ABSTRACT

In Chapter 2 it was suggested that in market econom ies we might expect som e form o f government action to be employed to coun­ teract any failures to which such econom ies might be prone. It was further proposed that socialist econom ies w ill, by definition, pro­ vide a large role for the government to play. The form that such government action takes is referred to as a ‘plan’. In order to formulate a plan, the society has to establish both the objectives to which action is to be directed and the parameters that will govern the way in which any set o f actions taken by the government will alter the course o f the econom y. It is to the derivation o f these objectives that we now turn. Objectives may be expressed in different ways, and will often not be explicitly presented in a form that is o f direct use when plans are being designed. In some ca se s , they may take the familiar form o f a function that is to be maxim ised. Thus, a plan that simply entails a transfer o f £x from individual 1 to individual 2 can be easily evalu­ ated i f the objective is to maxim ise a specified utility function defined over the wealth o f the two people. Clearly, the size of the transfer is chosen so as to bring about the greatest possib le increase in total welfare. In other cases, such information about objectives may not be available. If society does not regard the concept o f a welfare function o f this kind as legitimate, or has not specified the form that the function is to take, it will no longer be possible to say unambiguously whether any specific transfer would be a good thing or not. In such instances it will be necessary to devise some means by which soc ie ty ’s v iew s o f its merits may be articulated. A wide variety o f methods is available for this purpose; the soc ie ty ’s political structure may, for example, be such that problems o f this kind are resolved by referring the decision to a body o f elected representatives or to the whole electorate for voting.