In this book, Guinevere Liberty Nell visits this historical laboratory of social science to study the lessons in basic economics that it teaches. Nell observes that the founders of the Soviet experiment, Lenin and other Bolshevik leaders, wrote...

In this book, Guinevere Liberty Nell visits this historical laboratory of social science to study the lessons in basic economics that it teaches. Nell observes that the founders of the Soviet experiment, Lenin and other Bolshevik leaders, wrote volumes of articles and books on Marxist theory and then proceeded to enact the very policies that they promised. Therefore the Soviet experiment provides an ideal lens through which to view the consequences of various interpretations of economic theories and Marxist theories. However, despite the wealth of information available on the Soviet experiment, few writers have closely analyzed this historical process and what lessons it might offer for market economies. In this book, Nell carefully considers Soviet theory and practice, and draws out the lessons that Soviet planners learned. Each chapter considers one theory; the experience in the Soviet Union of policies based on this theory, and the reforms that planners implemented as the system evolved as well as in response to changes in the local and international conditions; and the lessons for market economies that this experience offers. Nell's lessons capture the dynamic nature of the economy and illustrate insights from the debate between socialists and Austrian economists. They should be useful and informative not only for readers interested in basic economics, but also for economists interested in heterodox approaches to economic modeling and theory, as well as for the citizen interested in rethinking the assumptions underlying mainstream policy debates.

Why did the Soviet system, which allowed the workers to own the means of production and held the hopes of so many for so long, fail to produce the promised prosperity and freedom? Was it hijacked and turned on its face'or was it the system itself which failed the people? A dispassionate analysis must carefully analyze the economic and political theories of the Soviet leaders, determine whether the policies they enacted were in fact those suggested by their theories, and then proceed to analyze why the results of the system did not measure up to the promise. There is no shortage of documentation on Marxist theory leading up to the revolution. 'Without revolutionary theory there can be no revolutionary movement,'� Lenin wrote in 1901. This was the year he first used the pseudonym 'Lenin'� and 16 years before his sudden rise to power amidst the turmoil of revolution in 1917. Lenin's revolutionary theory for that year is covered in volumes 4 and 5 of the 45-volume Collected Works of V. I. Lenin. Almost 9,000 works and documents are contained in the 45 volumes, including a huge number of articles relating to economic policy, political science, and the building of socialism. Yet many view Lenin as an impatient revolutionary, or see him as a dictator who exploited the peoples of the Soviet Union, betraying the hopes and dreams of socialism for his own benefit. Yet, if Lenin did make a true attempt at implementing Marxist theory, there are important lessons that could be lost to history if it is assumed that he was ill-intentioned. Lenin built his theory and policy on Marxist economics and a powerful belief in the superiority of socialism: a belief in the superiority of a system built upon social ownership of the means of production to a system based on private property. However, the lessons from the experiment of the Soviet system extend beyond the question of which of the two systems is superior. If anything is fundamental to the discipline of economics, it is the distinction between public and private ownership. Whether the profit motive is seen as immoral or useful or a necessary evil, economic theory must come to understand its effects and build them into economic models. As economists study public provision of core necessities, regulations, subsidies, and other economic policies, the distinction between private ownership and public ownership'the institutions of the society under study'must be well defined and well understood. The Soviet experiment presents a core body of evidence to researchers seeking to understand the full range of effects that institutions create. Yet the Soviet experiment with eliminating markets and installing a system of social ownership of production has not been closely analyzed by economists. What is Socialism? Before considering further how to learn from the Soviet experiment, some basic terminology should be cleared up. When I refer to socialism, I am using the term to mean something very specific: social ownership over the means of production. This is the definition of the word 'socialism'� used by economists during the period under discussion and today, including both advocates and skeptics of such a system. In popular policy debate, the term 'socialism'� is often used to describe economies without complete social ownership over all production: Sweden, France, and other European countries are sometimes called socialist, for example. Some political parties also call themselves 'socialist'� or 'social-democratic'� even if they do not advocate full-fledged socialism as defined above. This casual usage can cause some confusion. These countries and political parties may be called 'socialist'� because they advocate greater social ownership in the economy, but if they do not advocate social ownership over all production in the economy they are not socialist in the sense used by economists at least since Karl Marx.2 Furthermore, in casual usage, the economies that have implemented complete social ownership of the means of production are often referred to as 'communist'�' this is also misleading. Marx used the terms 'socialism'� and 'communism'� interchangeably, but he distinguished the lower and higher phases of communism. Lenin then coined the lower phase as 'socialism'� and the higher phase, 'communism.'� Thus, the Communist Party (Bolshevik) brought socialism to Russia in hopes of one day ushering in communism. This has been the way the two words have been defined ever since by economists debating the merits of social ownership, by Soviet economists and political leaders, and by public experts, including both advocates and skeptics of the socialist program. This is why some say that communism has never been attempted. . .

�  Introduction 1 �  Chapter 1. The Real Benefits of Competition 25 �  Chapter 2. The Dynamics of Unemployment and Efficiency 49 �  Chapter 3. The Holistic Target: The Value of Pro

�  Introduction 1 �  Chapter 1. The Real Benefits of Competition 25 �  Chapter 2. The Dynamics of Unemployment and Efficiency 49 �  Chapter 3. The Holistic Target: The Value of Profit and Loss for the Firm 83 �  Chapter 4. The Rat Race: The Value of Profit and Loss for the Economy 101 �  Chapter 5. Middlemen, Trade, and the Market System 131�  �  Chapter 6. The High Price of Price Control151�  �  Chapter 7. The Root of All Prosperity: Money and the Danger of Centralized Monetary Policy 181�  �  Chapter 8. Regulation and the Institutions of a Dynamic Economy 207�  �  Chapter 9. Democracy and Freedom 235�  �  Chapter 10. Corporate Capitalism or the Free Market 267�  �  Conclusion: Lessons for Economic Modeling 295�  �  Appendix: Further Lessons for Economic Modeling 307�  �  Bibliography 313�  �  Index 317