Chapter 5.1.

Chapter 5: Globalization of Planned Economy

5.1. Global Planned Economy

In the previous chapters, we discussed the theoretical foundations of a new planned economy that places emphasis on environmental sustainability - a sustainable planned economy. For the time being, this discussionhas assumed a planned economy at the level of a "country" - as we will discuss again in the following chapter 6, a sustainable planned economy is incompatible with the political unit of a "country".

However, since environmental sustainability means, strictly speaking, the sustainability of the global environment - in other words, preserving the Earth so that it is not destroyed by human factors - a sustainable planned economy cannot be practiced in only one particular country.

In its ultimate form, a sustainable planned economy must be practiced on a global scale. In this respect, it aims for a more thorough globalization than the "environmental policy theory" that trivializes environmental sustainability to a national policy issue, nor the recent trend of trying to coordinate specific environmental issues such as climate change and biodiversity through individual international treaties, with ratification or withdrawal left to the discretion of each country.

To achieve this, a world economic plan that will serve as a global standard for a sustainable planned economy is needed. This will be the overall framework (cap) for economic planning at the "national" level, which has been the premise of the discussion up to the previous chapter. In other words, planning at the "national" level will be positioned as an individual allocation (quota) based on the global economic plan.

Any "realist" will question such a grandiose concept, asking whether such a large-scale economic plan can be formulated effectively without dispute on the current Earth, which now has a population of several billion.

It is certainly a grand economic experiment that humanity has never experienced before. However, I believe that this can be achieved by abolishing the current system of sovereign states and creating the World Commonwealth to replace the current United Nations, which is merely a federation of sovereign states. In that sense, the relationship between a sustainable planned economy and political systems is an important point of discussion, but this will be the subject of the next chapter. 

👉The table of contents so far is here.

👉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
 4.4. Material Balance -part1- :Supply-Demand Adjustment  page18
 4.5. Material Balance -part2- :Local production for local consumption  page19
 4.6. Material Balance -part2- :Mathematical Models  page20
 4.7. Disciplining principle of the free production domain  page21

Chapter 5: Globalization of Planned Economy

 5.1. Global Planned Economy  page22
 5.2. From trade to economic cooperation  page23
 5.3. The World Economic Planning Organization  page24

 

To be continued.

Chapter 4.7.

Chapter 4: Standard Principles of Planning

4.7. Disciplining principle of the free production domain

In a sustainable planned economy, the planned economy is limited to the environmentally hazardous industrial sectors, while other sectors are left to unplanned free production. This may be interpreted as a kind of mixed economic system between a planned economy and a market economy, rather than strictly speaking a planned economy.

The difficulty common to such mixed economic systems is that mixing two types of economic systems based on different principles can cause malfunctions. To use a chemical analogy, it would be fine if they could be separated without mixing like oil and water, but the most worrisome situation would be if highly toxic substances were produced as a result of mixing them.

To prevent this, it is necessary to view the unplanned free production domain as a residual domain of the planned economy, rather than the "mixed" concept. In other words, the free production domain is considered to be a domain that is outside the scope of the planned economy, but to which the discipline of the planned economy is indirectly applied.

In this regard, it is inevitable that the planned economy will be applicable to free production domain in a spillover manner, since even free production domain will eventually receive supplies of goods and services from the planned domain covering the key industrial sectors related to the supply of capital goods and energy. 

Furthermore, the principle of environmental sustainability also applies to the free production domain, meaning that production activities in the free production domain are regulated by a common environmental legal regime, and "freedom" that undermines environmental sustainability is not tolerated.

By the way,  because a sustainable planned economy is an economic system that does not assume a monetized economy, even a free production domain is not naturally a monetized economy. As such, "freedom" here simply implies that it is not directly subject to economic planning, and a free production domain does not necessarily equal a market economy.

As an ideal type, we can imagine completely free production activities that are supplied free of charge, but the scale to which such activities will actually take place is a world unknown to humanity. As a prediction from economic anthropology, if humans are creatures that essentially desire exchange, then purely altruistic free production activities that do not involve any exchange will be very limited.

Therefore, if the old practice of barter is revived in place of a monetized economy, it is a type of exchange economy, and if the objects of barter are customarily formulated, it approaches a monetized economy. From there, if private currency that is only valid in specific trading circles emerges and becomes established, it will progress to the stage of a customary monetized economy.

In a sustainable planned economy system, customary private currency will not be recognized as official currency, but conversely, it will not be banned. Such economic practices are respected as an expression of private autonomy in the free productive domain. However, they are not laissez-faire and are subject to civil law discipline.

👉The table of contents so far is here.

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

Chapter 4.6.

Chapter 4: Standard Principles of Planning

4.6. Material Balance -part2- :Mathematical Models

The application of material balance standards in sustainable economic planning requires rigorous mathematics; getting it wrong could lead to a disruption in the supply and demand relationship in a planned economy, and if anything, supply to meet demand could stagnate, leading to chronic shortages. This is why precise mathematics is necessary for the material balance.

In this regard, the theory of linear programming has long been developed. This is a mathematical method that was researched and developed from the perspective of optimally allocating limited resources, mainly within the planned economy of the former Soviet Union, and the Soviet mathematical economist Leonid Kantorovich in particular was a pioneer in this field.

The theory of linear programming itself can also be applied to production and transportation plans for individual companies in a market economy, and even in the Western market economy, Dutch-American mathematical economist Tjalling Koopmans developed a method of activity analysis that determines the finite combinations of production factors required to produce a single product.

Kantorovich and Koopmans were jointly awarded the Nobel Prize in Economic Sciences in 1975 for their work in the East and West, respectively, and it was intriguing to see how planned economy theory and market economy theory intersected through linear programming.

These pioneering linear programming theories were the product of research at a time when environmental sustainability had not yet been incorporated into either planned or market economies, so further theoretical evolution will be required before they can be applied to a sustainable planned economy.

In this regard, linear programming, simply put, is a mathematical method for obtaining optimal target values ​​within constraints described by first-order expressions, and therefore in a sustainable planned economy, it could be applied to obtaining optimal production target values ​​within the constraints of environmental balance, which serves as the primary standard principle.

However, linear programming is just one type of mathematical programming in the broad sense that provides formulas for humans to use when rigorously mathematically converting plans into mathematics, and there are other mathematical programming methods such as nonlinear programming, which is the opposite of linear programming, and dynamic programming, which divides the optimization problem into multiple stages to prevent combinatorial explosion, and seeks a solution by successively increasing the number of stages.

It may be necessary to use dynamic programming, while still using linear programming as a basis, to derive the optimal solution within the constraints of environmental balance, which is difficult to predict and has multiple predictive scenarios. In any case, the application of such mathematical programming requires the use of supercomputers and artificial intelligence, which serve as the physical foundation.

In this respect, it has been pointed out that in the former Soviet Union's planned economy, inadequate computerization was a technical obstacle to rigorous planning, but this may be due to the fact that the former Soviet Union's planned economy was based on a monetized economy and state initiative, and the state had limited capacity to invest in advanced computerization. The Soviet Union's planned economy was based on a monetary economy and state initiative.

In contrast, since a sustainable planned economy does not essentially presuppose a monetized economy, monetary investment is not necessary - it is not even an issue in the first place. Under a monetized economy, whether it be a nation or a company, the use of advanced computerization and artificial intelligence would require huge investment, but under a sustainable planned economy it is by no means difficult.

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