Chapter Ƕ: Ļe Debate about the Efficiency of a Socialist Economy ȇȆIf a world champion has no one against which to measure himself, how
can he tell of what he is capable? A runner can run against himself by
means of a stop-watch: will a state concern be prepared to make contin-
uous efforts to reduce its own costs? If it does not do so, no one else can.
In a capitalist state Nemesis is always waiting for the lethargic monopoly,
as the calamity of the internal combustion engine fell upon the railways.
But it is doubtful whether anyone in a collectivist state would have any
hope of starting a rival department. (ȀȈȂȆ, pp.ȀȂȇ–ȀȂȈ)ț.Few blueprints of socialism make much specific provisions for
economic development. Even Franco Modigliani’s meager remarks are
unusual in the literature (ȀȈȃȆ, pp.ȃȅȂ–ȃȅȄ). Modigliani faces squarely the
disadvantage that decisions about new products would have to be made
by an administrative body. He perceives the twin dangers of inertia due to
lack of a profit incentive and of recklessness due to lack of a loss-penalty.
(Modigliani feels that the tendency toward inertia is probably more char-
acteristic of bureaucracy.) To avoid these dangers, Modigliani proposes
a Research Commission to decide on new big investments and on new
products requiring new plants. Ļe Research Commission and the vari-
ous industrial managers are to share the responsibility for mere product
modifications, and the managers are to receive bonuses for successful inno-
vations.
Doubts about the progressiveness of socialism do not rest on any sup-
posed lack of incentives for scientists. As Brutzkus writes,
Scientific discoveries, it is true, are not made out of a desire for profit
but in answer to humanity’s unquenchable search for truth. In the case
of inventions the scientific interest recedes in favour of practical motives.
But neither scientists nor even inventors are directly responsible for eco-
nomic progress; it is the organizers and practical men who stimulate
development.
Even supposing ... that the highest posts were filled in the best possible
manner, there would still remain the danger that each innovation could
only be tested in a definite place....
If ... the socialist organization succeeded in assuming stable forms it
would be distinguished by immense indolence and conservatism. It would
offer nothing which could be compared to the unceasing movement of
economic life under capitalism. (ȀȈȂȄ, pp.ȅȆ–ȅȈ)In his essayOn Liberty, John Stuart Mill uses his arguments for free-
dom of expression as a case for freedom of enterprise: