Customer Reviews

Socialism after Hayek (Advances in Heterodox Economics)

5 star:		(1)
4 star:		(4)
3 star:		(0)
2 star:		(0)
1 star:		(0)

 

 

This fascinating book attempts to answer directly some of Hayek's penetrating criticisms of socialism in order to show that a socialist economic system still is viable, and perhaps even strengthened by Hayek's important insights. The author begins the book by describing Hayek as a postmodernist whose radical epistemology posits the limited and socially constituted nature of all human knowledge. This novel characterization serves two functions. On the one hand, it presents Hayek as a serious intellectual to leftist thinkers, since Hayek's work is traditionally associated with the Right (reactionary conservatism), while on the other hand, it reveals to Austrian economists how truly radical Hayek's views really were. All Austrians appreciate immensely Hayek's contributions to epistemology and economic theory, but none have gone so far as to call him a postmodernist. But Burczak's accurate and persuasive description of Hayek's thought clearly shows that his work can (and should) be identified as such.

The best part of the book are chapters 4 and 5 which attempt to criticize Hayek's views of the market and legal system expounded in chapters 2 and 3. With respect to Hayek's description the rule of the law in an economy, the author argues remarkably that Hayek was not wrong, but that he inconsistently applied his "postmodern epistemology" to this area of his work. The rule of law cannot function as a place for the discovery of universal principles which judges must articulate and apply impartially to judicial cases. Their interpretation and enforcement of laws must and always will be inescapably subjective. This criticism is fascinting because it simply extends Hayek's insights to an area in which Hayek wrote and shows that Hayek simply failed to recognize the implications of his own thinking. The legal system, the author concludes, must be "non-neutral". As the author correctly notes, "[i]t is impossible to separate market processes from the rules that shape their boundaries" (p. 45). Traditionally, Austrians have relied on Hayek's work in legal theory to argue how a just and fair legal system would give rise inexorably to an equitable economic order. Burczak's criticisms cast doubt on the tenability of Hayek's legal theory and, if taken seriously, would force Austrians to go back to the drawing board to try to improve this glaring deficiency in Austrian economics.

Again, what makes this book important as a postive critique of Hayek's work from a socialist position is that it takes Hayek's critique of central planning seriously, and recognizes the fragmented, limited, and socially constituted nature of human knowledge. However, although Burczak addresses this problem repeatedly throughout this book, he tries to directly confront it only once, and unsatisfactorily at that. Burczak sees Hayek's articulation of the knowledge problem as a "large epistemic burden" and feels compelled to try to respond to it. Again, although he repeatedly notes the seriousness of this insight for socialist economies, he tries to answer it directly only in one place. Here is his response to Hayek's very important "knowledge problem":

"one counter to Hayek's knowledge based
critique ... is intended to be 'vague'.
... As a vague guide to public policy
that admits the impossibility of human
perfectibility but nevertheless seeks
to improve welfare-promoting institutions
where feasible, it would appear possible
to encourage capability development without
necessarily destroying the market order" (p. 97).

Insisting that public policy be "vague" does not sufficiently counter Hayek's essential insight of the knowledge problem, namely how would those in control be able to "obtain the requisite knowledge"? A vague policy, while it would not require the explicit and complete articulation of policies, also would not be able to 'objectify' in an intelligible way the fundamentally subjective dimensions of human knowledge and expectations. The problem is how best to create an environment that encourages the discovery, coordination, and utilization of subjective and dispersed information. I am not so sure insisting on vague policies would accomplish this aim. In fact, vagueness, far from being unambiguous and certain, might even inhibit the process of coordination because it does not lead to predictability in "the range of acceptable behavior." As Hayek (and Burczak!) note, it is clarity and stability that "allow people to form reliable expectations about how others will be permitted to act, and these expectations are essential to guide individual action in a manner consistent with social coordination" (p. 46). Vague public policies would seem to be incredibly destructive of these ends, namely that of social cooperation and coordination.

The last two chapters (6 and 7) are positive analyses of socialism. While the author says some interesting things, such as the inalienability of individual will and responsibility, the author feels confident that his views are vindicated by his response to Hayek's "knowledge problem". However, as my observation above makes clear, I have my doubts about this.

This is a fascinating book that will appeal to erudite socialists and Austrian economists. I look forward to see what the young Ted Burczak does in the future.

Theodore Burczak is Professor of Economics at Denison University. He received his Ph.D. from the University of Massachusetts, where rigorous training in traditional economic theory and econometrics was linked to an equally rigorous training in "political economy," by which was meant the analysis of the politico-economic dynamics of social systems. I was privileged to teach in this department at the time Burczak was there, and indeed in the acknowledgements, Burczak says that I "showed how to transform traditional economics into political economy." So the reader is warned---I am not an unbiased reader of this book.

