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.

Chapter 3.7.

Chapter 3: The Relationship between the Environment and the Economy

3.7. 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 3.6.

Chapter 3: The Relationship between the Environment and the Economy

3.6. 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 3.5.

Chapter 3: The Relationship between the Environment and the Economy

3.5. Environmental 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 developmental 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 developmental 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 developmental 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.

Chapter 3.4.

Chapter 3: The Relationship between the Environment and the Economy

3.4. Limitations of Classical Environmental Economics 　

In recent years, ignoring the environmental forecasting perspective in classical economics could be seen as going against the times. If classical economics is to be progressive to any degree, it must go to an economic theory that incorporates environmental forecasting, namely classical environmental economics.　　

The most important characteristic of such a classical environmental economics theory is that it makes the market economy self-evident. Thus, for example, even in the case of regulatory measures for carbon dioxide, which is regarded as the main cause of climate change, it is left to random market principles such as emission trading.

However, recent environmental projections have called for specific numerical targets for global average temperatures to be set and measures to be taken. For example, the Paris Agreement, the latest climate change framework treaty, calls for limiting the global average temperature increase from pre-industrial times to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above levels. 

Emissions trading is an environmental version of the market economy approach, in which the adjustment of supply and demand is left to random market transactions, but this unplanned approach makes it impossible to achieve specific numerical targets and only creates a new commodity: emissions credits. 　

In the classical school of environmental economics, another more advanced theory tries to step into the introduction of indirect production regulations such as environmental taxes. However, as long as capitalism is assumed, it is impossible to impose such a high tax rate that would significantly reduce the profits of capital enterprises, and many capitalist enterprises will maintain the conventional production system even if they have to bear a lukewarm environmental tax.

In this respect, the Stern Review submitted in 2006 by British economist Nicholas Stern in response to a consultation by the British government advocates changes in the energy system and technology in general based on environmental forecasting models, which is a step beyond classical environmental economics theory.

Because of its in-depth content, the Stern Review has the influence of an international guiding document that goes beyond a government report. At the same time, it has been criticized by many traditional environmental economists, including William Nordhaus, the first person from the field of environmental economics to win the Nobel Prize in Economics (2018). From the point of view of our concern here, the Stern Review has at least three limitations due to its classical framework.

First, although unavoidable given the nature of the report as a response to a government consultation on climate change issues, it is limited to climate change and does not cover biodiversity, hazardous industrial waste, and other issues that cannot be reduced to climate change.

The very measures taken to combat climate change are limited to the transformation of energy systems and technologies, and do not go into the quantitative and qualitative management of production. This is an inevitable consequence of classical economics, which is based on a market economy and does not envision a planned economy. 　

Furthermore, there is the limitation of the cost-benefit-effect theory that it uses as its methodology. Cost-benefit effects, which is essentially a capitalist profit calculation technique, naturally excludes high-cost measures that reduce profits. It is also a logic that prioritizes economic calculation over environmental ethics, especially impact on GDP, the most important macroeconomic indicator in capitalism. 

The fact that even the Stern Review, which is quite progressive for a classical school, has these limitations is precisely a manifestation of the limitation of classical environmental economics itself. As long as the capitalist market economy is assumed, it is impossible to combine the economy and the environment in an intersectional manner.　

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

Chapter 3.3.

Chapter 3: The Relationship between the Environment and the Economy

3.3. Role of environmental ethics 

Although scientific environmental forecasting is the foundation of a sustainable planned economy, there is, in fact, a fundamental driving factor that cannot be governed by pure science alone in the great transformation of the market economy, which seems to be more and more firmly entrenched on a global scale, into a planned economy. That is environmental ethics. 

There is no set theory as to what exactly should be included in an environmental ethic, but what is almost universally accepted is the principle of "intergenerational ethics," in which the present generation assumes responsibility to future generations with respect to the conservation of the global environment. This principle is also generally accepted in environmental conservation theories based on the market economy. 

