Why is Communist economics flawed?

Factual Questions
1

I put this in General Questions because I really don’t want to have a debate.

I’m not so much looking for the answer to the question “Why is Communist economics flawed?” as the answer to the question “Among the people who consider Communist economics flawed, why is Communist economics considered flawed?”. So please only reply with factual answers as to why it is the general sentiment that Communism can never work because of some characteristic of economics. If you want to debate or argue with another poster, please start your own Great Debates thread. If you think Communism can never work for some other reason than a characteristic of economics, please don’t reply in this thread.

Furthermore, I’d like to know if this economic flaw is considered universal. If Zorbloonians from the planet Maxzur-6 were to implement Communism, would it fail there too, or is it something about the economics humans have created? If the latter, is it theoretically possible to somehow remake economics so Communism would work?

2

I recall discussing this at length in my college econ class. The basic problem with the theoretical model is that the absence of market forces makes it inefficient. The government sets prices and controls production. The natural forces of supply and demand are ignored. There is no room for enterpreneurial expansion to meet emerging (or unfulfilled) customer demand, and there’s little incentive for innovagtion or improvement to existing products and processes. All too often other goods and services are produced in excess of demand.

3

Whaddaya mean?! They ARE Communist!

If you accept the definition of Communism as an extreme form of Socialism, I think the core model for both of them, is economically quite elegant. The problem is not as much in the economic model as it is in the execution of it.

I might be getting into Great Debate terrritory here, but it fails because of the inherent flaws in human nature. Ideally, everyone contributes to production while owning nothing, yet having enough to satisfy one’s needs and wants. This is just plain impractical. Maslowe’s heirarchy of needs and its variants professes that personal gain is what drives people to produce and contribute, and only if those needs are satisfied do the more altruistic motives engage.

Considering that Communism has been instituted in countries where the starting point has been poverty, unrest/rebellion, etc., people’s most basic needs are the ones required to be met first. This is hardly the climate in which it can work. Everyone is concentrated in his/her own survival and ambition, not in the common good. Additionally, those at the top of the social structure are invariably corrupted by the power and comfort the position affords them and soon begin to act in their own interests rather than the common good.

4

And to expand on this a little, in any economic system with scare resources (which is every system) people must make choices as to how to use those resources. Money has no inherent value, it is simply a mechanism for communicating the relative value of various goods and services. When society wants more of a particular product, prices go up which encourages the production of more of that product and vice versus. No system has ever been created that can meet the various demands of the market more efficiently than the market iteself. In fact, the only reason we have government intervention at all is a) certain goods and services should always be available (ie police, fire) but are not always needed and b) emotion and politics often causes people to cling to enterprises long after they are no longer viable.

The inherent flaw of communism is that it takes away freedom. In a capitalist society, I am free to work or not work as long as I can support myself. I can work where and how I want to work. Competition, my own skills and ambitions, the incentives of wealth and the disencentives of poverty help place me in the position where I can be the most productive. In a communist system, you either work where you are told or you work where you want (regardless of need). Neither option is particularly good.

5

I can’t speak for the Zorbloonians, but I might have a thought to offer here anyway.

Ever read Brave New World by Aldous Huxley? It’s a work of fiction, so we certainly can’t prove anything by it, but the book does speculate on a possible future when humanity has been reshaped into what is essentially a giant ant colony.

People are “free” to do what they want, although what they want has been largely programmed into them through psychological and physical conditioning. (Huxley wrote before DNA was discovered; otherwise he could have worked that into the novel’s premise as well.) This future world is prosperous and stable, though it is lacking a bit in innovation and novelty. Discontent is no longer a problem. Everyone’s basic needs and material desires are met. Everyone is sculpted from birth to fit their role in society — if not to fit a particular job, then to fit a general category of jobs: administration, skilled labor, or menial labor.

Huxley’s world maybe can’t be called “communist” as the term is normally used, but it does have a state-planned economy, one based on humans who have been tailored to fit that economy. Perhaps it would fail anyway for the reason anson and others have already given: the market (which you can’t escape; it’s always there) is prevented from determining the relative value of products and skills. So perhaps Brave New World is ultimately impossible, even if everyone willingly cooperates with the system.

