I am reaching back into memory now, but he had a whole section on this, IIRC this discount rate has to be consistent with the average rate of return on capital investment, which in turn is a concept that has to be tied down by market prices. (Kantorovich doesn't refer to capitalist market prices in so many words, because this would have caused real trouble - the Soviet authorities of the 1930s were very suspicious of the "cyberneticians" at the best of times), but the basic idea is that the discount rate for investment in future projects has constraints placed on it by the need to be consistent with the set of (shadow) prices for producing output today. If you can solve the socialist planning problem for the economy today then this will help you set a consistent discount rate, but if you can't, then you can't just set the discount rate at any level you want (note that what we're talking about here is the real, long-term discount rate, so bringing the Federal Reserve in at this stage would be a red herring).
best dd > ----- Original Message ----- > From: "Jim Devine" <[EMAIL PROTECTED]> > To: PEN-L@SUS.CSUCHICO.EDU > Subject: Re: How is socialist cost-benefit analysis possible? > Date: Thu, 15 Nov 2007 14:33:15 -0800 > > > even for shadow prices on a macro level, such as the over-all rate at > which we discount future costs and benefits? > > On Nov 15, 2007 2:22 PM, <[EMAIL PROTECTED]> wrote: > > Kantorovich did a lot of work on this at the Soviet Academy. He ended up > > concluding that you really can't do without a system of market prices (and > > required a bit of fast footwork to keep himself out of trouble for saying > > so). The information requirement to set these shadow prices is too big.< > -- > Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own > way and let people talk.) -- Karl, paraphrasing Dante. >
