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338 Economics
mathematical economics with which are associated such names as Kantorovich,
Nemchinov and Novozhilov).
It must at the same time be borne in mind that:
1, The widespread application of modern mathematical methods in central
planning depends on the solution, not only of various mathematical and tech-
nical problems, but even more, on a number of theoretical problems in
growth theory and in the theory of the functioning of a planned economy;
2. The purely economic calculations do not in themselves fully decide what goes
into the plan, but merely help in elaborating a set of realistic and effective
variants; the choice among these variants is made in thelight of the economic
objectives which constitute the general policy and the feasibility of attaining
them within the given time-limits.
What has just been stated does not imply that, in drafting the plan, the market
mechanism possibilities should be ignored - especially in view of the progress
likely to be made in the solution of both the theoretical and the technical prob-
lems of mathematical programming. It is a) the thesis of the automatism of the
market and b) the superior rBle of the market, which are rejected; hence the
need for control over market processes, and the limitation of market mecha-
nisms to a sui generis ancillary function, within the limits of the development
aims laid down on the basis of non-market considerations. Within the frame-
work so defined, both market and non-market sources of planning information
can be used, their relative weight varying according to a number of criteria such
as the speed of iterative processes, the amount and cost of the information
required, the efficiency of the corrective mechanisms (particularly during the
transition from the initial to a postulated structure), and so on.
Stressing the need for a combination of direct and market mechanism sources
in planning, Oskar Lange makes two points in his essay ‘The Computer and the
Market’. One is that the capacity of even the most powerful computer is limited,
which makes it either impossible or uneconomic to solve problems that are
extremely complex in terms of either the number of variables or the type of re-
lationships between them. Under these circumstances, not to make use of market
mechanism sources to the extent fixed by the general aims of the plan would
mean excluding various acts of choice from the plan’s purview. This point was
made by Novozhilow (‘Zakonomernosti razvitija sistemy upravlenija sotsialis-
ticeskim hozjajostvom’ in Ekonomika i matematiceskie metody (Economics and
Mathematical Methods), Vo1.1, No. 5, Moscow 1965) who employs the terms
‘direct and indirect (market) forms of centralization of economic decision’. He
writes: ‘The direct centralization of the solution of economic problems of a
particular type consists in making concrete decisions by the central planning
office. The indirect centralization.. . consists in determining such parameters of
the outlay-effect calculus as could serve the local bodies.. . to find the variants
which best suit the general economic plan ... The indirect centralization is in-
dispensable under both socialism and communism ... (for) it has the great ad-
vantage of subordinating all local decisions, including the most detailed ones, to
the plan.’ The correlation between plan and market is currently described on
very much the same lines in the literature of the socialist countries: there is no