It’s just as well. I didn’t want to live in such a world anyway.

To finally make the point I set out to make: I think a planned economy could conceivably work for an alien species, if they had a very different psychology from us. One with much more rigidity, compliance, and competence, like the social insects, or maybe naked mole rats (the one mammal species that organizes itself into inbred colonies). This still seems to require that the aliens’ leaders have near perfect clairvoyance in order to plan for all contingencies. Either that, or near perfect computer models.

Thoughts?

6

In my opinion, the theory works perfectly on paper. Unfortunately people aren’t made of paper.

7

Here’s how I understand it. First, optimizing is a calculus problem, which the communist solves with arithematic. As a result, she concludes that the capitalist is exploiting the worker, when in fact, if we apply the same analysis from the other side of the coin, the worker is exploiting the capitalist! Both of these are incorrect, and as long as the communist erroneously concludes that the worker is exploited, the capitalist will be unjustly demonized and repressed.

Second, a non-competitive market economy is not guaranteed to produce maximal well-being. We can imagine an über-planner who knows everything needed to distribute all the scarce goods efficiently, where “efficient” means “producing maximal well-being.” But to do this, the planner must know all sorts of private information, like how much chocolate you want to eat and how thoroughly you like to wipe your butt after doing “your business.” Competitive markets guarantee efficient outcomes, even though no one but yourself needs to know your private information. So absent an omniscient planner, communist systems are neccessarily wasteful.

This wastefulness can be egregious. One example is that of Soviet soldiers just cutting off potatoes in the ground with their bayonetts because they were getting paid the same amount whether they actually produced potatos from their effort.

For humans, pigeons, and rats, yes, it is universal. Competitive market efficiency is at the very bottom a product of the character of preferences. It is becoming increasingly verified through experiment that humans and animals do indeed have rational preferences and, as a result, any system that fails to act accordingly will be flawed at a fundamental level.

Whether Zorbloonians have rational preferences is open to debate. However, I would imagine that they wouldn’t get too far without them. Given a choice between a Glot, a Doinkle, or a Coogfet when all three are available and affordable, a Zorbloonian who prefers the Glot to the Doinkle, the Doinkle to the Coogfet, and the Coogfet to the Glot will spend the rest of his life never choosing one because there is always another that he would rather have. Instead of building a spaceship to come to Earth and probe some hapless slob, he’ll spend his days cycling between the three goods like some comical version of Buridan’s Ass.

8

It’s not true that communism “works on paper” or “doesn’t work because people aren’t perfect”. It’s not the “perfect system” at all.

AS one poster said, it destroys prices. Without price information, no one knows the true costs of anything.

Suppose you and I both have companies that make tractors. My tractors are very inefficient and poorly made and cost $1,000. Yours are simple and cost $100. In the capitalist system, no one buys any of mine.

What’s even better is that the reason why mine costs so much is that it uses more steel, electronics, labor everything. These are “resources”. My tractor uses more “resources” so it costs more. Yours uses less. So society as a whole is benefited because less resources are used to solve a problem. Furthermore, price information present in the $100 tractors causes people to try to innovate. Maybe they can make a cheaper tractor. Prices of all inputs are readily observable to it is easy to optimize. Just get the most output with the cheapest inputs. Maybe a farmer seeing how much tractors cost will plant crops in such a way that eliminates the need for them. Planting will cost more but it will save money in the long run.

With a communist system, there are no prices, so no one knows how cheap or dear a given product is. No one has any information as to whether certain innovations would work better and be cheaper, as there are no prices of anything. It’s a ridiculous system as it doesn’t allow for any innovation or improvment or optimization of anything. It works well on paper if you think in terms of “cars”, “steel”, “ironing boards” and say make as many as you can and we’ll divy it up. But the capitalist system actually improves things.

Cars that cost slightly more but get better gas mileage and are more durable. Steel which varies in quality…cheap steel for building, more expensive for cars and such.

