Optimal Planning with Consumer Feedback: A Simulation of a Socialist Economy

Jan Philipp Dapprich

Review of Political Economy, 2023, vol. 35, issue 4, 1136-1156

Abstract: Mathematical optimization can be used to increase the effectiveness of economic planning in socialist economies. Cockshott and Cottrell [Towards a New Socialism, Spokesman: 1993] have proposed a model of socialism in which optimal planning is made responsive to consumer demand. A point of contention has been the emphasis on labor values in their model. The use of labor values could mean that the environmental impact of production is insufficiently reflected in planning targets. This paper discusses how alternative values (opportunity cost valuations, OCs) can be calculated using linear optimization and presents a computer simulation of a socialist economy based on these values. An agent-based consumer model was developed to model the behavior of consumers. An alternative version of the simulation based on labor values is used for comparison. It is found that in specific circumstances the use of OCs does indeed result in a stronger emphasis on more environmentally friendly production than the labor value model. Relevant literature on optimal planning, distribution under socialism and valuation will be reviewed, followed by a presentation of the simulation and a discussion of some of its results for a series of small test economies.

Date: 2023
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DOI: 10.1080/09538259.2021.2005367

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