¹ The main points of this analysis may be found in Robinson, Joan, The Economics of Imperfect Competition (London, 1933)Google Scholar; Chamberlin, Edward, The Theory of Monopolistic Competition (Cambridge, 1933)Google Scholar; Schneider, Erich, Die Theorie der Produktion (Yena, 1934)CrossRefGoogle Scholar; and von Stackelberg, H., Marktform und Gleichgewicht (Yena, 1934).Google Scholar

² Writers on “competitive socialism” such as Lange, O., On the Economic Theory of Socialism (Minneapolis, 1938)Google Scholar, Lerner, A., The Economics of Control (New York, 1944)Google Scholar, and others, have been concerned in their analysis with various aspects of incomplete control rather than with the extreme case of complete control which underlies the present form of Soviet industrial policy.

³ “An essential difference between Soviet economy and the capitalist economies of other countries is that the maximization of profit by the individual firm or business man is no longer the decisive factor in determining … output … and the direction and volume of sales. What is determined elsewhere by the separate decisions of thousands of autonomous entrepreneurs is determined in Soviet economy by a single co-ordinated complex of decisions which constitutes the economic plan.” Dobb, Maurice, Soviet Planning and Labour in Peace and War (London, 1942), 9.Google Scholar “Expropriation … has made possible the ending of social dependence upon the profit-making motive as a stimulus to productive effort.” Laski, Harold, Reflections on the Revolution of Our Time (New York, 1943), 48.Google Scholar

⁴ “Looking to traditional economic teaching for some light on planning problems, Mr. Dobb finds little to help him. Economic theory may be roughly divided into two parts—a static … and a dynamic … Neither is of much application to the questions at issue.” Robinson, Joan, in Soviet Studies, I, 1949, 60.CrossRefGoogle Scholar The distinguished author of The Economics of Imperfect Competition appears to be misled by Mr. Dobb's presentation of the Soviet planning which, she claims, exposes “the hollowness of theoretical economics.” Ibid., 63. Compare also Hicks', J. R. statement, “The State is a very incalculable economic unit, so that the extent to which its activities can be allowed for in economic theory is somewhat limited.” Value and Capital (Oxford, 1939), 99–100.Google Scholar

⁵ It is hoped that a second article which extends economic analysis to Soviet industry as a whole will be published soon. All references to Russian sources in these articles are presented in English translation.

⁶ Sorokin, G., in The Socialist Planning of the Soviet National Economy (Moscow, 1946), 66 Google Scholar, enumerates the following individual targets of a Five Year Plan: the gross output, the market output, output of various articles in natural units, capital repairs, reinvestments and new investments, full own price (planned costs of production), productivity of labour, cost-reduction, profits, procurement of materials and fuel, the budget of revenue and expenditure, the wage fund, and the aggregate number of workers. Apart from these targets of the Five Year Plan, ministries fix a number of standard rates for technical consumption of materials and fuel, stocks of materials, outputs per man, etc.

⁷ In addition to these two targets, output of some important articles such as coal, crude oil, iron, steel, and some others is also planned in natural units.

⁸ Turetzki, Sh. Y., The Industry's Costs of Production and the Problem of Price Determination (Moscow, 1940), 125 ff.Google Scholar

⁹ Cf. National Income of the Soviet Union, ed. Prof.Chernomordik, D. I. (Moscow and Leningrad, 1939), 84 ff.Google Scholar

¹⁰ The name of this system constitutes an abbreviation from the Russian term for “economic accounting,” khozaistvennyi rachet.

¹¹ The conception of the plan-as-an-order was developed by the Stalinist fraction of the Russian Bolshevist Party in contrast to the conception of the plan-as-a-prediction which was put forward by a great number of Soviet economists who were subsequently removed from responsible positions.

¹² Kozlow, G., The Khozrachet System in the Socialist Society (Moscow, 1945).Google Scholar

¹³ It may be of some interest to point out that the logic of wartime control induced the German Government to resort to a similar formula.

¹⁴ “The development of production in the Soviet Union is subject not to the principle of … the guarantee of capital profit, but to the principle of planned management and a systematic elevation of the material and cultural welfare of the workers.” Problems of Leninism (10th Russian, ed., Moscow), 397.Google Scholar

¹⁵ The problem involved here is that of the chasm between the intellectual construction and the actual life, between an Utopian ideal and a sombre reality. Whereas hundreds of millions of Soviet citizens, and people dominated by the Soviet authorities, regard the reality as the characteristic feature of Soviet economic life, Soviet writers and a few intellectuals in the West treat the Soviet dogma of planning as if it were realized.

¹⁶ Yotkovsky, A. A., Production and Procurement in an Industrial Firm (Moscow, 1941), 33.Google Scholar

¹⁷ Baykov, A., The Development of the Soviet Economic System (New York, 1946), 344.Google Scholar

¹⁸ Sh. Y. Turetzki, The Industry's Costs of Production.

¹⁹ Plotnikov, K. N., The Budget of the Socialist State (Moscow, 1948), 184–6.Google Scholar

²⁰ “Budgetary difference” constitutes the difference between the price fixed for textile articles, and the sum of the actual costs of production of these articles plus planned profits.

²¹ Total profit R(x) may be expressed as R(x)=Px−C(x) where C(x) represents total costs. It follows that

and hence

²² Soviet Finances, 1945, no. 12, 8 ff.Google Scholar

²³ A recent Soviet source, Plotnikov, K. N., The Budget of the Socialist State, 184–5Google Scholar, shows that in one particular textile mill, the Second Serpukhovskaya, profit rates of individual articles varied during the first quarter of 1937 from —8.47 per cent to +56.53 per cent as follows:

Professor Plotnikov points out further that in the Soviet linen industry profit rates actually earned varied for individual articles from zero up to 46 per cent. In the Soviet woollen-cloth industry profit rates varied from 15 per cent to 50 per cent, and in the fur-coat industry from 6 per cent to 94 per cent. Plotnikov admits that these widely diverging profit rates caused some firms to work at a loss and induced managers to ignore both the Khozrachet formula and the assortment targets of the firms concerned.

²⁴ T. K. Lebedev, Secretary of the Central Committee of the Latvian Communist Party, on the Plenary Meeting of this Committee held in January, 1948.

²⁵ The undifferentiated rate of 2 per cent for all firms was abolished in 1946, and higher rates of 4 per cent were fixed for various heavy industries. The 2 per cent rate was retained in the light industry only. This change shows that now also the Soviet heavy industry, where profits used to be lower than elsewhere, is subjected to the profit-incentive.

²⁶ ProfessorRovinskii, N. in Soviet Finances, 1946, no. 12, 1 and 7.Google Scholar

²⁷ This is so because uncertainty cannot be eliminated from the technical process of production and hence, from cost formation.

²⁸ “In any type of society uncertainty is likely to produce ‘planlessness,’ ” Hicks, , Value and Capital, 139.Google Scholar

²⁹ We refer to the article “Khozrachet—Real or Imaginary?” in Soviet Finances, 1945, no. 12, 20.Google Scholar