"The social-democratic model remains the best one ..." John Roemer

|Peter Boettke|

Tyler Cowen links to John Roemer's recent article in Analyse & Kritik, and highlights how Roemer admits to a change of mind with respect to the workability of his reconstruction of the socialist model in the wake of the collapse of communism in 1989.  My early work as an economist was focused on the Soviet experience and the theoretical and empirical debates that formed around that discussion.  After 1989, the models by Bardhan and Roemer focused on equal shares or coupon based market socialism were the main contenders in the effort to build an system which could meet the Hayekian objections head-on, yet also provide a workable model of socialism with a capital market that while not permiting concentrations of wealth produces prices that could guide the efficient use of resources.

What is interesting in the abstract to the most recent article is Roemer's admission that this earlier model is not workable because of what could be termed opportunistic behavior.  Here is the full abstract:

State ownership, worker ownership, and household ownership are the three main forms in which productive assets (firms) can be held. I argue that worker ownership is not wise in economies with high capital-labor ratios, for it forces the worker to concentrate all her assets in one firm. I review the coupon economy that I proposed in 1994, and express reservations that it could work: greedy people would be able to circumvent its purpose of preventing the concentration of corporate wealth. Although extremely high corporate salaries are the norm today, I argue these are competitive and market determined, a consequence of the gargantuan size of firms. It would, however, be possible to tax such salaries at high rates, because the labor—supply response would be small. The social-democratic model remains the best one, to date, for producing a relatively egalitarian outcome, and it relies on solidarity, redistribution, and private ownership of firms. Whether a solidaristic social ethos can develop without a conflagration, such as the second world war, which not only united populations in the war effort, but also wiped out substantial middle-class wealth in Europe—thus engendering the post-war movement towards social insurance—is an open question.

In my book, Why Perestroika Failed I argue that in assessing the workability of utopian schemes we must first subject them to a coherence test, and then a test of their vulnerability to opportunism.  Schemes that are inchorent are deemed impossible; schemes that are coherent but vulnerable are impractical; and only schemes that are both coherent and invulnerable should be considered in the feasible set of workable utopias. (see pp. 4-5, and then chapters 3-5 in the linked book).

Roemer seems to be suggesting that if the population could coordinate around a solidaristic social ethos, then the social-democratic model, perhaps even the market socialist model, might be workable.  I have always found these arguments weak whether they are made by libertarians, conservatives, progressives, or socialist.  It amounts to arguing that the entire system turns of the moral character of the individuals who populate the system.  If everyone was a libertarian (socialist), then we could have a libertarian (socialist) world.  But think about that for a second, the more everyone coordinates around the norm, the greater the potential scope for gain by opportunistically violating that norm.  So rather than rely on moral character to make the argument work, I have always been more attracted to instituitonal solutions that do not require for their working improved moral character let alone a fundamental change in human nature.  Instutitional problems demand institutional solutions.  Human beings do have the Smithian propensity to truck, barter and exchange, as well as Smithian sentiments about others  --- that is our better nature --- but human beings are also haunted by the Hobbesian propensity to rape, pillage and plunder, and sentiments such as envy, jealousy, resentment, and loathing of the other.  Which propensity manifests itself is a function of institutional environment in which we interact with each other and with nature.  The logic of the situation rules, not a sense of solidarity.  Solidarity, instead, is a by-product of institutions.  So back to the test --- is a proposed system coherent -- are the means chosen consistent with the ends sought? --- and is a proposed system vulneralbe --- can opportunistic actors disrupt the ability of the system to achieve its goals?

Socialist have a hard time coming to grips with both tests, and as a result no viable model has yet to be proposed.  It is to Roemer's credit that he admits this is true of his proposed mutual shares market socialist model -- though he believes it is only becuase of vulnerability, when a real analysis would show that it doesn't even met the coherence test due to epistemic reasons.  Furthermore, even the claim that the social-democratic model (as he understands it) produces the best - most egalitarian - outcome can only be sustained if you ignore the full thrust of the coherence test and the vulnerability test.

As a result, reports of John Roemer's retreat from socialism are exaggerated as you can see in this recent interview with the Yale Herald.

Comments

[Roger McKinney]

I don't know. McCloskey writes in "Bourgeois Dignity" that institutions are necessary but not sufficient. What's necessary is adoption of the bourgeois values.

"Culture Matters: How Values Shape Human Progress" by Lawrence E. Harrison and Samuel P. Huntington argues that culture determines institutions and religion determines culture.

Helmut Schoeck argues in "Envy: A Theory of Social Behavior" that growth can't happen until envy is restrained and that required Christianity.