Many reasonable people believe that capitalism, for all its myriad of weaknesses, is the best possible economic system. This is a highly defensible position, given the abject failure of all attempts to create viable alternatives over the past two centuries, and especially after the spectacular collapse of the Soviet Union, the failure of European socialism, and the bitter extinction of Third World Socialism. Personally, I believe capitalism is the best system we know of, but it is very important to have some smart and committed people around who spend all their time and energy in devising workable alternatives. Burczak lies squarely in this tradition, and Socialism after Hayek is a very creative and thoughtful work that deserves to be widely read and evaluated.

The most salient fact about Burczak's defense of socialism is his wedding a model of market socialism with democratically run, worker-owned firms (Lange, Lerner, although Burczak uses arguments from the contemporary Austrian school, which fits well with Hayek) with a welfare analysis based on human flourishing (Aristotle, Sen), and perhaps most uniquely, a defense of markets inspired by the extremely right-wing, Nobel prize winning economist Friedrich Hayek. This potent mixture of ideas is a welcome alternative to the usual contemporary defense of socialism, which is based either on know-nothing populist sloganeering or reliance on the ancient German philosophers of socialism of the Nineteenth Century---especially Marx and his brainy intellectual followers, whose obvious Hegelianism reverberates nil with the modern mind (Marx said that he was "Hegel turned on his head." What he forgot was that an upside down Hegel is still Hegel, just upside-down, just as an upside-down chicken is just a chicken, upside down).

In Burczak's Lange-Sen-Hayek trinity, traditional economic theory is used to defend market socialism and democratic worker ownership (Samuel Bowles, John Roemer, Pranab Bardhan and I were working in this area when Burczak was working on his doctorate at the University of Massachusetts), to defend egalitarianism on the basis of Sen's notion that human welfare depends on developing capabilities, not on simply getting material things, and to defend a Postmodern philosophical position on the basis of Hayek's theory of knowledge.

Burczak's treatment is highly sophisticated, but I am afraid I am not persuaded. The absolutely central and bottom-line problem is that an economy consisting of worker-owned and democratically controlled firms would impose a significant static efficiency loss on the economy and would severely retard scientific and entrepreneurial innovate. I say this with pain and regret, because I and my colleagues work for almost ten year to devise a workable market socialism, but my final conclusion (I'll let the others speak for themselves) is that our models are more applicable to promoting self-employment of poor farmers in developing countries (see Pranab Bardhan, Samuel Bowles and Herbert Gintis, "Wealth Inequality, Credit Constraints, and Economic Performance", in Anthony Atkinson and Francois Bourguignon (Eds.) Handbook of Income Distribution (Dortrecht: North-Holland, 2000):541-603).

The main problem facing democratic worker control of firms is that the workers must be residual claimants on the profits and losses incurred by the firm, or the workers will have no reason to adopt efficient technology and work practices. Lenders will not willingly lend to worker-controlled firms because they cannot maintain sufficient influence over the firm's policies in this case (Herbert Gintis, "Financial Markets and the Political Structure of the Enterprise", Journal of Economic Behavior and Organization 1 (1989):311-322). John Roemer and Pranab Bardhan (Pranab Bardhan and John Roemer, "Market Socialism: A Case for Rejuvenation", Journal of Economic Perspectives 6,3 [Summer] (1992):101-116) worked out a sort-of "pari-mutual" betting plan that would direct public funds to the most promising firms, but it is implausible that such a plan, were it workable, would not succumb to political forces in a way to which private capital markets, based on the inviolability of private property, are virtually immune. Moreover, firms based completely on outside finance are extremely overleveraged and would inevitably collapse when even small threats to their viability arose.

The conclusion is that democratic firms must be almost wholly worker-owned, meaning that virtually all of the firm's capital stock is owned by the workers. However, there are severe problems with worker ownership. Most important, the capital per worker in the average firm is greater than the total wealth of the average worker in that firm. If the worker were given a share in the firm outright, he would prefer to sell it to diversify his asset holdings. Indeed, all the workers would prefer to sell out to a capitalist enterprise so they would become less vulnerable to the vicissitudes of the market. Indeed, there are several cases in which land redistribution to the peasants failed because the peasants sold the land right back to their previous landlords! Of course, this could be prevented by law, but the economic inefficiency of having a workforce of highly exposed individuals would be extreme. Moreover, if the workers own the firm, they will not want to expand employment in the firm, because the new workers would get a share of the value of the firm. Of course, new workers could be forced to buy a share in the firm, but few would willingly do so. Finally, the idea of worker ownership might be feasible for some highly stable and technologically developed sectors, but a vibrant economy is based on entrepreneurial innovation, and this is incompatible with workplace democracy.

