Chapter 4.3.

Chapter 4: Standard Principles of Planning

4.3. Environmental Balance -part 2- : Mathematical Models

It was mentioned in the previous section that the key to the functioning of a sustainable planned economy is to devise a model to actuarially implement "control" in the "environmental balance," which is the priority reference principle in a sustainable planned economy. The former method calculates the environmental impact of production, distribution, and consumption activities, while the latter calculates the environmental impact on natural ecosystems, focusing on land and water areas.

The former can be further divided into a method for calculating the environmental impact of each production sector and a method for calculating the environmental impact of the consumption process of products, but the calculation of the environmental impact of each production sector is the key to formulating specific economic plans.

In formulating a comprehensive economic plan, it is necessary to calculate the overall environmental impact of each production sector, taking into account the interconnectedness of individual production sectors, rather than individual calculations for each sector. In this regard, the use of input-output model is indispensable.

The input-output model is a correlation diagram created by Soviet-American economist Wassily Leontief, inspired by Marx's reproduction schema, which quantifies the input-output structure in the production and distribution process of each industrial sector in a matrix format. In capitalist market economies, it is used to understand the economic structure and calculate the production ripple effect.　

This input-output model itself can be used to determine the "material balance," which is the second standard principle in a sustainable planned economy, but it can also be used as a basis to determine the "environmental balance," and to calculate the environmental load for each sector.

Leontief was also involved with postwar Japan, and the "Embodied Energy and Emission Intensity Data for Japan  Using Input-Output Tables (3EID)" that Japan's National Institute for Environmental Studies has been developing since the 1990s is based on input-output tables divided into around 400 industrial sectors, and calculates the amount of environmental load, such as energy consumption and greenhouse gas emissions such as CO2, that occurs in unit production activity (equivalent to one million yen) in each sector. This is a powerful model that can serve as the basis for environmental balance calculations.

On the other hand, the method of calculating the environmental load during the consumption process of a product is useful for calculating the cross-sectional environmental load during the consumption and distribution process of a product, which is comprehensive and difficult to grasp using a vertical input-output table.

Although the specific method has not yet been established, the Carbon Footprint, which investigates and grasps the source of greenhouse gases such as carbon dioxide emitted in the life and activities of individuals, groups, and companies, may be applicable to calculating the overall environmental load other than greenhouse gases.

In response to the above, methods for calculating the environmental load on natural ecosystems, focusing on land and water bodies, are needed when planning the use of land and water bodies that are essential for humans to continue industrial activities, including agriculture.

In this regard, the "Ecological Footprint (EF)", defined as "a metric of human demand on ecosystems, or more precisely on the planet’s biocapacity, which tracks how much mutually exclusive, biologically productive area is necessary to renew people’s demand for nature’s products and services", can be a useful clue.

When organically combined with the methods for calculating the environmental load associated with production, distribution, and consumption activities mentioned above, the EF serves as a numerical indicator for planning so that the EF remains within the limits of biological production for each piece of land and water body.

However, the existing calculation models presented above as concrete examples were all devised as methods of environmental analysis under a capitalist market economy, and therefore at present they remain analytical tools for environmental balances that are premised on a capitalist market economy. Further application is required when applying these to a planned economy.

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 4.2.

Chapter 4: Standard Principles of Planning

4.2. Environmental Balance -part 1- : Mitigation vs. Control

In sustainable economic planning, environmental balance is a criterion principle that takes precedence over material balance. Environmental balance strictly means ecological balance pertaining to the balanced maintenance of the earth's natural ecosystem.

In that sense, it might be more appropriate to clearly define it as "ecological balance," but since this is not necessarily a widely supported term, here we will use the term "environmental balance," which has the broader meaning of a healthy balance in the global environment.

The most elementary principle of ecological balance in this sense is mitigation, which reduces the load on the ecosystem as much as possible. This is not about controlling the development itself, but about gradually reducing the environmental burden caused by the development. The stages of the process are avoidance, minimization, correction, alleviation, and compensation, in that order.

The first stage, "avoidance," is almost never adopted because it is a zero approach to avoiding certain development activities, and the second stage, "minimanization," is also difficult to adopt because it means minimizing the extent and scale of certain development activities.

The third, "correction," works insofar as it is possible to restore an ecosystem damaged by a development activity, but is rejected when that restoration requires significant costs, and is structured so that it eventually settles on the fourth, "alleviation." In reality, even alleviation is an obstacle to development, so it is often dealt with by the fifth option, "compensation," (including monetary compensation), which is provided as an escape route.

