ON CERTAIN REGULARITIES

EMPIRICALLY OBSERVABLE IN OUR ECONOMY

…Society represents an intricate complex of phenomena evolving in a certain direction, their elements being mutually connected by close ties. Any social system contains elements of contradiction which are resolved in one way or another when society is preserved. Class struggle shocks society in its very foundations, and as a result there occurs either a revolution and a transformation of society, or—through partial modification—society, while preserving its basic structure, attains an equilibrium. But such equilibrium is, to be sure, a moving one: today is not identical with yesterday but resembles it. Even revolutions, for example the greatest of all revolutions—the October [1917] revolution—cannot change economic forms over night by socialization of the processes of production and exchange. Nationalization could not cover all enterprises, and transition to planned distribution could not destroy the free market which continued to exist, even though illegally.

Following the era of war communism, which drastically changed—under the conditions of blockade—the forms of distribution of currently produced values as well as values that were accumulated earlier, we started on the road of organized application of methods elaborated by the highly monopolistic stage of capitalism (money, banks, credit), aiming to make use of such organizational forms as means of building a socialized economy. Why is that so? Objective conditions of the economy, given by its entire historical development, require certain economic forms, processes of production and exchange of goods, and distribution of national income. They cannot be arbitrarily decreed. “One cannot give orders to the economy,” said V. I. Lenin. Only after having created the conditions for consciously influencing the development of society as a whole by establishing a proletarian government can one begin and continue to proceed in the direction of socialist construction of the whole society. But this is again possible only on the condition—to use the words of N. I. Bukharin—”that one sees the whole at all times, that one understands the interrelationships and interdependence of its parts” (Bol’shevik, no. 14, p. 28). Comrade Bukharin correctly adds that one must constantly keep in mind the dynamics of the economy.

We have formulated the same idea differently in a memorandum to the Presidium of Gosplan dealing with the principles and methods of planning, in which we stated that the teleological and genetic viewpoints must be organically connected and that primacy belongs to the genetic.

Scientific socialism, as distinct from utopian socialism, developed the idea that genetic development of society must create the forces capable of securing both the power and the will to transform society in a certain direction. When political power is captured and one intends to start immediately the deliberate transformation of society, then the method and the forms of such transformation are dictated by the objective conditions of the society and the hidden objective tendencies of its development.

The method of learning the condition of a society and the objective tendencies of its development appears to be the formulation of empirical laws of the statics and dynamics of the economy, of laws established by statistics with the aid of theorems of political economy….

Clearly, a theoretically established tendency must find its statistical expression in the form of an “empirical law.” By the latter we shall understand observable regularities of the existence and the sequence of phenomena, for instance the law of declining mortality associated with the growth of welfare, the growth or decline of yields associated with changes in cultivation, the relation between the value of industrial and agricultural output coming to the market, etc.

When we begin to search for empirical laws of economic statics and dynamics in the era of the reconstruction process, we run, of course, into a number of difficulties….

(1) The country is in the midst of the recovery process, whose essence lies in more and more intensive utilization of fixed capital in agriculture, industry, and transportation, more and more intensive drawing into active work of human labor, better and better organization of the process of production and exchange, as well as in perfecting the technical tools of exchange (monetary circulation and the credit system). The beginnings of planning are striking more and more roots in practice.

(2) The basic criterion of evaluating the dynamics of economic processes must be the principle of moving toward equilibrium, i.e., toward proportional development of different elements of the economy mutually determining each other. Any violation of this principle either from the side of objective conditions or as a result of incompatibility between planning measures and the principle of proportional development of individual sectors of the economy immediately affects in a most unfavorable way the over-all process of economic development.

(3) The third proposition may be formulated as follows: the relation between the development of material productive forces and the living standards of the working masses is of decisive significance for the general direction and rate of growth of economic development, its smoothness or, on the contrary, its violence, crises, and contradictions.

(4) The fourth proposition can be expressed as follows: the conflict between social economic forms (“state capitalism,” private capitalism, independent small-scale production, cooperation) takes place both in conditions of progressive development and during a regressive process, and the subjectively desirable form is not always at a given moment the form which under the objective circumstances is economically most effective. This is inevitable. There is, of course, no predetermined harmony between social forms of production and the development of productive forces and at any given instant the optimum combination of social forms cannot be always recognized and realized.

We shall consider the following problems:

(1) The relative growth rate of development (recovery) of industry and agriculture.

(2) The relationship between the value of industrial and agricultural products entering the market and the resulting relationship between price levels of both types of products.

(3) The distribution of industrial and agricultural products between the city and the village.

(4) The relationship of the volume of money and the turnover of goods.

(5) The relationship between the state budget and production and the turnover of goods in the economy.

(6) The relationship between the productivity of labor, wages, and labor costs.

We shall investigate these problems by searching for static and dynamic regularities in the existence and consistency of phenomena.

Can such a search count on being successful? Yes. Even though economic life is complex, its elements changeable, its combinations whimsical, its development capricious, such regularities exist and can be discovered. Of course, the degree of their stability is not absolute; regularities once discovered will not subsequently reappear in identical form. However, subsequent events will closely resemble the regularities, and changes of established relationships in which the process of economic development is reflected can themselves be investigated and studied. As a result of these investigations we shall arrive at static and dynamic empirical laws of economic phenomena. We must thereby arrive at a system of empirical laws. In formulating empirical laws we start with the assumption that no single phenomenon can change without changes in the aggregate of other phenomena and of each of them separately. The method of searching for empirical laws involves complex as distinguished from isolating thinking. Suppose the investigator establishes that the price of bread has changed, then he already assumes that, if the country in question is an isolated one with a hard currency, this country has suffered a bad harvest or that a process of industrialization has taken place. Along with that he must also ask how real wages, production costs, the conditions of the market for industrial products, etc., must change when bread prices change, and how these phenomena are in turn reflected in the bread prices themselves.

The chain-like relationship between economic phenomena is the constant regulative idea of the investigator’s work, and his work must lead to an elaboration of a system of static and dynamic laws of the economy, mutually determining each other, in which connection primacy must belong to the perceived developmental tendency of the economy as a whole….

“O nekotorykh zakonomernostiakh empiricheskl obnaruzhivaemykh v nashem narodonom khoziaistve,” Planovoe khoziaistvo, January, 1925, pp. 88-101. (Editorial note of Planovoe khoziaistvo: by way of discussion.)