If the contribution of workplace democracy to social welfare were sufficiently great, perhaps some of these severe problems could be overcome. But in fact, workplace democracy and popular ownership of capital are not fundamental values, but rather are instrumental values. Of course, in the minds of truly committed socialists they become ends in themselves, but I do not think such an idea can be sustained, even using Sen's notion of capacities. Socialists talk of "wage-slavery," but working for a boss is not slavery by a long shot. There are good and bad bosses, good and bad workplaces, but there are also good and bad teachers, and this does not imply that all authoritarianism should be abandoned in the educational process. Market socialists like to compare workplaces to communities, asking why we should have democratic communities but not democratic workplaces. This is a good question, but the fact is that our democratic communities work because we have a traditional market economy to draw upon. Moreover, while it is clear that a liberal democratic national constitution is a must, it is not clear that there would be something completely unacceptable about having corporations run communities, as they now run some schools and prisons.

I think the most creative insight in this book is the relationship between Hayek and Postmodernism. I love Hayek and I am deeply put off by Postmodernism, so I am certain that the melding of the two must be carefully executed to maintain continuity with Hayek's thought. But it is interesting food for thought, one of many Burczak offers us in Socialism After Hayek.

Perhaps the first time somebody that is a socialist understands Hayek and is a socialist writes a book about it. Basically it tries to solve the knowledge problem of socialism, articulated by Hayek and modern market process theorists as the problem of how to utilize the information dispersed over millions of individual minds. Socialism cannot possibly work, according to Hayek, because it is centralized and therefore fails to utilize the dispersed knowledge of all individuals. Therefore without the decentralization of decision making that charactherizes market economies it is impossible to attain a high degree of division of labor and economic complexity.

The author tries to solve that problem by constructing a model of market socialism where individuals are free to make entrepreneurial decisions, free to make profits and free to buy and sell anything, except labor. He claims that socialism can be attained as a market economy without a labor market, therefore the workers would always need to be partners in the enterprises and can never become simple tools for the capitalists. He also claims that the government should distribute money for people who finish highschool to make them able to act as entrepreneurs, due to the imperfection of credit markets.

While I think that his arguments are interesting and very well articulated, his overall model of a market socialist economy is ultimately a failure. Though a better failure than Lange's nonsense model.

Socialism After Hayek is an extremely interesting book. It is accessible even for those who have no formal training in economics and extremely thought provoking. Theodore Burczak attempts to work out a blueprint for socialism which would take Hayek's critiques of central planning based on the tacit and dispersed nature of knowledge into account, and he combines the entire project with the normative capability theory worked out by Amartya Sen and Martha Nussbaum. A number of the previous reviewers seem to feel that Burczak's blueprint is ultimately unworkable and they may be right. I am certainly in no position to question their assessments, but I would like to point out that even if Burczak's concrete proposals (which he works out in the last two chapters of this book) prove unworkable that does not in anyway negate the value of this book. I will attempt in the first part of my review to provide a fairly comprehensive summary of the contents of this book. In the second section I will offer a few brief criticisms (or reservations) I have about particular aspects of Burczak's analysis.

I.

Burczak begins the book with an analysis of what Burczak calls Hayek's Postmodern Economics. The reason Burczak feels justified in attributing the label of postmodernism to Hayek is because of Hayek's views on the subjectivity of knowledge. Burczak writes that "The point of Hayek's work in psychology...is to give a scientific rationale to the view that when a person observes the world, whether for theoretical or practical purposes, that observation is always 'interpretation...all the way down'" (pg18). The subjective notion of knowledge and perception winds up effecting Hayek's notion of purposive action. According to Hayek individuals act based on their subjective perceptions of opportunities rather than on any objective knowledge of economic opportunities. Perception is not rigidly determined by external events since every perception is interpreted in light of the past experiences of the individual and of the species and since action is based on perception action is also not determined rigidly by external events. In other words one cannot determine individual action purely from a set of given, objective parameters. Not only is knowledge subjective in the sense of being based on subjective interpretations but much knowledge is often tacit and incapable of being expressed in general, scientific terms (for those familiar with Greek philosophy much of human knowledge is a form of knowledge the Greeks called techne, or know-how, as opposed to episteme (scientific knowledge) or sophia (knowledge of causes). And as Hayek writes, "there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of particular circumstances of time and place" (pg23). All of this adds up to a fairly devastating critique of central planning since all of this knowledge, which is relevant to the efficient functioning of an economy, is not simply knowledge which would be difficult for a central planning agency to obtain but is knowledge that is, in principle, impossible for a central planning agency to attain due to its subjective nature (subjective in the three senses described). Burczak considers Hayek's critiques of central planning based on the subjective nature of knowledge to be entirely valid.

