Production for Use

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Description

From the Wikipedia:

"Production for use is the defining criterion for a socialist economy that distinguishes socialism from capitalism, which is based on production for profit. It was one of the fundamental defining characteristics of socialism initially shared by Marxian socialists, evolutionary socialists, anarchists and Christian socialists.

Production for use is contrasted with production for profit (subjecting production to the perpetual accumulation of capital). It means that goods and services would be produced directly to satisfy economic demands and human needs (use-values), the result being that the productive apparatus of society serves individual and social needs. This is contrasted with capitalism, where goods and services indirectly satisfy use-values by orienting production to generate a profit, the result being that society is structured around a perpetual need for the accumulation of capital.

Production for use was the historically dominant modality until the initial primitive accumulation of capital, where production was undertaken to satisfy community interests." (http://en.wikipedia.org/wiki/Production_for_use)


Discussion

Proposed Accounting Mechanisms

From the Wikipedia:

"Several mechanisms have been proposed to be used as a unit of account and for coordinating production decisions in a socialist economy. Some are based on natural, non-monetary units of accounting, while others rely on market approximation or a direct measure of labor-time. Some of these proposals are based on economic planning in production, so that conscious planning can be utilized to satisfy broader social objectives.

Physical quantities

The classic formulation of socialism involved replacing the criteria of value from money (exchange-value) to physical utility (use-value), to be quantified in terms of physical quantities (Calculation in kind and Input-Output analysis) or some natural unit of accounting, such as energy accounting.

Input-output model analysis is based upon directly determining the physical quantities of goods and services to be produced and allocating economic inputs accordingly; thus production targets are pre-planned.Soviet economic planning was overwhelmingly focused on material balances - balancing the supply of economic inputs with planned output targets.


Marginal cost

Oskar Lange formulated a mechanism for the direct allocation of capital goods in a socialist economy that was based on the marginal cost of production. Under a capitalist economy, managers of firms are ordered and legally required to based production around profitability, and in theory, competitive pressure creates a downward pressure on profits and forces private businesses to be responsive to demands of consumers, indirectly approximating production for use. In the Lange Model, the firms would be publicly-owned and the managers would be tasked with setting the price of output to its marginal cost, thereby achieving pareto efficiency through direct allocation.


Cybernetics

Cybernetics, the use of computers to coordinate production in an optimal fashion, has been suggested for socialist economies. Oskar Lange, rejecting his earlier proposals for market socialism, argued that the computer is more efficient than the market process at solving the multitude of simultaneous equations required for allocating economic inputs efficiently (either in terms of physical quantities or monetary prices).

Salvador Allende's socialist-led government developed Project Cybersyn; a system whereby economic decisions and feedback could be relayed in real-time through a network of telex machines fusing the information received/given by state enterprises and government departments. The project was disbanded after the 1973 Chilean coup d'état.


Free market

Cooperative models of free-market socialism have proposed that simply replacing the antagonistic interests between capitalists and workers in enterprises would alter the orientation of the economy from private profit to meeting the demands of the community, as firms would seek to maximize the benefits to the member-workers that would comprise society. Cooperative economist Jaroslav Vanek suggests that worker self-management and cooperative ownership of enterprises operating in a free-market would allow for a genuine free-market economy free of the market-distorting, monopolistic tendencies and antagonistic interests that emerge from private ownership over production." (http://en.wikipedia.org/wiki/Production_for_use)