Introduction• “Under all forms of market socialism, from Lange (1936) to the present, the state ultimately controls the firms, and hence politicians’ objectives must determine resource allocation.”
Introduction• Two arguments against democratic market socialism:1) No democratic government is likely to place sufficient weight on economic efficiency, regardless of whether the economy is capitalist or socialist.2) The damage from the government pursuing its “political” objectives will be much greater under socialism than under capitalism because, under socialism, the government has a greater ability to determine outcomes at the firm level.
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Background on Economic Thought• Lange established that a central planner can clear markets just as well as a Walrasian Auctioneer• Lange went on to present several reasons why socialism is superior (p. 166):1) The state can distribute income more equitably2) Since the state controls all firms, it can solve the problem of externalities3) Since the state sets prices and determines entry, it can avoid monopolies