Neither the theoretical arguments put forward in the West, nor the fact of the collapse of Soviet socialism, historic landmark as it undoubtedly is, warrant the belief that socialist economic planning <#13#>tout court<#13#> is an untenable notion whose time has passed. Indeed, modern developments in information technology open up the possibility of a planning system that could outperform the market in terms of efficiency (in meeting human needs) as well as equity. Such are the claims that we have defended in a number of recent publications, designed to re-open a debate over socialist economics.1 We do not expect that our ideas will meet with immediate political success, but we do venture to hope that open-minded economists will consider our economic arguments on their merits.
We do not intend to reiterate our general arguments in favour of planning here. Our object is to refute the objections to socialist planning put forward by Hayek in his classic article `The Use of Knowledge in Society' (1945). The relevance of such an argument to the readership of this journal might be questioned. Doesn't Hayek lie outside of the mainstream of British (increasingly, Anglo-American) professional economics, with its dual roots in Marshallian pragmatism and the formal general equilibrium theory of the Lausanne school? Wasn't Hayek's defence of the market always a bit too strident and doctrinaire to suit the sensibilities of a profession that (in Britain at any rate) has traditionally had a broadly social-democratic outlook? Maybe so, but it is our impression that Hayek's star is on the rise in the post-Communist world, and that even those who baulk at his extreme enthusiasm for the unfettered market are often quite ready to see his arguments used to bury any form of thorough-going socialism.
And so to business. We offer below an exposition and point-by-point contestation of the ideas in Hayek (1945). We should make it clear that some, though by no means all, of our criticisms of Hayek are anachronistic---that is, they depend on advances in information technology that have taken place since Hayek wrote. We think this is justified for two reasons. First, Hayek clearly thought he was putting forward a very general argument, which he did not expect to see undermined by technological change. Second, Hayek's followers (e.g. Lavoie, 1985) continue to support his arguments of several decades ago, and to assert that developments in information technology are largely beside the point.
In our exposition of Hayek we try to balance concision with the need
to produce a sufficiently full and fair account to obviate the suspicion
that we may be attacking a straw man. We begin with a brief summary of the
philosophical views that inform the argument of `The Use of Knowledge in
Society', which are spelled out more fully in <#15#>The Counter-Revolution
of Science<#15#> (Hayek, 1955).