Burczak does, however, attempt to critique some of the implications that Hayek drew from his analyses of the subjective nature of knowledge in relation to the common good. Hayek believed that a free-market system based on formal (end-independent) and universal rules was the form of society which best utilized the subjective and dispersed knowledge of its members and which best promoted the common good. As Burczak writes, "A market economy...is not a constructed organization but, rather, an evolved institution that has emerged out of certain regularities of human behavior that have developed in dialectical interaction with the human environment. As such, a market economy aims toward no single end and has no single purpose. It does not maximize anything. It may, however, be highly conducive for 'the pursuit of many purposes,' insofar as it allows people the freedom to undertake creative ventures and to satisfy personal goals" (pg41). Hayek prefers these forms of what he calls 'spontaneous order' in order to distinguish them from forms of organization that have been consciously planned, to forms of order which are based on the attempt to organize society from the standpoint of human reason, "Hayek argues that when people believe they can direct society toward some predefined goal or when they are willing to accept social outcomes only if these outcomes adhere to some rational criterion, they have overestimated the power of human reason and underestimated the tacit, unarticulated knowledge that is embodied in evolved institutions" (pg41). A big part of Hayek's defense of spontaneous orders is based on his notion that "spontaneous orders, like the weather, do not act in the interests of any particular group or person" (pg51) whereas when a government body attempts to pass laws in an effort to achieve some specific purpose the law winds up benefiting some at the expense of others. In other words, spontaneous orders are neutral, whereas laws passed in a democratic process will tend to favor some groups over others. Burczak begins his critique of Hayek at precisely this point. Burczak believes that Hayek's preference for spontaneous order is based on the notion that "common law judges can discover impartial, universally applicable rules to adjudicate economic conflicts...He describes judges as 'unwitting tools' whose decisions are limited and determined by the set of already existing rules" (pg60). Burczak believes that Hayek contradicts himself in this regard and his subjective theory of knowledge which led Hayek to the conclusion that "a limited set of rules may be combined to produce an almost infinite array of actions" (pg60). Burczak, therefore, attempts to apply Hayek's own theories of knowledge to his legal theory. Burczak highlights the subjective nature of a judges knowledge (the judge does not have access to the objective facts in a case) and to the indeterminacy of rules and comes to the conclusion that "the law is far less a neutral set of general, universal rules of just conduct than an instrument of public policy," and also believes that "the development of law in directions beneficial to the interests of a particular group rather than to the interests of all...may be an ineradicable feature of the legal system" (pg61). Laws are going to be filtered and shaped by the values, theories, and preconceptions of the judges responsible for determining particular cases and can easily become the instrument of particular interests.

Burczak then goes on to give some examples of ways in which a market economy will tend to favor some over others, specifically the asset rich over the asset poor. One of the central tenets of Hayek's notion that markets benefit both the rich and the poor (which is developed further by Israel Kirzner) is the belief that the rich and the poor have an equal opportunity to become entrepreneurs since a successful entrepreneur is someone who acts on his or her own subjective perceptions of economic opportunity. The notion, put simply, is based on the idea that anyone, whatever their place in the economic system, will be capable of perceiving disequilibrium price discrepancies and of exploiting those price discrepancies for economic gain. Most entrepreneurs will not have the capital to act on their perceptions but will have to turn to sources of external finance and borrowing. In the standard equilibrium theory the interest rate will be determined by the supply and demand of loanable funds in which case anyone who has a genuinely profitable economic opportunity (one in which the expected return is higher than the interest rate they will have to pay) will have the opportunity to pursue that opportunity. If the number of people who perceive economic opportunities increases the demand for loanable funds will increase and so will the interest rate in which case some of those opportunities will no longer be profitable. But even at the higher interest rate all of those who believe that their projects will still be profitable will be able to attain credit since they will be willing to pay the higher interest rate. This view fails, however, to take into consideration the possibility of credit-rationing which is itself based on asymmetric information. As Burczak writes, "While demanders of credit may react in traditional fashion to interest rate movements, credit suppliers, such as banks, are not necessarily eager to increase their lending when the demand price of loans rises. Banks care about the expected returns to loans, not simply about the interest borrowers are willing to pay. The two classic problems of markets with asymmetric information - moral hazard and adverse selection - prevent there being an isomorphic relationship between interest rates and expected returns. Since the willingness to lend is determined by the expected return on loans, the interest rate consistent with the optimal expected return for lenders may not be the interest rate that demanders are willing to pay" (pg74). All of this can make it very difficult for asset poor individuals, who are unable to offer collateral for their loans, to attain credit no matter what the interest rate they are willing to pay which will make it difficult or impossible for them to act on their subjective perceptions of economic opportunity. Not only does this contradict the notion that a free-market does not favor anyone, rich or poor, but it also means the common good is not served as efficiently as it could be since the asset poor are unable to act on their perceived opportunities which might ultimately be more profitable (allowing them to pay a higher interest rate) than the opportunities perceived by the asset rich who are able to get credit.