Such an idea is compatible with the loose environmental policy of "environmental protection" within the capitalist framework symbolized by the "development and environment compatible" slogan. In fact, there is a nod to the fact that this idea originated in the United States, historically the headquarters of capitalism. Even in a planned economy, however, it can be adopted in a development economic planning scheme that focuses on development.

However, as a principle of a sustainable planned economy that focuses on guaranteeing ecological sustainability, "mitigation" principle is just too loose and insufficient as a reference principle. Instead, it is necessary to introduce the concept of "controlling."

"Controlling" is a reference principle that goes beyond ‘mitigation’ to more actively control production activities, both quantitatively and qualitatively, in order to maintain ecological equilibrium. In light of the five stages of the “mitigation” principle mentioned earlier, the three stages of avoidance, minimization, and correction are systematically implemented, while the neutralized stages of mitigation and compensation are eliminated.

Such a “controlling” principle is a general framework, but in order to apply it to a planned economy, it is necessary to devise and apply a precise mathematical model that enables balance-of-payments calculations to objectively measure the environmental impact of production activities. This is the next task.

"Controlling" goes beyond "mitigation" and is a standard principle that proactively regulates production activities both quantitatively and qualitatively in order to maintain balance in the ecosystem. In light of the five stages of the "mitigation" principle mentioned above, the three stages of avoidance, minimization, and correction are implemented in a planned manner, while the neutralizing stages of alleviation and compensation are excluded.

This "controlling" principle is just one broad framework, and to apply it to a planned economy, it is necessary to devise and apply precise mathematical models that enable balance calculations to objectively measure the environmental load caused by production activities. This is the next challenge.

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 4.1.

Chapter 4: Standard Principles of Planning

4.1. Overview　

This chapter will look at the reference principles that serve as the basis for the implementation of specific planning based on a sustainable planned economy. These reference principles of planning should serve as the basis for the economic techniques to be applied in developing individual economic plans.

In this regard, if we return to the three planned economy models discussed in the previous section, in the equilibrium planned economy model, the most important criterion principle in planning is the equilibrium between supply and demand. In a sense, this is the starting point of the theory of planned economy.

In a capitalist market economy, the relationship between supply and demand is subject to random and capricious transactions between parties in the market, which is permanently unstable, while there is always the risk that the market will be manipulated through tricks such as intentional price manipulation. Therefore, economic management is inherently unstable, and events such as depressions and recessions are inevitable due to the imbalance between supply and demand.

In light of these deficiencies, the planned economy is planned in advance in order to adjust the supply-demand relationship appropriately. The reference principle here is the concept of "material balance." Material balance refers to balancing the amount of production (amount of value) set as the production target and the amount of input required to achieve the target in each planning year, and is the core concept of supply and demand adjustment in a planned economy.

In fact, this balancing principle is also applied in the production planning of individual companies in a capitalist economy, but the difference is that in a planned economy, it is applied to the entire area where economic planning is implemented.

Incidentally, in the development planning economy model, the "development tempo," which measures the degree of economic development through each economic plan, was set as an additional criterion principle, while the balance of goods and services principle was used as the base principle. This is a criterion principle peculiar to the former Soviet model of planned economy, which started from a state of underdevelopment and set the supreme goal of catching up with and overtaking capitalism, but before long, expansion and reproduction became the overriding principle, rather than the material balance.

In contrast, in the environmentally planned economic model on which the sustainability planned economy, the subject of this paper, is based, "environmental balance" is added. This is the principle of adjusting the balance of goods and services according to the allowable load of the global environment, and is the very core principle that guarantees ecological sustainability.

In this sense, it is no exaggeration to say that this principle is not merely an additional principle, but a fundamental principle that should take precedence over the material balance mentioned above. On the other hand, principles such as the development tempo, which could push the environmental balance out of balance, no longer apply in an environmentally planned economic model.

By the way, in the rigorous application of these principles, whether in the material balance or the environmental balance, it is essential to construct a mathematical model. Among other things, it is the application of linear programming. In this respect, the development of supercomputers and artificial intelligence today is a tailwind for the construction of such mathematical models for planning.

On the other hand, in applying the material balance to the adjustment of supply and demand, it is necessary to introduce not only mathematical models, which may fall into desk planning without humans, but also behavioral science principles to rationally predict the economic decision-making of concrete, flesh-and-blood humans.

👉The papers published on this blog are meant to expand upon my On Communism.

TABLE OF CONTENTS

Preface  page1

Part I: PRINCIPLES OF SUSTAINABLE PLANNED ECONOMY

Chapter 1: What is a planned economy?

