Calculation and Coordination

"The Elgar Companion is a big book with a lot of short essays about Austrian economics. My other books are much more about specific things, so, for example, I’ve written three books on the history and practice and collapse of socialism in the Soviet Union, and the transition from it. My book Calculation and Coordination is the last one on that, all essays in post-socialist transition. The easiest way to understand that book is that in order for us to go someplace, we have to go from here to there. If you ill-define where you started from, or where you’re going, your ride is going to be totally different. To move from socialism to capitalism, that’s a here to there idea. So we have to define, first and foremost, what the here and now is, what that system actually is like, and then where we want to go with it. Do we want to look like the US or Britain? Do we want to look like Sweden or Western Europe? Part of what goes on in the book is trying to straighten out what socialism actually looks like at the point of its demise, because that’s our start state. What I try to show is that a lot of the mistakes that took place during the 1990s were because we didn’t define the start-state correctly. We also ill-defined the end-state, and as a consequence we got on the wrong bus for economic reforms. What I’m doing is trying to get the history right and then get the political economy analytics right, and then trying to use both of those to explain that from that original history it was logical that we ended up with the system that we ended up with, rather than the system that we wanted to end up with. So if you ask a question which was a popular policy question at the beginning of the 2000s, which is “Who lost Russia?”, you can understand from my book that it was not because of the IMF or the World Bank. It’s because of political economy questions. That’s why the title is Calculation and Coordination , when you establish the institutions that permit economic calculation, you generate the advanced economic coordination that’s possible in a complex system. When you have institutions cutting against the ability to engage in economic calculation, don’t be surprised when people substitute out economic logic for political logic and as a result you get not economic coordination, but political interest groups that form and become dominant and control the system. Yes, I’m one representative. There are a whole bunch of people. Calculation and Coordination is an effort to take Austrian economics and apply it to a real world policy-relevant issue, which is the transition from communism to capitalism."