All of this leads Burczak to a higher estimation of democratic processes in his search for an institutional framework that more fully promotes human well-being and the common good. While Hayek critiques the notion that there is an objective good at all (which is consistent with his subjective theory of knowledge) Burczak wonders if "Perhaps the common good needs to be created" (pg79) and if democratic institutions and processes might not offer the best method for determining and coming to agreement about the common good since, "Democracy involves a set of noninstrumental procedures...that establish a framework permitting a collective conversation about the nature of the common good" (pg80).

Burczak uses some of the ideas of Martha Nussbaum to question Hayek's liberal belief that any substantive agreement about the good life in modern societies is impossible or that diverse individuals can share any common, outcome-oriented ends (pg85). "Nussbaum," Burczak writes, "Maintains that the liberal skepticism is overstated. Diverse individuals and societies have agreed and continue to agree about the attributes that are necessary for a being to be considered as human...The possession of practical reason, mortality, the need for nourishment, and dignity are some of these characteristics...If a being that we recognize as human lacks the means (say, adequate food) necessary to choose to function in a manner consistent with his or her nature (he or she is malnourished), then we can reasonably conclude that he or she does not have the capability to function as a good or flourishing human" (pg85-86). Liberals also often question the goal of equality and believe that policy should be designed to promote freedom rather than equality of outcome. The economist Amartya Sen however has argued that "every theory of justice that has gained acceptance in the modern world appeals to equal treatment of people in some conceptual space important to that theory" (pg89). What separates theories is not their concern (or lack thereof) for equality but the conceptual space in which they conceive equality. Liberals who promote freedom over equality are really making an argument for equality before the law, Kirzner's theory appeals to equality of opportunity to be an entrepreneur, etc. So the real question is: what conceptual space should we use to measure equality? Sen and Nussbaum argue that we should view equality in terms of equal capability to achieve essential human functionings. Sen and Nussbaum's theories provide Burczak with one of the normative theories he uses to critique existing capitalism in favor of socialism. To get a little ahead of myself, however, his ultimate critique of capitalist managed firms, which Burczak wants to replace with worker-managed firms, does not rely on Sen and Nussbaum's theories but on a notion of appropriative justice which he borrows from a couple of other thinkers. Burczak uses Sen and Nussbaum to critique the inequalities (injustices from the standpoint of the normative capability theory) which Burczak admits would still exist in a society with worker-managed firms. Even a society with worker-managed firms would require some form of welfare state in order to remedy these forms of injustice. The important point to note here is that even if Burczak's proposals for worker-managed firms turn out to be unworkable that does not invalidate his argument up to this point. Even if we maintain capitalist managed firms there will still be a necessity for some form of welfare state (if you agree with Burczak's analysis). Personally I find Burczak's critique of Hayek, and libertarianism (as well as the ideas of Sen and Nussbaum) extremely compelling and so I think it worthwhile to point out that I think the entire analysis remains valid up until this point even if we wind up rejecting Burczak's final two chapters.

In the final two chapters of the book Burczak works out his own proposals for a socialist society. This review is already quite long and since a number of reviewers seem to think Burczak's proposals are seriously flawed I will try to be brief in my descriptions. Burczak first wants to work out a normative theory from which he can critique capitalist society and to do so he draws on the work of David Ellerman. Since the form of socialism Burczak supports is a form of market socialism Burczak needs to work out a theory that critiques capitalist production without relying on a wholesale critique of private property. In other words, if you believe that the institution of private property is inherently unjust then Burczak's version of socialism will not necessarily represent a step forward from capitalism since the means of production will still be privately owned. According to David Ellerman, "the fundamental injustice of capitalism is that wage labor assumes the legal status of a thing in a capitalist firm. To rectify this injustice requires prohibiting the wage-for-labor-time exchange...A just economy...is one in which joint production processes are carried out cooperatively by democratic, labor-managed firms in which all staff members collectively appropriate the entire product of the firm" (pg102). The injustice of capitalism, in this view, is not a matter of privately own means of production but a matter of who appropriates the new products created in the production process. This view definitely owes something to Locke's notion that individuals have a right to the product of their own labor. I think the stronger point of Ellerman's theory, however, has to do with his notion of the wage-for-labor-time contract and the way he believes this violates 'the juridical principle of imputation'. The juridical principle of imputation states that, "people should always be held legally responsible for the positive and negative results of their de facto responsible actions" (pg112). According to Burczak, "A typical wage-for-labor-time contract violates the juridical principle of imputation because it allows the employer to be the last owner of the worker's time, thereby transforming the worker into the legal instrument of the employer and giving the worker the legal status of a thing" (pg112-113). This argument is really a development of the idea that certain rights are inalienable and cannot be traded or exchanged. Slavery is illegal (no slavery contract would be recognized as valid in the United States even if entered into voluntarily) because as a society we have decided that a human being is not something that can be traded or exchanged or owned by another human being. Ellerman's argument makes the same argument but in relation to labor time. No employer can own, or be responsible, for another human beings responsible actions. In Burczak's version of socialism the wage-for-labor-time contract would be considered illegal in the same way that a contract of slavery would be considered illegal and democratic worker-managed firms would be the appropriators of their own product.