 1.1. Planned economy and market economy  page2
 1.2. Planned economy and exchange economy  page3
 1.3. Marx's theory of planned economy  page4

Chapter 2: Criticism of the Soviet-style planned economy  

 2.1. Ambiguous beginning  page5

 2.2. National planned economy  page6

 2.3. Intrinsic deficiencies  page7

 2.4. Policy deficiencies  page8

Chapter 3: The Relationship between the Environment and the Economy

 3.1. Science and forecasting  page9
 3.2. Role of environmental ethics  page10
 3.3. Limitations of Classical Environmental Economics  page11
 3.4. Environment planned economy model  page12
 3.5. Dialectic between Environment and Economy  page13
 3.6. Economic Theory of Non-monetized Economy  page14

Chapter 4: Standard Principles of Planning

 4.1. Overview  page15
 4.2. Environmental Balance -part 1- : Mitigation vs. Control  page16
 4.3. Environmental Balance -part 2- : Mathematical Models   page17

 

To be continued.

Chapter 3.6.

Chapter 3: The Relationship between the Environment and the Economy

3.6. Economic Theory of Non-monetized Economy 　

All traditional economic theories, whether market theories or planning theories, have been conceived on the premise of a monetized economy, which is inevitable since human economic activities have developed around money since the invention of money as a means of exchange. 　

On the other hand, non-monetized economy has been the subject of anthropology (economic anthropology), which studies the customs of "uncivilized" peoples for whom monetized economy is not widespread. Such ancient customs, though interesting, cannot be brought into a "civilized" society. 　

As a result, even in the planned economies that began in earnest in the former Soviet Union, economic planning was pursued on the premise that the monetized economy would be maintained. There, the commodity form of exchange of goods and services for money was maintained, at least for consumer goods, and the state, which was the main actor in economic planning, invested its financial resources in priority areas, as in the past, using money to manage public finances.

In this respect, it was not so different from capitalism, except that it did not officially recognize the free market (although the black market was latent, albeit illegal) and attempted to control all commodities at official prices according to an economic plan.

However, the means of money was originally "invented" to make free barter easier, faster, and more repeatable, and is therefore essentially a means of exchange that presupposes a free market. Trying to apply this to a planned economy is so far-fetched that it can almost be described as "physically impossible." 　

Moreover, the ultimate proposition of equality of property, which has been the goal of many revolutions in the past, will remain a pipe dream as long as the monetized economy is maintained. This is because it is impossible to distribute equally to all members of society the money generated in the free market, which is the arena of competition among economic agents who are always striving to establish transactions favorable to themselves and to gain profits. 

In fact, a planned economy is essentially an economic system that is not based on monetary exchange. It is precisely because it does not have a market based on monetary exchange that it requires an overall plan to regulate production and distribution. In this sense, the theory of a planned economy is necessarily an economic theory of a non-monetized economy. 　

In particular, an "ecologically sustainable planned economy" that aims to internalize the economy into the environment would not fit well with a monetized economy. This is because the environmental criteria that define the general framework of planning are, by their nature, not convertible into monetary values. 　

Then, from this point on, it is almost uncharted territory for conventional economic theory. However, in order to establish a true theory of planned economy, we must make a major shift in the assumptions of conventional economic theory and reconstruct an economic theory of non-monetized economy. 　

There, for example, concepts such as GDP (gross domestic product), which is measured by converting total production into monetary value, and "economic growth," which is indexed by the rate of increase in GDP, will be discarded. Instead, gross output will be measured in terms of actual output, and the emphasis will be on "quality of life" from the perspective of real people, rather than "economic growth."

Although it is theoretically possible to use the rate of increase in the quantity of output as a new indicator of "economic growth," in a planned economy guided by strict environmental standards, "economic growth" that endorses a constant increase in output would be a dangerous concept that could cause the economy to overtake the environment.

Instead, the key criterion for domestic economic conditions is the improvement of "quality of life" as evaluated comprehensively by various indicators, such as the nutritional and health status of real people, life expectancy, child mortality, living environment, and work and leisure time.

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 3.5.

Chapter 3: The Relationship between the Environment and the Economy

3.5. Dialectic between Environment and Economy 　

Traditional environmental and economic theory has been based on the "compatibility of the environment and the economy" as a perspective when attempting to resolve the conflicting and contradictory relationship between the environment and the economy. This is a simple and safe motto that has been widely used, but it is in fact an empty theory. 　

The reason why it is an empty theory is that modern economic activities since the Industrial Revolution, which work on the natural environment and are promoted even if they sometimes destroy it, have to stand in constant conflict and tension with the natural environment. 　 

In the framework of classical economics, the environment is regarded as an external condition of the economy, and environmental destruction is regarded as an external diseconomical event. Then, policy technologies such as emissions trading and environmental taxes (carbon tax) are used to internalize the external diseconomies and alleviate the conflict between the economy and the environment. 　

