Calculating Without Money: in kind accounting of O. Neurath and A. Chayanov
Nikolay NENOVSKY (University of Picardie Jules Verne)
ESHET Annual Conference, 23-25 May 2019, Lille Objectives and contributions
- Discuss proposals of alternative to money measurement and accounting, in particular 1918 – 1921 period, more precisely in kind models of A. Chayanov and O. Neurath
- This is insightful for understanding currents technological trends and discussions on digital currency, decentralised and moneyless economy, “labour time banks”, EU discussion on clearing, on Target 2 etc.
- Precursors (Chayanov) of frontier operational research productive efficiency of DMUs (DEA and SFA)
- Fundamental discussion on possibilities of building socialism, planification (since Mises, …) Objectives and contributions
- First post War and Bolshevik years - Russia and Austria (Hayek, 1935)
- Austria (1919 O. Neurath’s proposal well known, Weber, Hayek etc.)
- Russia (A. Chayanov, 1920 (1918?) less known outside Russia, unlike labour and energetical value models, according to L. Yurovsky Chayanov model has “some merits, the most logical proposal”) Neurath and Chayanov - O. Neurath (1882 -1945) and A. Chayanov (1888 - 1937)
Common elements - War Economy, Bolsheviks practices (Russia, Hungary, Bavaria) - Ideas of Marxism, socialism, agrariarism, etc - Utopia as science - Neurath: “Utopianism as science” (System of socialisation, 1920) - Chayanov: on his literary, peasant utopias, see Raskov, 2014, Glovelli, 2004 Elements on Neurath and Russia On Neurath and Russia - Vienna, practical experiences during the war (Ministry of Planning, 1917/18) and Soviet Bavaria (April 1919)
- “Economics in kind, calculation in kind and their relation to war economics” (1919/… 1916) - “Of the two stages of the future to came” (1919) - “System of socialisation” (1920/21) etc.
- Translation of some of his books and articles in Russian, popularity - ex: VSNH journal , 1919, two articles on International clearing On Neurath and Russia - Original conceptual framework - Quality of life, conditions of life, order of life, basis of life, efficiency and plasticities etc.) - Order of society and order of community, principle of society and principles of community etc. (common forms of collectivist movements) - Social engineering, organisational reconstruction, economic planning (input/output), rationalisation etc Neurath and Russia - Original conceptual framework - Institutions of socialisation (similar to established by the Soviets)
- Central Economic Administration (STO, Council of Labor and Defense) - Control centre (workers, soviets) - Centre for rationalisation, experts (VSNH, Supreme Council of National Economy) - Centre for calculation in kind (Gosplan) and Centre for organisation etc - Accounting office - Central Bank: 1) for socialisation and 2) for compensation - Monetary institutions
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On Neurath and Russia - Basic movements of the total socialisation - From underutilisation to total utilisation - From economy of the masters to economy of community - From net profit to economic plan - From monetary economy to economy in kind (Naturalwirtschaft) - From rule of the masters to the rule of community
- Monetary proposals are not technically elaborated - Sometimes monetary calculation will exist (as vouchers or unit of account, compensation) side by side with calculation in kind Destruction of money in Russia (Practice and discussions) 1918 – 1921 (War communism)
- January of 1918 – Autumn 1918 “left communists” (Bukharin, Larine) for a radical elimination of money, Lenin hesitates (State Capitalism)
- Autumn 1918 – January 1920 Lenin and the Party officially against money, number of official documents in this respect, in January 1920 the Central Bank merged with Treasury and transformed into Central Accounting Office
- January 1920 – March 1921 Social accounting, moneyless economy January 1920 – March 1921
- Transitional Period (coexistence of basically two economic systems, two sectors): - S1: Nationalised, industry, town (“Product”) - S2: Private, cooperative, agrarian, village (“Commodity”)