Burczak admits that such a society would still have a tendency to perpetuate inequalities. Specifically, it would still be difficult for asset poor worker-managed firms to attain credit and compete with asset rich worker-managed firms. In order to promote greater equality Burczak puts forward puts forward the proposal of giving every citizen a social inheritance when they reach maturity. Burczak believes this is consistent with the liberal tradition insofar as it allows each individual to determine the best use for his or her inheritance (pg131). This form of redistribution (the inheritance would be financed through a wealth tax) would also create greater equality of opportunity and go a long ways towards solving the problem of credit rationing. Burczak also believes that this proposal would fit into the Hayekian vision of society since, "it would be implemented via abstract, well-announced rules and would redistribute wealth outside of the market process" (pg134). It would not, therefore, interfere with the market allocation of resources and distribution of income and it would not seek to reward or punish any particular productive activity or disrupt the ability of the market process to coordinate the activities of diverse people with diverse knowledge (pg134). That in a nutshell is Burczak's argument in this work.

II.

The main reservation I have about Burczak's book has to do with the grounds for his critique of capitalism. Sen and Nussbaum's ideas do not ultimately lead towards socialism but simply imply the necessity of some form of welfare state. Burczak really argues for the necessity of socialism based on Ellerman's theory of appropriative justice. While I personally find Ellerman's ideas at least intriguing I doubt that they will carry much weight with those who are opposed to socialism or state intervention in the economy. It is going to be hard to convince people that the wage-for-labor-time contract is a form of slavery or that human beings possess an inalienable right to appropriate the products of their own labor. I do not necessarily believe these ideas are wrong but they are going to be a hard sell. I also am not sure worker-managed firms would really be that different from capitalist-managed firms. It will still be necessary to have managers and a certain hierarchy, the difference will be that the managers are elected by the workers, but the nature of work, or the drive for profits, will not change (and I think it is the drive for profits which leads to a form of abstract domination in capitalist society that provides the real basis of Marx's critique; more on this in a moment). Worker-managed firms, even if they are democratic, will still result in a domination of the minority by the majority as well. Instead of a single manager dominating his or her employees one would have one group of workers dominating another.

More importantly, I am not convinced that Burczak's (or Ellerman's) critique of capitalism really gets to the heart of Marx's critique of capitalism or addresses what I think are the genuine problems inherent in the capitalist system. I think one problem is that Burczak seems to be operating within the class perspetive of Marxist thought in following Marxians like Resnick and Wolff where the injustice or domination within capitalism is defined in terms of class domination. On this view the injustice of the capitalist system is based on the appropriation of the products of labor by non-laboring classes. Burczak does take this in a slightly new direction (at least new to me) since he defines exploitation not simply in terms of the appropriation of surplus-labor (or unpaid labor) but as the ownership of labor within the wage-for-labor-time contract. But I still do not believe that this notion gets to the heart of capitalist domination which I think is ultimately not a matter of one class dominating another but of the domination of an abstract process (for more on this see Time, Labor, and Social Domination: A Reinterpretation of Marx's Critical Theory by Moishe Postone). The capitalist system is based on competition for profits. This leads to a number of problems. First, it leads to a constant dynamic of growth that I think is ultimately unsustainable ecologically speaking. It also leads to a social system which is geared towards the production of more and more wants which I do not think is conducive to human well-being. We wind up with a system in which people spend their lives working at jobs they hate in order to produce products that no one really needs and that are not ultimately conducive to human happiness. This is perhaps a simplistic way of putting things but I do not believe that Burczak's proposal for a socialist society would be capable of solving any of these problems which seem to be endemic to capitalism and the real basis of Marx's critique. Burczak's form of socialism might be capable of solving what I think most people would consider a fairly minor problem (who appropriates the final product in the production process) but it will not keep the economic system from being an abstract system of domination ruled by the insatiable drive for profits pursued in the form of infinite want creation. It will not solve the imperative of growth that seems to be inherent within capitalism and which I think is ecologically unsustainable, and it will not solve the problem of the periodic crises which tend to plague capitalism (for more on this see Law of Accumulation and the Breakdown of the Capitalist system by Henryk Grossmann). Admittedly these are much more difficult problems to solve. It may simply be impossible to design a social system that would be capable of solving these problems, but I do not think that means we should stop trying to solve them, or trying to rectify the problems that we do see. Ultimately I just do not think that Burczak's version of socialism, even if it proved workable, would solve the problems that Marx has with capitalism.