I’ll give you an example. A company called Nucor uses a process to melt scrap steel and use it for buildings, roads, etc. They’ve improved the process so it can be used for a wider variety of goods too.

Now to know that it was profitable to do this, Nucor had to know the price of
a) labor
b) scrap steel
c) electric furnaces (to melt scrap)
c) electricity (to power furnaces)
d) land (on which to build the plant)
e) building steel (which was previously made in cast iron furnaces)
f) shipping costs

They put all these things together and figured they could make a profit. The price of steel for many applications FELL. This means less inputs went into it even though Nucor still made a profit. Repeat this example millions of times in all aspects of the economy and you have the reason why the US is the most productive country.

9

I’m not sure that is strictly true. Prices per se don’t do the job, prices in a competitive market do the job. IIRC, Robert Conquest noted that Soviet economists had to come up with thousands of pages of documentation to set the price of each item, for unimaginable numbers of items. Also worth noting is that in a capitalistic economy that allows unfettered monopolies, efficiency is lost even though the prices are set in the market.

While one may be considerably more flawed than the other, they are both inefficient. It is my understanding that the Crony Capitalism of regimes such as Suharto’s in Indonesia are good examples of what sort of havoc non-competitive capitalist markets can wreak. Two identical Indonesias, one monopolistic, the other communistic, would see one fold before the other—my guess is the commie one would fold first—but they’re both inefficient and inferior to a third, competitive-market Indonesia.

Efficiency is guaranteed only with competitive markets; i.e. the market sets the price and no individual economic actors have ability to set prices.

10

Ultimately it gets back to human nature.

Are you willing to bust your buns XX hours a week so I can rest mine in comfort?

On the other hand, if you aren’t willing to earn your keep, you can go hungry!

Only the incapacitated can expect a hand out and that not a lavish one.

11

I consider communism flawed. So here’s my two-cents:

(This is IMHO territory, BTW.)

I believe the basic problem with communism is that it does not take actual, ”as-found” human nature into account. It relies on a different form human nature. Unfortunately for communists, this form only exists in their minds.

For an economic or government system to be successful, it cannot rely on an idealistic model of human nature. The system must acknowledge (and perhaps even accept) the good, bad, and ugly aspects of human propensities and behaviors.

The cold truth is that humans…

  • are individualistic
  • are selfish/self-centered
  • are competitive
  • are greedy
  • desire to own/possess property & material stuff

The beauty of capitalism is that it was designed not only to * acknowledge* the above attributes, but to embrace them. It leverages off the fact that humans are inherently selfish, competitive, and greedy. Instead of shunning or squelching these attributes, capitalism is fueled by them.

Does communism even acknowledge the above attributes exist? I don’t claim to be an expert on it, but I would guess it doesn’t. And if it does, I can only guess it condemns them, and says human nature must change.

But can human nature truly be changed? No. And this is why communism failed.

12

I remember discussing this very thing with someone 20 years ago. He said that, just as you can’t build a nuclear reactor with Newtonian physics or a bicycle with Einsteinian (and I take him at his word on this), you can’t run a nation with socialist theory. You can run a commune or a group house with it; the stakes are much lower and everyone has each other’s well-being in mind anyway. But there are things you’d do for a friend that you wouldn’t for a stranger, like put in an extra shift without pay, or clean the bathroom when it isn’t your turn yet. But no one in a group house wants to live with an exploiter who built his fortunes on the crushed dreams of other housemates, so small entities can’t be run capitalistically, either.

So yeah, Communism can work–for political entities of 20 or fewer people. After that, it kinda falls apart.

13

Another possibility, from a historical science-fiction book I read (by Leo Frankowski, maybe):

Karl Marx wrote his book defining Communism while living in 1800’s England, surrounded by a complete, working transportation system. Therefore he assumed this as part of an economy, and didn’t pay any attention to the need for a system to transport both raw materials and finished goods around the country. This leads to the whole transportation system being largely ignored by Communist governments (since it isn’t discussed by Marx), and this leads to a very inefficient transportation system, which drags down the whole economy.

