Market socialism

Market socialism is a type of economic system involving social ownership of the means of production within the framework of a market economy. Various models for such a system exist, usually involving cooperative enterprises and sometimes a mix that includes public or private enterprises.^[1]^[2] In contrast to the majority of historic socialist economies, which have substituted the market mechanism for some form of economic planning, market socialists wish to retain the use of supply and demand signals to guide the allocation of capital goods and the means of production.^[3]^[4]^[5] Under such a system, depending on whether socially owned firms are state-owned or operated as worker cooperatives, profits may variously be used to directly remunerate employees, accrue to society at large as the source of public finance, or be distributed amongst the population in a social dividend.^[6]

Market socialism can be distinguished from the concept of the mixed economy because most models of market socialism propose complete and self-regulating systems, unlike the mixed economy.^[7] While social democracy aims to achieve greater economic stability and equality through policy measures such as taxes, subsidies, and social welfare programs, market socialism aims to achieve similar goals through changing patterns of enterprise ownership and management.^[8]

Though the term "market socialism" only emerged in the 1920s during the socialist calculation debate,^[9] a number of pre-Marx socialists, including the Ricardian socialist economists and mutualist philosophers, conceived of socialism as a natural development of the market principles of classical economics, and proposed the creation of co-operative enterprises to compete in a free-market economy. The aim of such proposals was to eliminate exploitation by allowing individuals to receive the full product of their labor, while removing the market-distorting effects of concentrating ownership and wealth in the hands of a small class of private property owners.^[10]

Although sometimes described as "market socialism",^[11] the Lange model is a form of market simulated planning where a central planning board allocates investment and capital goods by simulating factor market transactions, while markets allocate labor and consumer goods. The system was devised by socialist economists who believed that a socialist economy could neither function on the basis of calculation in natural units nor through solving a system of simultaneous equations for economic coordination.^[12]^[9]

Real-world attempts to create market socialist economies have only partially implemented the measures envisioned by its theorists, but the term has sometimes been used to describe the results of various attempts at liberalization in the Eastern Bloc including Hungary's New Economic Mechanism, the economy of Yugoslavia, Perestroika, and the economic reforms of China as well as Lenin's New Economic Policy.^[13]

^ Schweickart, David; Lawler, James; Tickten, Hillel; Ollman, Bertell (2016-04-22). Market Socialism: The Debate Among Socialists. Taylor & Francis. p. 105. ....it is important to realize that the school of thinking calls itself "market socialism" is further divisible along three different lines: (1) whether its goal, market socialism, involves only worker-owned enterprises, or a mix of enterprises some worker-owned, some privately-owned, some nationalized, etc. (2) whether market socialism will eventually by followed by communism...
^ Corneo, Giacomo (2017). Is Capitalism Obsolete? A Journey through Alternative Economic Systems. Cambridge, MA: Harvard University Press. pp. 192–197.
^ O'Hara, Phillip (September 2000). Encyclopedia of Political Economy. Vol. 2. Routledge. p. 71. ISBN 978-0415241878. Market socialism is the general designation for a number of models of economic systems. On the one hand, the market mechanism is utilized to distribute economic output, to organize production and to allocate factor inputs. On the other hand, the economic surplus accrues to society at large rather than to a class of private (capitalist) owners, through some form of collective, public or social ownership of capital.
^ Buchanan, Alan E. (1985). Ethics, Efficiency and the Market. Oxford University Press. pp. 104–105. ISBN 978-0-8476-7396-4.
^ Gregory, Paul R.; Stuart, Robert C. (2003). Comparing Economic Systems in the Twenty-First Century. p. 142. ISBN 0-618-26181-8. It is an economic system that combines social ownership of capital with market allocation of capital...The state owns the means of production, and returns accrue to society at large.
^ Marangos, John (2004). "Social Dividend Versus Basic Income Guarantee in Market Socialism". International Journal of Political Economy. 34 (3): 20–40. doi:10.1080/08911916.2004.11042930. JSTOR 40470892. S2CID 153267388.
^ Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. ISBN 978-0-8047-7566-3. Archived from the original on 2020-11-28. Retrieved 2020-12-25.
^ Roosevelt III, Franklin Delano; Belkin, David (1994). Why Market Socialism?. M.E. Sharpe, Inc. p. 314. ISBN 978-1-56324-465-0. Social democracy achieves greater egalitarianism via ex post government taxes and subsidies, where market socialism does so via ex ante changes in patterns of enterprise ownership.
^ ^a ^b Steele, David Ramsay (September 1999). From Marx to Mises: Post Capitalist Society and the Challenge of Economic Calculation. Open Court. p. 177. ISBN 978-0875484495. It was in the early 1920s that the expression 'market socialism' (marktsozialismus) became commonplace. A special term was considered necessary to distinguish those socialists prepared to accept some role for factor markets from the now mainstream socialists who were not.
^ McNally, David (1993). Against the Market: Political Economy, Market Socialism and the Marxist Critique. Verso Books. p. 44. ISBN 978-0-86091-606-2. [...] [B]y the 1820s, 'Smithian' apologists for industrial capitalism confronted 'Smithian' socialists in a vigorous, and often venomous, debate over political economy.
^ Stiglitz, Joseph E. (1996). Whither Socialism?. Cambridge, MA: MIT Press. ISBN 9780262691826.
^ Roemer, John (1 January 1994). A Future for Socialism. Harvard University Press. p. 28. ISBN 978-0674339460. The first stage was marked by the realization by socialists that prices must be used for economic calculation under socialism; accounting in some kind of 'natural unit,' such as the amount of energy or labor commodities embodied, simply would not work. The second stage was characterized by the view that it would be possible to calculate the prices at which general equilibrium would be reached in a socialist economy by solving a complicated system of simultaneous equations [...]. The third stage was marked by the realization, by Lange and others, that markets would indeed be required to find the socialist equilibrium [...].
^ Ackerman, Seth. "The Forgotten Vision of Market Socialism". Institute for New Economic Thinking. Archived from the original on 2023-08-21. Retrieved 2023-08-21.