Despite these reservations I still wholeheartedly endorse this book. There are a ton of interesting ideas expressed in its pages (far more than I have been able to summarize). And it is good to see that there are really intelligent people out there thinking about possible alternatives to capitalism.

-Brian

Being thoroughly trained in both Marxian and Austrian school theory makes Theodore Burczak is a very rare breed in economics. His work is regularly published in some of the leading Austrian and Marxist academic journals, and I highly recommend it to everyone. Such a background naturally offers a refreshingly unique perspective on political economy, making this book well worth the purchase.

'Socialism after Hayek' is essentially an attempt at formulating a theory which truly takes to heart Friedrich von Hayek's critique of economic planning, while nevertheless fulfilling longstanding socialist objectives. Despite Burczak's appreciation of Hayek's numerous insights, however, he remains highly critical of many Austrian school positions; offering penetrating critiques of private adjudication, the alleged "impartiality" of common law, Israel Kirzner's "finders-keepers" defense of entrepreneurial profit, and so forth. A significant portion of the book is also devoted to the nature of the credit rationing system under capitalism -- which systematically discriminates against the asset-poor in society, rendering them unable to receive loans to take advantage of entrepreneurial opportunities.

To remedy the injustices endemic to capitalism, Burczak develops a system of worker self-managed market socialism by synthesizing Hayek's defense of the market with Marx's theory of alienation, Wolff and Resnick's postmodern Marxism, and Ellerman's opposition to the wage-for-labor-time contract on the basis of the juridical principle of imputation. However, Burczak's market socialism differs from previous models, insofar as it doesn't recommend the complete abolition of private ownership over capital goods or private finance. What the model does share with earlier conceptions of market socialism is that labor-managed firms would represent the dominant organizational form of production -- thus eliminating capitalist exploitation by having workers democratically allocate whatever surplus their firm generates.

Burczak also articulates a theory of distributive justice based upon Sen and Nussbaum's Aristotelian capability theory. He favors the formation of a "socialist stakeholder society," wherein every citizen (when they come into legal adulthood) would be granted a social inheritance of roughly $80,000. This grant would be used exclusively for the purpose of capability-enhancement, thereby allowing the recipients the "equal opportunity to enter into nonexploitative work arrangements, through self-employment or by joining a labor-managed firm" (p. 133). To subsidize such a grant, Burczak favors implementing a tax policy similar to that which Ackerman and Alstott promote in The Stakeholder Society.

Aside from his dismissal of the aforementioned libertarian policy proposals, Burczak also analyzes Michael Albert and Robin Hahnel's theory of participatory economics (or 'parecon'). His assessment is that Hayekian "knowledge problems" and a lack of sufficient economic incentives prevents even decentralized planning from being capable of overcoming the same set of problems experienced in centrally planned economies. Though I was unpersuaded by his contention that participatory planning is unfeasible, I do question the overall desirability of parecon nonetheless.

One major drawback in 'Socialism after Hayek' is that it may leave nonpartisan readers somewhat underwhelmed with respect to Burczak's case for workers' self-management. After all, one could easily make the claim that while certain redistributive measures are essential for securing justice in a market economy, the elimination of the traditional capitalist enterprise is not. For example, Herbert Gintis (a former advocate of market socialism himself) argues that human beings are fundamentally indifferent to the issue of wealth inequality and that "workplace democracy and popular ownership of capital are not fundamental values, but rather are instrumental values." Such arguments can and should be addressed by individuals advocating on behalf of socialism (be it of the market or planned variety) today. Personally, I strongly disagree with the notion that people aren't bothered by the massive wealth inequalities observed in capitalist nations -- which the empirical data collected on the topic verifies [see Norton, Michael I. and Ariley, Dan (2011), "Building a Better America - One Wealth Quintile at a Time," Perspectives on Psychological Science v. 6, no. 1 (Jan.) pp. 9-12]. As far as workplace democracy is concerned, since the age of Enlightenment and the ascent of the capitalist mode of production, many workers and intellectuals alike have been extremely critical of the concept of wage labor:

"It is the impossibility of living by any other means that compels our farm laborers to till the soil whose fruits they will not eat, and our masons to construct buildings in which they will not live. It is want that drags them to those markets where they await masters who will do them the kindness of buying them. It is want that compels them to go down on their knees to the rich man in order to get from him permission to enrich him. . . . What effective gain has the suppression of slavery brought him? . . . He is free you say. Ah! That is his misfortune. The slave was precious to his master because of the money he had cost him. But the handicraftsman costs nothing to the rich voluptuary who employs him. . . . These men, it is said, have no master - they have one, and the most terrible, the most imperious of masters, that is need. It is this that reduces them to the most cruel dependence." (Simon-Nicholas Henri Linguet, 1793).

