Calculation and Coordination: Essays on Socialism and Transitional Political Economy. New York: Routledge, 2001.  
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Book Review

Paul R. Gregory
Professor of Economics
University of Houston

This book is a collection of previously published essays by Peter Boettke on three themes: The contributions of Hayek and Mises to the economic theory of socialism; the
economics of Soviet-type dictatorships, and the political economy of Russian transition. Boettke’s contributions to these three issues are thought provoking, and, if accepted, would require considerable rethinking of thewaywe viewthe Soviet planned economy and Russian
transformation. As someone who considered himself reasonably versed on the “socialist controversy”
—having been brought up on Hayek and Mises’s most famous essays and on Abram Bergson’s Journal of Political Economy essay—I confess that I had missed the extreme
subtlety, particularly of Hayek’s critique of socialism. Boettke argues (Essay 3) that the socialist controversy has been wrongly interpreted as being about whether socialism, in perhaps its market variant, could achieve something approximating equilibrium prices for
the purpose of rational calculation.

Boettke explains that Hayek was not particularly interested in equilibrium prices; rather capitalism’s true superiority lay in its ability to react to disequilibrium prices, which entrepreneurs took as signals for business opportunities and investment. Equilibrium prices are, at best transitory. In contrast to other interpretations of Hayek and Mises as focusing on motivational problems and calculation complexity, Boettke argues that the heart of the Hayek-Mises critique is the calculation problem—both the inability
of socialism to determine what is abundant and what is scarce and to use prices to react to disequilibria.
Essay 4 deals with Hayek’s overlooked writings on the political economy of socialism,
Boettke argues that Hayek did indeed foresee the political economy consequences of socialism
and maintained that socialism will be run not by benevolent dictators but by those
who have a comparative advantage in political brutality. In this manner, Boettke makes a
case that planned socialism will breed ruthless dictators of the Stalin/Mao variety not by
historical chance but as an integral feature of the system itself: “There are strong reasons for
believing that what to us appears the worst features of the existing totalitarian systems are
not accidental by-products but phenomena which totalitarianism is certain sooner or later
to produce.” (Hayek 1944, quoted p. 52). Moreover, Hayek’s 1944 Road to Serfdom anticipated
the public choice logic of concentrated benefits and dispersed costs, which applies
to distributional coalitions in planned as well as to market economies.
Boettke devotes Essays 6 and 7 to the initial years of Soviet socialism—theWar Communism
period dating from 1918 to March of 1921.War Communism was an abortive attempt
to introduce full communism without going through any preparatory steps—a disastrous
move which socialist writers later dismissed as forced upon a reluctant Bolshevik leadership
by the civil war emergency. Boettke makes a convincing case that War Communism was
not a response to the emergency of the civil war but constituted the “original intent” of the
Soviet founders. Boettke’s chronology is particularly convincing. He shows the major war
communism policies either preceded or succeeded civil war hostilities. His reading of the
contemporary writings of Lenin also provide convincing evidence of the ideological origins
of war communism. Although Boettke’s case concerning the founder’s original intent
is convincing (and he provides one of the few good accounts of the first years of Soviet
socialism), I have never been convinced this is a key issue in understanding later Soviet
socialism. Such an experiment, whether based on ideology or necessity was bound to fail
Boettke’s key contribution (co-authored with G. Anderson), and his most controversial,
is his interpretation of the mature form of Soviet socialism (Essay 8). Boettke dismisses
the Soviet myth of planned socialism (a myth too commonly accepted by Soviet specialists)
and applies instead a political-economy interpretation of the Soviet system. Boettke’s
controversial interpretation is of a Soviet dictator who deliberately creates monopolies
which he “sells” in some fashion to monopoly rent seekers. These monopoly rent seekers—
presumably industrial ministries or regional leaders—then exploit their monopolies to reap
economic rents in the form of political favors, bribes, or to gain resources from other monopolists.
The state planning commission, in Boettke’s model, is not the planner-balancer
of the scientific planning model but an arbiter of conflicts among monopolists. Boettke
applies this analysis to Soviet economic reforms (Khruschev’s regionalization reforms,
Gorbachev’s perestroika), which he interprets not as efforts to raise economic efficiency but
as redistributions of monopoly rents as new leaders come to power (Essay 9).
I disagree with Boettke’s conclusion that Soviet planned socialism was not a unique
political-economic system but an extreme variant of mercantilism in which state revenue
was generated not by taxation but by sales of monopoly rights. I would, however, accept it
as a polar variant to the propagandistic Soviet version of scientific planning. In this sense,
the Boettke Soviet “venality” model serves a useful function.
Essays 11–13 deal with the former Soviet Union’s transition. If one accepts Boettke’s
interpretation of the Soviet period, as an extreme form of mercantilism, then the transition
must be reinterpreted accordingly. Boettke accuses the political economy of transition
literature as focusing on “the wrong questions” (p. 250). Transition specialists overlooked
“questions of history, culture, legitimacy and so on” (p. 250) and dealt instead with technical
questions such as accounting practices or voting procedures. Transition success will rest
“with the ability of the Russians themselves to establish institutions of governance which
reduce political uncertainty by restricting the opportunities for public and private predation
and enhance the willingness of individual actors to ‘bet on their ideas’ in the marketplace
for goods and services.” Boettke also makes the point that privatization could not be done
effectively without a market to place a value on assets.
The essays in this collection are the originals. They have been published without revisions
or updating. Those that were written in the mid 1990s on the Russian transition have been
somewhat dated by subsequent events. Boettke’s provocative reinterpretation of the Soviet
and transition periods, particularly his reinterpretation of the Soviet period, is based largely
on theoretical foundations, due to the extreme secrecy of the Soviet period. He provides
interesting hypotheses about the Soviet economy being a rent seeking rather than a planned
economy—that can eventually be tested against real-world Soviet data as they emerge. The
application of modern political economy to explain the problems of transition has brought
together the “old” and “new” economic specialists on the former Soviet Union. I am particularly
pleased that Boettke, unlike others, has taken the time to examine the Soviet past
and in particular question the stereotypes of the Soviet administrative-command economy
that Soviet specialists have been too willing to accept.
Paul R. Gregory
Professor of Economics
University of Houston