Not being any kind of an economist, I have no idea of the accuracy of this. But it sounds rather believable.

14

Communism is doomed to fail because human beings are greedy, selfish, suspicious bastiches. If you bust your hump working all day, you get cranky when you discover that the fruits of your labor are what someone else decides is your “fair share” of the communal take. You end up either working the minimum necessary, skimming some extra off the top for yourself, or any other form of individual corruption.

You might be able to make some form of Communism work for robots or Vulcans, however. :slight_smile:

15

The problem of information transmission is critical to understanding the failure of communism. Prices not only communicate information, they uncover it. If a state bureaucrat asks me if I need a new car, I’ll say “Damned straight I do!” But if I have to buy it, suddenly I have to start thinking about all the other things I could buy with my money. It forces me to prioritize. It forces me to make all my own decisions in relation to all others I could make. A rigid system of applications and quotas lacks this. Even if the bureaucrats were supergeniuses with supercomputers, they can’t process information they don’t have.

This essay by Friedrich Hayek sheds some light on this issue:

The Use of Knowledge in Society

16

The main flaw in Communism as an economic theory is that it is primarily based on the labor theory of value. This posits that since all wealth requires human labor of one kind or another to create, that labor = wealth. The obvious flaw in this argument is that work can be squandered on useless endeavors, and has more formally been disproven as a proposition in standard economic theory.

More broadly, the problem with Communism in that in a sense it isn’t really a purely economic theory at all. It’s a grand philosophical/ social/ political synthesis which regards classic economics as merely the product of one particular social-ideological system, which Communism claims to transcend. For example, it dismisses profitability as a mere artifact of the free market system. So it doesn’t address economic concerns so much as it attempts to ideologically redefine them.

17

I would suggest that the efficiency and price version of the problem is far more accurate that the “humans are greedy” version. There’s nothing WRONG with humans, and humans are in fact very social creatures, instinctively prone to collective effort and helping the less fortunate.

Communism doesn’t work because something is worth what other people will pay for it. There’s no other logical way of assigning value. Any system which assigns prices based on anything BUT what people will freely pay for things is not going to work.

18

Coming from the liberal side of the political spectrum, I’m with Sam Stone. One need not hold a certain view about human nature to recognize the efficiency of a non-command economy.

Generally speaking, one can be a Marxist and think that people are fundamentally evil and greedy (take Stalin, for example) or be a staunch capitalist and hold a firm belief in the fundamental righteousness of people (take Reagan).

If greed were really the most important element of a capitalist system, producers could set prices as high as they like, hold consumers over a barrel, and reap in great profits. Every producer, under such a system, would have an equivalent quotent of greed.

However, in a free market, greed for profit is offset by the willingness of the consumer to pay a particular price. Basically, the common man gets a vote in what he’s willing to pay. Both producers and consumers end up winners, because the price of an object covers the price of materials and a profit, and a consumer gets something at a reasonable price. Everyone wins.

In a command economy, however, prices can be distorted so that either it is inequitably skewed toward producers (ie, cars were far too expensive for almost anyone to own in Communist China until market liberalization in the 1980s and 1990s); or skewed toward consumers (again, the apocryphical cheap Soviet shoes). Who wins in such a system? Well, nobody. That’s a damn big problem.

Well, let’s say that there were an omniscient bureaucracy that could set prices accurately – enough profit for business, enough value for the public. Fantastic. Best of luck to them. But it would still be costly to run such a bureaucracy, compared to the “invisible hand” that would achieve the same result.

19

“From each according to his ability,
To each according to his need.”

When your income depends on your need, there’s not much motivation to do a little more. A lot more? Don’t be silly.

20

You’re forgetting the role of soma. The only way that people could be satisfied living in such a system was either that they had sub-par intelligence, or that they spent all their free time drugged up. In that society, very very few people were in a position where they could rationally analyze the economy. In the Soviet Union, however, just about any Joe Schmoeski could figure out that sticking strictly to the communist way of doing things would probably benefit him less than engaging in some capitalist-type activities (aka the black market).