* Essay: The Functionalist Theory of Society and the Problem of Socialist Economic Calculability. (A Rejoinder to Professor L. von Mises and Dr. Feliz Weil). By Karl Polanyi. Archiv fur Sozialwissenschaft und Sozialpolitik, Vol. LII, 1924, pp. 218-227.
Market, planning or mutual coordination? An early classic on the topic. This goes back to the time when the discussion between planning and the market were the hot topic of the day. Polanyi introduces here a third point of view.
Translated from German by Kari Polanyi Levitt. Excerpted from Karl Polanyi:
“There are basically three contending groups of viewpoints – two of which represent the traditional contradiction between market and non-market economy, while the third position, which is not so well defined takes its point of departure from reasoning independent of the traditional dichotomy. The advocates of this third position are less numerous to be sure; we refer to them as representatives of positive socialist theories.
As regards to the two major contending groups, there is agreement concerning the problematic. Both sides identify the contradiction between market and non-market economy with the contradiction between capitalism and socialism, and both sides accept a definition of socialist economy in its collectivist and state-socialist sense, which, moreover, is assumed to be a non- exchanged, non-market command economy. However hotly the contending positions are debated by their respective advocates, both sides to the dispute make common front against the more recently constituted third group in this debate. The latter includes the pioneers of functional (pluralistic) socialism in England, particularly the advocates of functional guild socialism and embraces also socialist theoreticians who share the orientation of E. Heimann and J. Marschak.
Our own writing originated in a challenge to the two conventional positions and should be interpreted as an attempt to respond to the need to create a positive socialist theory of economics (Wirtschafslehre) as distinct from what, in our view, is a somewhat state scholastic debate between orthodox Marxists and their “bourgeois” enemies.
Thus, to the meat of the matter. The acknowledgement of the need to create a “positive socialist economics” implies the admission that such a body of knowledge does not, as yet, exist. Our article addressed itself in detail to the articulation of an appropriate methodology, for the treatment of the problem of economic calculability in a socialist economy. We have consciously and deliberatively selected definitions and related postulates in a fashion which permits the development of a positive theory of the economics of socialism.
Specifically, we are concerned with three aspects. Firstly, with respect to the definition of socialist economy; secondly, with respect to the mutual relationship between the legal and the economic order; and ultimately with the mechanisms which drive the economy. Our conception of a socialist economy is one which conceives the organizations of communal economics activity, in the widest sense of the term, as autonomous. The realization of two central requirements – the advancement of maximal productivity on the one hand, and of the rule of social justice on the other, (as manifested in the distribution of the product and in the social orientation of the discretion of production) – constitutes the essence of our concept of a socialist economy.
We approach the concepts of law and economy in the same spirit: not statically, as two manifestations of the social – economic base, (property relations = relations of production), but dynamically as two relatively independent determinants of social reality. In this manner we are able to distinguish between circumstantial and directly interventionist effects of legal property relations on the economy, a distinction which escapes the conventional alternatives of the planned command economy versus the free market economy.
Finally, we formulate the problem of the divorce between “natural” and “social” costs of the product in terms of an analysis of “holistic economic will” (einheitlicher Wirtschaftswillen) respecting motivation and clarify the relationship between the inner organization of economic actors with the behaviour of economic groups.
All of this is but a starting point toward the construction of a positive theory of socialist economics.”