Such sentiments were echoed in the United States at the height of the Industrial Revolution in the 1850s -- where in Massachusetts, for example, the Lowell so-called 'factory girls' actually created the expression "wage slavery." The working-class press frequently wrote of the similarities between chattel slavery and wage labor, and took it as a given that workers should own the factories they labored in [Chomsky, Noam. Powers and Prospects: Reflections on Human Nature and the Social Order. Boston: South End Press, 1996. p. 85]. Bear in mind that the American working-class press at that time was literally run by wage laborers, not by professional revolutionaries; these workers had never read a single word penned by Marx or Proudhon, their disdain for wage slavery was entirely organic. Considering that capitalist work relations are a relatively modern phenomenon, this should come as no surprise. It could very well be the case that human beings have an innate impulse to reject the authoritarian structure of capitalist firms, or as Noam Chomsky said, "It's conceivable that the founder of what's now called 'evolutionary psychology' (Peter Kropotkin) is right, and that there are evolutionary pressures leading to his version of communist anarchism. Or to Parecon. Or--take your pick" [Jump Arts Journal. "On Terrorism," Noam Chomsky interviewed by John Bolender, January, 2004.] To this end, while democratic firms can certainly help to mitigate the alienation workers may feel, they are by no means a panacea. Nevertheless, when workers are polled regarding how they feel about working in a labor-managed firm, as opposed to a traditional capitalist enterprise, the vast majority state their preference for having the ability to have a say in the productive process, and they also like having management more accountable to them and enjoy the relative job security cooperatives provide. Even when a cynical worker-member of the Mondragón Cooperative Corporation was asked if it mattered to her if she worked in a cooperative or a capitalist firm, she unequivocally replied "of course it matters. Here I have job security, and here I can vote" [Schweickart, David. After Capitalism. Lanham: Rowman & Littlefield, 2002. p. 70]. One needn't accept Marxian value theory or David Ellerman's Labor Theory of Property in order favor democratic production over authoritarian production, it may just accord better with our innate preferences as a species.

Certain critics have also argued that labor-managed firms are "less efficient" than capitalist firms -- for a thought-provoking critique of orthodox notions of economic efficiency, see Wolff, Richard D. (2002), "Efficiency: Whose Efficiency?" Post-Autistic Economics Review no. 16, (Oct.) -- but this contention is ill founded. Numerous studies have been conducted on existing cooperative firms throughout the world and the results are nearly unanimous: Labor-managed firms are just as efficient as capitalist firms in most cases, many times even more so [see Doucouliagos, Chris (1995), "Worker Participation and Productivity in Labor-Managed and Participatory Capitalist Firms: A Meta-analysis," Industrial and Labor Relations Review v. 49, no. 1 (Oct) pp. 58-77]. The claim that cooperatives tend towards risk aversion and perverse behavior are also empirically false [see Schweickart, David. Against Capitalism. Boulder: Westview Press, 1996. p. 91]. Another obstacle critics point to is the problem of finance under market socialism, which I believe Burczak's model (unfortunately) doesn't sufficiently address. The most compelling method of finance I've encountered thus far can be found in Michael W. Howard's Self-Management and the Crisis of Socialism (pp. 156-161). I also reject the claim that an economy consisting of labor-managed firms would lack technological dynamism. There is ample evidence suggesting that the old "carrot and stick" method is not needed to effectively spur creativity [see Pink, Daniel. Drive: The Surprising Truth About What Motivates Us. New York: Riverhead Trade, 2011].

For my part, I've never had much patience or respect for the tenured academicians who endlessly praise capitalism, and proceed to explain just how wonderful this economic arrangement has been for working men and women the world over. Many of these very intellectuals have the privilege to work with a relatively high degree of autonomy and self-management themselves, yet the irony never seems to phase them. I believe Noam Chomsky was correct when he said, "The intellectual tradition is one of servility to power." Theodore Burczak deserves to be commended for his willingness to challenge the status quo and provide us with an interesting and feasible alternative to capitalism.

The alleged problems facing market socialism are clearly not insurmountable, and I believe there is a good case to be made for the desirability of the system -- from the preferences of workers, to a reduction in the destructive class divisions that currently plague society. Ultimately, the people will decide the matter for themselves. In the words of Prof. Richard D. Wolff:

"Socialism was born with capitalism, it's capitalism's shadow/other, and is provoked and revived by capitalism's own mechanisms. Those who suffer, like those able to see and sympathize with the suffering, caused by the deep irrationality of capitalism, will sooner or later rise from a focus on fixing the system, to fundamentally changing it."