However, as long as the market economy is assumed, such ethical principles must also end up in generalities. This is because a market economy is supremely concerned with "how much profit can be made in the here and now. This is symbolized by the instantaneous transactions in the securities and exchange markets, but the essence is the same in commercial transactions in the general industrial world.

It is the market economy that is thoroughly concerned with the present time axis, and this is the "logic" of capitalism, the ideological framework of the market economy. Unless such "logic" is abandoned, intergenerational ethics will end up as a subject. In fact, the source of skepticism, which is the antithesis of climate change theory, can be seen as a repugnance and repudiation of this environmental ethic, more than a scientific objection. 

On the contrary, in a sustainable planned economy, intergenerational ethics will be established as the ethical foundation, along with environmental prediction as the scientific foundation. In order to truly put intergenerational ethics into practice, rather than just talking about it as a topic, we need a major shift to a planned economy on a global scale. 　

That said, if everything has an end, the day will come when the planet Earth itself will come to an end. If that is the case, then it is even possible to have an ephemeral idea of making the best use of the global environment as much as possible right now, which we might call the "environmental feast theory."

Capitalism, which prioritizes the time axis of the present, has a strong affinity with this environmental feast theory. In particular, measures to deny the finite nature of natural resource extraction, or to consciously estimate the limit point over a long period of time in order to hasten the development of high-value natural resources, are representative examples of environmental feast theory. 　

However, as long as intergenerational ethics is emphasized, it follows that even if the death of the global environment or the earth itself from natural causes is inevitable, we should at least ensure that the earth does not die from anthropogenic causes. A sustainable planned economy is the most fundamental global environmental protection measure for this purpose.

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

Chapter 3.2.

Chapter 3: The Relationship between the Environment and the Economy

3.2. Science and forecasting 　

The most fundamental foundation of a sustainable planned economy is environmental forecasting based on science, before any other economic theory. This is because a sustainable planned economy is an economic structural measure to essentially prevent possible future environmental degradation and environmental death of the earth. 　

The question in this regard is whether science can withstand the act of forecasting. Science consists of the accumulation of analytical intellectual activities, and analysis is usually an activity to analyze and clarify the causes and mechanisms of some event that has already occurred, not necessarily to foresee events that may occur in the future.

This is reflected, for example, in the fact that despite dedicated attempts to foresee disasters such as earthquakes, no methodology for accurate prediction has yet been established. Pessimism about disaster foreseeing also persists. While it is possible to analyze disasters that have occurred, it is impossible to foresee disasters that may occur. 　

It is true that it is extremely difficult to accurately "foresee" the occurrence of specific disasters, but disasters do not occur suddenly and unexpectedly, but rather, they are manifested as disasters at a certain point in time through a process of long-term natural change. Therefore, it is possible to recognize the natural changes that lead to disasters and to make long-term "forecasting."

In summary, scientific forecasting is possible, although scientific foreseeing is extremely difficult. The foundation of a sustainable planned economy is environmental forecasting as such scientific forecasting. In fact, scientific environmental forecasting has been actively conducted in recent years in relation to climate change, which is now an urgent issue. 　

However, these climate change forecasts are often rejected by skeptics. Moreover, skeptics, or politicians under their influence, often rise to deny or mitigate environmental measures based on climate change projections.

As is the fate of scientific forecasting, it is difficult to draw conclusions with absolute certainty. This is the difference from the case of analyzing an event that has already occurred. Forecasting an event that has not yet occurred, by its very nature, must be a probability theory that includes the possibility of modification. Therefore, the emergence of skepticism cannot be ruled out. 　

Therefore, scientific environmental forecasts should be built around short-term forecasts with high probability, while being aware of the existence of skepticism and open to the possibility of modification, and distinguishing between long-term and short-term forecasts, with long-term forecasts limited to those that represent merely one possibility.

Therefore, even if scientific environmental forecasts are used as the basis for specific economic planning, they should be reflected in relatively short-term economic plans (three-year plans) based on short-term forecasts. Long-term forecasts, on the other hand, are used as a reference material to determine the direction of the next and subsequent plans.

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