cost. Such additions would have to be
to marginal
everywhere proportional to the marginal cost so that the normal
prices would be proportional to the marginal costs of the various
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