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This paper examines public budgeting in the first 30 years of China under central economic planning and one-party system. The research question is whether budgeting operates as it does under market economy in a democratic system. Analysis of historical documents finds that as a subordinate to central economic planning, budgeting was not able to play its functions. Though China was successful in employing all fiscal and monetary means to channel resources into targeted policy areas, budgeting was not effectively used as an administrative instrument. In the 30 years examined, the country seemed to be searching in vain for a workable budgeting system so as to avoid repeated financial frustrations.

This paper examines public budgeting in the first 30 years of China under central economic planning and one-party system. The research question is whether budgeting operates as it does under market economy in a democratic system. Analysis of historical documents finds that as a subordinate to central economic planning, budgeting was not able to play its functions. Though China was successful in employing all fiscal and monetary means to channel resources into targeted policy areas, budgeting was not effectively used as an administrative instrument. In the 30 years examined, the country seemed to be searching in vain for a workable budgeting system so as to avoid repeated financial frustrations.

Peter Boettke and I had taken Don Lavoie's graduate Comparative Economic Systems course during the Fall of 1985. Lavoie had just published Rivalry and Central Planning (Lavoie, 1985b) and National Economic Planning: What is left? (Lavoie, 1985a), and was at the cusp of establishing himself as a major player in the comparative systems and contemporary critique of socialist planning literature.¹

Extensions/applications/revisions of the Marxian vision of socialism can broadly be categorized into two polar strands: the centralized and the decentralized strands of socialist economic systems. Explores the main postulates of a decentralized version of a socialist economic system as provided by Kautsky, Luxembourg, Bernstein, Bukharin and Lange. The centralized strand of socialist economic systems has been elaborated drawing mainly from the writings of Lenin, Trotsky, Dobb, Sweezy and Baran.

The purpose of this paper is to clarify the presuppositions implied in a recent debate about the possibility of economic planning using computing models and to provide additional arguments relevant to the economic calculation debate.

Recalling the fundaments of the classical debate on economic calculation (L. von Mises in 1990, O. Lange in 1936, 1937) and using Cantor's theorem from the set theory the arguments proposed by Robert R. Murphy are reformulated and refined, sustaining the thesis that, in an economic system based on collective forms of property, the central planner must necessarily resort to an infinite uncountable list of prices.

The paper provides additional arguments supporting the thesis that computation in a planned economy implies computation with infinite uncountable domains. In addition, this paper rejects the objections raised by some earlier researchers in 2007 in response to Murphy's theses.

The possibility of computation and calculation in an economic system is of great practical importance. Institutional settlements and policies are not indifferent to the economic calculation problem. Different institutional settings can hinder the very possibility of economic calculation and rational allocation of resources. From this perspective, the conclusions of economic calculation debate are crucial. The economist's and philosopher's criteria used to define institutions and policies must take into account this important question of the possibility of computation and calculation in an economic system.

The paper is of value in providing additional argumentation concerning the economic calculation debate.

During the decade of the 1980s, the design and implementation of economic reforms had divided the Chinese leadership into two factions: conservative proponents of moderation and “circumscribed” economic reform, and liberal proponents of comprehensive and rapid economic and social reform. Seeks to identify the economic‐theoretic core of leftist and rightist positions. The leftist position described is centred on the works of Chen Yun, Sun Yefang, and Zue Muqiao and explicitly excludes the idealistic and revolutionary political theories of Maoism, focuses instead on the more pragmatic goals of rational central economic planning. The rightist position became identified with Zhao Ziyang and his vision of mixed market socialism which, in the minds of his opponents, came dangerously close to capitalism. As the Chinese economy faltered toward the end of the decade, the conflict between leftist hard‐line conservatives and rightist liberals heightened, leading to the pro‐democracy movement of 1989 and its aftermath.

The law of value performs its regulatory function in the capitalist system where the private ownership of means of production and commodity production prevail. Under the centrally directed system of socialism, the economic process must be determined by plans and valuations of the central authority to maintain the consistency of the system′s internal co‐ordinating mechanism. In theory, the process of building socialism is a process of the withering away of the operation of the law of value. Recognition of the law of value as a permanent feature of the socialist economic system means conceding either a lack of understanding of the fundamental differences between capitalism and socialism, or the failure of the Marxist‐Leninist dogma. It also acknowledges that the Soviet system of socialism was exposed to increasing contamination by elements incompatible with socialism and was gradually transformed into its opposite – a form of centrally regulated exchange economy where a new ruling class, grown from the Party, was (and temporarily still is) in control of public ownership of means of production, as well as of all markets. The evolution of Soviet socialism from the October Revolution to its disintegration can be characterized by its passage through distinct “official” attitudes towards the role of the law of value. Its denial under the totally centralized economy of War Communism was followed by its temporary reintroduction under the New Economic Policy, then the recognition of its restricted functioning during the transitory phase from socialism to communism, then its recognition as a permanent feature of socialism, and finally its abandonment together with the rest of the Marxist‐Leninist dogma following both the doctrinal and economic crises in the 1990s.

Gorbachev′s vision of democratic, decentralised and market‐oriented socialism has generated diverse and controversial perceptions in the Soviet Union. Gorbachev′s claim that the USSR is not retreating from socialism but advancing towards it, having dismantled the Stalinist Command model, is assessed.

National governments took responsibility for expanding their economies and providing public services during the 1950s and 1960s for many reasons. In North America and Western Europe the strength of central government bureaucracies grew from their crucial roles in mobilizing resources during World War II and, afterward, they took on expanded responsibilities for economic and social reconstruction. Strong central management in industrialized nations offered convenient models for new governments in developing countries. In the post-colonial period, many newly independent governments in Africa and Asia saw local jurisdictions as colonial institutions or as strongholds of ethnic or religious minorities that could be sources of political opposition. Weakening their powers and concentrating resources and authority in the central government was a crucial instrument for nation building.

Ludwig Lachmann’s Capital and Its Structure ([1956] 1978) is a classic in the literature in Austrian economics. It is mainly discussed in relation to the Austrian contributions to the macroeconomics debates of that time – from Hayek’s dispute with Keynes to the capital controversies of Cambridge UK and Cambridge US. Among Lachmann’s many ideas developed in that work, critical is his idea that the capital structure of an economy consists of heterogeneous capital goods that have multiple specific uses. This fact of the world makes the intertemporal coordination of economic plans a complex phenomenon and not a simple phenomenon. In the standard macroeconomic account, the coordination failure results from a distortion to the interest rate which miscommunicates to economic actors the underlying savings and consumption pattern in the economy at that time. This results in a boom/bust cycle, as the malinvestments in production projects are revealed in time and must go through a costly correction. But this discussion is simply an illustration of a much broader set of problems of relative prices as guides to productive activity in an economy and the problem of economic calculation. Our chapter explores the capital theoretic side of the socialist calculation debate and highlights the importance that an understanding of the capital-using economy consisting of production plans made up of heterogeneous goods with multiple specific uses is to the argument about the calculation problem being the lynchpin argument against the feasibility of socialist economic planning.