Why I’m Not Going to Properly Review “The People’s Republic of Wal-Mart”

Meanwhile, mainstream economists as well as those on the leftward and rightward fringes have also debated the viability of a planned economy, particularly in the so-called socialist calculation debate of the 1920s and ‘30s, about which more in a moment.  Anyone with a serious interest in the economics of socialism needs to study this debate closely.

And there is much more: the mainstream economic theories of the firm, the various competing management theories, and related ideas about aspects of economic theory relevant to organizing coordinated action.

Alas, Phillips and Rozworski have apparently studied little of this.  As I read along, the evidence kept mounting:

Their snippets on the socialist calculation debate begin with Otto Neurath (an interesting but minor participant) and then go on to brief mentions of Ludwig von Mises, Oskar Lange and Friedrich Hayek.  Nothing about Enrico Barone, who started the whole thing as part of a larger project on general equilibrium theory and its relationship to what we now call welfare economics.  Mises in 1920 was actually disputing Barone, and it’s worth looking at what the disagreement was about.  Contrary to the claims in PRW, neither this stage of the debate nor the subsequent ones were about avoiding surpluses and shortages of goods; they were about “rational”—efficient, well-being-enhancing—allocations.  Of course, that depends on how those properties are defined, which any survey of this literature should make explicit, and which Phillips and Rzworski don’t.  Their brief, vague references suggest, rather, that they know little about either general equilibrium theory or welfarism.  (How can you cover the socialist calculation debate without even mentioning the equimarginal criterion?)  It is interesting that the more orthodox Marxist position of one of the debaters, Maurice Dobb, is completely ignored in PRW.  Finally, Phillips and Rozworski show no signs of having absorbed the argument of Don Lavoie in Rivalry and Central Planning, which has completely upended traditional interpretations.  (Lavoie has been criticized, rightfully in my opinion, for a certain amount of anachronism, attributing to people like Mises the arguments they should have made in light of modern Austrian theory, but if one cares mainly about the implications of the debate and not its precise historical course, that is a minor fault.)

Early on, PRW offers the predicted litany of faults with capitalism, but ironically they are not faults with the system, only its regulation.  For instance, they make much of the failure of actually existing capitalist economies to internalize critical environmental externalities, but this is not intrinsic to the system as such, since governments have the ability to reverse this.  It’s like saying that our current epidemic of unprovoked police violence shows that we must do away with police altogether.  (Some of you may desire an unpoliced society, but if you do you need a better reason for it.)  What is troubling is that it’s impossible to discuss the why and how of socialism without a clear statement of the faults it is supposed to address.  No serious thought is given to this in PRW.

The possible exception to this last criticism is the brief discussion of worker unfreedom under capitalism, although its casuistry indicates it is no exception at all.  Phillips and Rozworski note that defenders of capitalism argue that workers are not tyrannized because any particular employment is voluntary: workers can leave their job and take a different one.  This is an illusion, we are told, because workers will starve if they don’t allow themselves to be bossed by one capitalist or another; hence it is tyranny after all.  But this is embarrassingly sophomoric, treating freedom as a simple binary: either you’re free or you’re enslaved.  Of course, worker unfreedom in capitalism is a matter of degree, more severe under some circumstances than others.  (Some fortunate workers in high demand are not unfree at all.)  How reformable is capitalism in this respect?  And how much unfreedom will persist in socialism?  These are important questions that deserve careful thought, but what I read was sloppy and superficial.

Now let’s talk for a moment about what the first three chapters reveal about P&R’s knowledge of economics.  They have a brief mention of Joseph Stiglitz and “information theory”, but their interpretation is simply that information is costly and people may not have enough of it.  Clearly they haven’t read either Stiglitz or Akerlof (who is indirectly referenced), since their issue is asymmetric information and the effect of prices on perceptions of invisible quality.  Their discussion of the economic theory of the firm has a brief precis of Coase, and that’s it.  There’s nothing on principal-agent theory, incomplete contracts or anything else that modern economics has to say about the matter.  This is not to say that these theories should be swallowed unthinkingly, just that, if you’re writing in this area, you shouldn’t simply ignore them.  Finally, there is no mention at all of the rise of game theory, the encounter between economics and organizational behavior, or similar departures.  Milgrom and Roberts, Tirole, the rest—they don’t exist.  The literature on lead firms and the structure of supply chains or relational contracting—not there.  These guys are completely out of their league.

Finally, on a partially related note, the book is written in a cutesy style: aren’t we crazy now, two radical Marxists writing a book on business management?  It’s full of winks and righteous asides to demonstrate that the authors haven’t gone native.  If this means the book’s left wing readership really does assume there is nothing to be learned from the last century of developments in organizational theory and practice that might suggest the contours of a future society, and that they have to be cajoled into reading a book on the topic with such flourishes, we really are in a bad way.  I’ve pulled out one example:

(You might also be asking: Why does it now seem like I’m reading a god-awful, capitalism-fellating airport business book?  Suck it up.  Socialism is all about logistics, comrade.)  (Parentheses in the original.)

You get the idea.  But socialism is actually not all about logistics.  Keeping track of stuff and moving it around efficiently is essentially the same problem in capitalism and socialism.  It can be done better or worse, but it has nothing to do with how socialism might be organized and whether it would be an improvement.  If you don’t understand the difference between organizing an enterprise whose goal is to compete in a market environment with other enterprises from the problem of devising a socialist framework that offers other (or additional) channels for meeting the needs of different groups in society, you shouldn’t write a book about it.  Or if you do, I don’t need to read it.