[1] Schweickart, David; Lawler, James; Tickten, Hillel; Ollman, Bertell (2016-04-22). Market Socialism: The Debate Among Socialists. Taylor & Francis. p. 105. ....it is important to realize that the school of thinking calls itself "market socialism" is further divisible along three different lines: (1) whether its goal, market socialism, involves only worker-owned enterprises, or a mix of enterprises some worker-owned, some privately-owned, some nationalized, etc. (2) whether market socialism will eventually by followed by communism...

[2] Corneo, Giacomo (2017). Is Capitalism Obsolete? A Journey through Alternative Economic Systems. Cambridge, MA: Harvard University Press. pp. 192–197.

[3] O'Hara, Phillip (September 2000). Encyclopedia of Political Economy. Vol. 2. Routledge. p. 71. ISBN 978-0415241878. Market socialism is the general designation for a number of models of economic systems. On the one hand, the market mechanism is utilized to distribute economic output, to organize production and to allocate factor inputs. On the other hand, the economic surplus accrues to society at large rather than to a class of private (capitalist) owners, through some form of collective, public or social ownership of capital.

[4] Buchanan, Alan E. (1985). Ethics, Efficiency and the Market. Oxford University Press. pp. 104–105. ISBN 978-0-8476-7396-4.

[5] Gregory, Paul R.; Stuart, Robert C. (2003). Comparing Economic Systems in the Twenty-First Century. p. 142. ISBN 0-618-26181-8. It is an economic system that combines social ownership of capital with market allocation of capital...The state owns the means of production, and returns accrue to society at large.

[Social_Dividend_versus_Basic_Income_Guarantee_in_Market_Socialism,_2004-6] Marangos, John (2004). "Social Dividend Versus Basic Income Guarantee in Market Socialism". International Journal of Political Economy. 34 (3): 20–40. doi:10.1080/08911916.2004.11042930. JSTOR 40470892. S2CID 153267388.

[7] Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. ISBN 978-0-8047-7566-3. Archived from the original on 2020-11-28. Retrieved 2020-12-25.

[8] Roosevelt III, Franklin Delano; Belkin, David (1994). Why Market Socialism?. M.E. Sharpe, Inc. p. 314. ISBN 978-1-56324-465-0. Social democracy achieves greater egalitarianism via ex post government taxes and subsidies, where market socialism does so via ex ante changes in patterns of enterprise ownership.

[Steele_177-9] Steele, David Ramsay (September 1999). From Marx to Mises: Post Capitalist Society and the Challenge of Economic Calculation. Open Court. p. 177. ISBN 978-0875484495. It was in the early 1920s that the expression 'market socialism' (marktsozialismus) became commonplace. A special term was considered necessary to distinguish those socialists prepared to accept some role for factor markets from the now mainstream socialists who were not.

[10] McNally, David (1993). Against the Market: Political Economy, Market Socialism and the Marxist Critique. Verso Books. p. 44. ISBN 978-0-86091-606-2. [...] [B]y the 1820s, 'Smithian' apologists for industrial capitalism confronted 'Smithian' socialists in a vigorous, and often venomous, debate over political economy.

[11] Stiglitz, Joseph E. (1996). Whither Socialism?. Cambridge, MA: MIT Press. ISBN 9780262691826.

[12] Roemer, John (1 January 1994). A Future for Socialism. Harvard University Press. p. 28. ISBN 978-0674339460. The first stage was marked by the realization by socialists that prices must be used for economic calculation under socialism; accounting in some kind of 'natural unit,' such as the amount of energy or labor commodities embodied, simply would not work. The second stage was characterized by the view that it would be possible to calculate the prices at which general equilibrium would be reached in a socialist economy by solving a complicated system of simultaneous equations [...]. The third stage was marked by the realization, by Lange and others, that markets would indeed be required to find the socialist equilibrium [...].

[13] Ackerman, Seth. "The Forgotten Vision of Market Socialism". Institute for New Economic Thinking. Archived from the original on 2023-08-21. Retrieved 2023-08-21.

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