- Respectively two monetary regimes - For S1, when monetary revenue approaches 0 (1920) → organising social accounting, and moneyless economy, according to communist principles - For S2, and between S1 and S2 different mechanisms (1) paper money → (2) voluntary commodity exchange → (3) forced commodity exchange → (4) natural seizure (prodrazverstka) January 1920 – March 1921
- Establishing Central Accounting Office (Settlement, Clearing Administration) - Decrees of the Soviet Authorities - L. Obolensky, Governor, 1920 “At present, in Soviet Russia, the system of moneyless settlement is the first step on the road to the cancellation of monetary circulation in general»
- In 1918, “unity of bank's cash register (unité de caisse)” at the Central Bank, Lenin: “Socialism is Accounting !” January 1920 – March 1921 - Mid 1918, later January 1919, VSNH, Settlement found at the Central bank - All ministries (glavki), enterprises, cooperatives and so on, are obliged to keep increasing amounts at this fund and to pay through it, there is also Treasury account - Task, attracting people to depose their saving (ex: for 3 months, 55% of the funds)
- In 1919 “note for settlement”/“reckoning tokens” (razchetnii znak), not anymore “monetary unit”
- January 1920, Central bank merged with Treasury and saving banks and became Central Budgeting and Accounting Administration (for 15 months, later NEP) Theoretical approaches
- Destruction of money as means of payments, medium of exchange
- Destruction of money as unit of account (measure of value) The future of the means of payments
- Soviet monetarists («Theory of issue economy », S. Falkner, O. Schmidt) - Soviet ideologists («Theory of nullification », E. Preobrajensky, Y. Larin)
[See annexe] The future of the unit of account
- New measures of value - Theory of energetic unit (M. Smith) - Theory of energy-labour unit (S. Klepikov) - Theory of labour unit, tred (S. Strumilin, K. Shmelev)
- In kind (in natura) measuring (A. Chayanov and followers)
- Mixed model ‘in kind and labour, treds’ (A. Dembo) A. Chayanov and in kind measurement «Methods of moneyless accounting of economic enterprises” (written in January 1918, published as articles in October 1920, book published in 1921), in: Proceeding of Agrarian Academy (later Tymiryazev) - With collaboration of A. Vanstchein, K. Petuhov, N. Mackevic, F. Termitin, etc. - Main problem: of efficiency and rentability criterium (advantage/vigodnost) for socialist economy - Attempt to build an accounting system for the Soviet economy - Independently of O. Neurath (1919/1914/Mises, Weber, …/Barone/, in Russia - Novojilov, Brutzkus/… Hayek (1935)
- Don Lavoie, 1985 in his “Rivalry and economic planning” notes Tschayanoff, 1923, in German Measure of advantage (rentability)
- Capitalist economy: net revenue, profit, income (political economy, Marx)
- Socialist economy: total revenue, income (new theory and methods for analysisng nature, level and measure of rentability) Measure of advantage (rentability) - Fundamentally for the both systems the same Law, “principle of economy of power, forces” = comparing efforts with results; A. Bogdanov)
- Under Socialism, State behaves as a head of a patriarchal peasant household, “grandiose natural households” Socialist economy is: - Unified, organized, natural, consumer and labor - New principle of accounting (in natura, no price and money), p. 31 Old accounting tasks New accounting tasks 1) Full account of the turnover of 1) Full account of the turnover of products, materials and their value products, materials and labour 2) Definition of 2) Definition of - Net profit - Labour productivity - Rent - Efficiency of using materials, machines, - % on capital building, etc. 3) Accumulation and processing of 3) Accumulation and processing of material for organizational calculations material for organizational calculations
Capitalist Economy
Socialist Economy Socialist economy: - Efficiency only within the Max Accepted branches - Centre defines the frontier, norm (statistically or experimentally), and deviation from the frontier for each enterprise - (ex: Denmark, assessment of the milk productivity of cow "Rosa ») - Centre (Glavk) similar to market, p. 36 (Barone, Lange) - Data envelopment analysis (DEA, and SFA) is a nonparametric method in operations research and economics for the estimation of production frontiers.
