Are there economic laws of socialism?

Monthly Review, July-August, 1985 by Harry Magdoff

4. The Law of Value. The stress on the validity of the law of value despite the overthrow of capitalism is that commodity production must continue in planned post-revolutionary societies. This is simply and clearly put forth by an economist who at the time of writing was the director of the Institute of Economics of the Hungarian Academy of Sciences:

The law of value is a law of several socioeconomic formations, it prevails in a narrower or wider scope in every society where commodity production plays some smaller or greater role. It expresses the objective tendency for commodities to be exchanged for one another in proportion to the amounts of socially necessary labor used in their production; in other words, that their relative prices develop accordingly.

This proportion is presumed to follow from Marx's analysis. It does no such thing. Marx does of course call attention to the obvious need in every society for social labor to be distributed in definite proportions, but he is quick to add that the way it is done depends on the social formation. Thus, the law of value governs the distribution of social labor and its reproduction when the means of production are privately owned and the interconnection of social labor is achieved by private exchange of the products of labor. Most important of all: the law operates as an objective tendency not because it is a law of nature but because of the discipline of the market. Once the latter no longer controls, the law of value loses its pertinence. For example, if commodities continue to be exchanged according to the socially necessary labor incorporated in them (a prime attribute of the law), how is it known how much labor is socially necessary and how much unnecessary? Under capitalism that determination is made by market competition. But no such mechanism or meaningful substitute for its is available in a planned society. Moreover, if social goals are to dominate economic behavior, then use value must (or should) enter exchange relations in a way that is distinctly different from the operations of a private exchange economy.

There are, to be sure, a host of practical problems associated with price-making in a planned economy. It is clear that the plan cannot regulate every aspect of the economy. Experience with the arbitrary setting of prices has shown that it leads to waste, bottlenecks, and other obstacles to the most effective use of resources. At the same time, there is no simple device that will automatically produce a suitable set of relative prices. The law of value will not do the trick in the absence of the discipline of the market. On the other hand, resort to market discipline ends up in the abandonment or curtailment of such social goals as full employment and meeting the basic needs of the people. All that establishment of the law of value as the objective determinant of commodity prices in socialism accomplishes is to sweep under the rug the substantive and practical issues, implying in effect the absence of contradictions inherent in price policy.