Compared to the supremacy of economic theory, which underestimates external diseconomies and seeks to protect the superiority of economic activities, this direction is a conscientious attempt to dialectically sublate the economic-environmental antagonism. However, it is impossible to completely internalize the external condition of the environment, which is governed by natural laws, into an economy, and it must always remain an incomplete internalization, which is only partial as a dialectic. 　

Let us change the premise of separating the economy and the environment into an internal/external relationship and assume that human economic activity is just one of the activities carried out within the great condition of the environment. However, this assumption does not automatically eliminate the antagonistic relationship between the environment and the economy. 　

Economic activities motivated by human desires can easily go out beyond the environmental conditions. The destruction of the environment since the Industrial Revolution may be interpreted as such a "phenomenon of environmental externalization of the economy. To overcome such a situation, it is necessary to keep the economy inside the environment. 　

In this respect, economic activity before the industrial revolution was inefficient and undeveloped, relying on human power, and as a result economic activity was inevitably limited to environmental conditions. However, since the Industrial Revolution, the economy has surpassed the environment due to the rapid increase in productivity thanks to the expansionary technological development.

If it is neither possible nor appropriate to reverse the externalization of the economy to the pre-industrial stage of development, the only way to solve this problem is to introduce an environmentally planned economy. An environmentally planned economy, especially an "ecologically sustainable planned economy," is a technique for keeping economic activities within environmental standards, both quantitatively and qualitatively. 　

The environment and the economy are in a perfect dialectical relationship, and economic planning guided by rigorous environmental criteria is the guarantee of that perfection. Conversely, through economic planning, the opposition between the environment and the economy is completely sublated and resolved.

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 3.4.

Chapter 3: The Relationship between the Environment and the Economy

3.4. Environment planned economy model

In order to overcome the limitations of classical environmental economics theory, we must move away from the adherence to the market economy assumed by classical environmental economics and shift to a planned economy. However, it is necessary to distinguish between three different models of planned economies: the equilibrium planned economy, the development planned economy, and the environmental planned economy. 　

The first model, the equilibrium planned economy, is a model in which economic activities are developed according to a supply-demand plan for the entire society, aiming to correct the structural distortions caused by the instability of business cycles, inequality in the distribution of goods, and uneven distribution of wealth resulting from the capitalist economy (broadly speaking, a market economy). It is also the most basic form of a planned economy. 　

Such a model is at the base of all planned economy models, but a model to which the objective of increasing productive capacity is added is the development planned economy model. This model is based on a precise economic development plan, and is the model consistently pursued by the former Soviet Union in its attempt to increase productive forces in opposition to capitalism. 　　

The planned economy model of development was similar to the capitalist market economy model in that it aimed to increase productive forces, a rival model if you will, but as is well known, it failed to last for 100 years in the former Soviet Union and allied countries that followed it. 　

This model, having forgotten the equilibrium planned economy model on which it was based, became obsessed with competitive economic development with the capitalist system, which resulted in environmental destruction that outstripped capitalism, and was also defeated in its ultimate goal of increasing productive capacity. 　

What should be newly constructed now as a planned economic model to guarantee ecological sustainability is not such an unsustainable planned economic model of development, but an environmental planned economic model. To divide the terminology here, an environmental planned economy is an "environmental planned-economy" and not an "environmentally-planned economy" model. 　　

This distinction may appear to be a play on words, but it represents a significant substantive difference. As will be discussed in the next section, the formal distinction is that the "environmental planned- economy" refers to a planned economic model that is combined with an environmental component and has environmental protection as its ultimate objective, not to an economy that is externally accompanied by an environmental protection plan. 　

The latter term, "environmentally-planned economy," refers to an economic system that externally incorporates environmental protection programs, as in the case of the United Nations Environment Programme, which is an international organization. Therefore, a market economy with environmental protection programs is also possible. 　

In fact, the current market economy system, which incorporates various environmental measures, can be said to be oriented toward such an "environmentally-programed economy," but it cannot truly guarantee ecological sustainability. 　　

This is where the "environmental planned economy" model comes in, which, while based on the equilibrium planned economy model is a model that has parted company with the development planned economy model of the former Soviet Union and has set environmental protection as its objective rather than economic development. 　

In more detail, the "sustainable planned economy," which is the title of this series, is not limited to the "environmentally conservative planned economy" in which individual environmental conservation measures are reflected in economic planning, but applies environmental criteria from an ecological standpoint to the entire economy.　

👉The papers published on this blog are meant to expand upon my On Communism.