- It is used to empirically measure productive efficiency of decision making units (DMUs) (only for similar one) (“best-practice frontier”, "balanced benchmarking”)
- Could be used in natural or monetary units
Pioneering book: "Measuring the efficiency of decision making units" by Charnes, Cooper & Rhodes (1978)
- For the production of 1000 units of cereal products are used factors as … - Norm limit and a concrete result of the undertaking - Overall assessment of success Max Observed Ratio
Total assessment - Overall assessment of success for the all activities of the enterprise (field breeding, livestock breeding, vegetables … )
- Giving weighs of each activities … (?) Accounting in Socialist economy: - Main accounting book is different, closing accounts are: - capital account - state account - there is no general balance, no saldo
In capitalist accounting we have - capital account - owner account - saldo account, net profit
Capitalist accounting (P. Struve, J. Cartelier) - Measures in rouble - Final Saldo (net profit)
Credit Debit - Socialist accounting - Measures in kind, in natura - « Technical modules » (A. Vanshtein) Some concluding remarks - Neurath’s proposal not developed technically - Chayanov, far ahead, DEA precursors, attacking money as measure and unit of account, therefore his model could be useful for the current energetic and ecological proposals, digital currencies, big data etc.
- Nevertless standard critics apply, information and knowledge limits, public choice considerations, incentives etc.
- Even Strumilin like Mises and Hayek: “If you give a full account of all goods in nature by a complete division of them into varieties and brands and in various measurement units, then the ingenious, brillant mind will not contain this diversity of material accounting.” (big data !) End Annexes Soviet monetarists («Theory of issue economy », S. Falkner) S. Falkner (1890-1937) - «The Paper currency of the French Revolution”, 1919 - Many articles, 1918…, book in 1924 “Theoretical and practical problems of Issue Economy ”
- Theory of permanent and rhythmic depreciation of the paper money - “Issue economy” (Emissionnoe hozyaistvo) - How State collects income ? - In the tax economy, encroaching sound money already in circulation - In the issue economy, government introduces new money whose value is constantly falling
- No limits for the “Issue Economy” (only if: no exchange, exchange in kind, or new currency – political error, ex: tchervonetz) Currency in circulation (log)
O. Schmidt (1891- 1956), book “Mathematical laws of Monetary Emission” (1923), Ph. Cagan (1956)
E. Slutsky (1923) V. Bazarov (1925) S. Srumilin (1924) Currency in circulation during the War Communism (factual and theoretical) Soviet monetary ideologists («Theory of nullification »
E. Preobrajensky (1886-1937) « ABC of Communisme », 1920, with N. Bukharin In 1920, «Paper Money in the Epoch of the Dictatorship of the Proletariat”
- « I dedicate this book: the printing press of the People's Commissariat of Finance” - “In the archives of the proletarian revolution, along with the cannon, rifles, and machines gun of our epoch that vanquished the enemies of the proletariat, the place of honor will be given to the printing press, the machine gun of the Commissariat of Finance that poured fire into the rear of the bourgeois system and that made use of the laws of currency circulation of that regime for the purpose of destroying it and of financing the revolution” (p. 4) E. Preobrajensky
E. Preobrajensky: since 1918 worked for the VSNH - Ideology (Marx, metallic money, QT, accepted Falkner theory, but only for the transition period) - Transition period: two economic laws: Law of Value and Law of Primitive Socialist Accumulation (PSA) - Massive issue of paper money is a basic tool of the PSA tool of capitalism and market destruction (together with natural confiscation), - Technically support Schmidt modelling, and propose to index regularly fixed price by forecasting money supply and price level … Extremes soviet monetary ideologists (immediate “nullification” money)
Y. Larine (Luria) (1882 -1932), VSNH - Since 1918 till the end a furious critic of money (did not follow Bukharin and Lenin) - Hyperinflation is a logical mechanism for “nullification” money and for switching to moneyless, natural communist economy, the money disappears as the organized sector grows - « Central accounting office » and new measurement unit New value unit for the social settlement
- Theory of energetic unit (M. Smith, 1878 - 1968) - ened (energetisheskaya edinica), 1919/20 - horsepower - Theory of energy-labour unit (S. Klepikov) - unit of man-machine energy, 1919/20 (A. Bogdanov (1873-1928) theory and energetic version of Marx abstract labour)
- Theory of labour unit (S. Strumilin (1877-1974), K. Shmelev) - tred (trudovaya edinica), indexes from the worker budget (calories) or from the level of prewar wages, 1920 (social version of Marx abstract labour), 1920 Some concluding remarks - Strumilin: “Если дать полный учет всех благ в натуре полным подразделением их на сорта и марки и в разнообразнейших единицах измерения, то и гениальный ум не вместит этой пестроты материального учета“