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.