Oskar Lange

Oskar Ryszard Lange (July 27, 1904 – October 2, 1965) was a Polish economist and diplomat. He was most known for advocating the use of market pricing tools in socialist systems and providing a model of market socialism.

Lange was born in Tomaszów Mazowiecki as son of Arthur Julius Lange and Sophie Albertine Rosner. He studied law and economics at University of Krakow, where he received a B.A. (1926) and a Masters of Law (Ll.D, 1928). From 1926 to 1927 Lange worked at the Ministry of Labor in Warsaw. This was followed by a research assistantship at the University of Krakow (1927–1931). He married Irene Oderfeld in 1932. In 1934, a Rockefeller fellowship brought him to England, from where he emigrated to the United States in 1937. He then became a professor at the University of Chicago in 1938, and was naturalized U.S. citizen in 1943. Joseph Stalin was so impressed with Lange's work that he not only prevailed on President Franklin D. Roosevelt to obtain a passport for Lange to visit the Soviet Union to speak with him personally, but also proposed offering him a position in the future Polish cabinet. Towards the end of World War II, Lange broke with the Polish government-in-exile in London and transferred his support to the Lublin Committee sponsored by the Soviet Union. As a result of this trip, the Polish American Congress condemned Lange and defended the Polish government-in-exile. Lange returned to the United States at the end of May, met with Free Polish London Exile Prime Minister Stanisław Mikołajczyk, who happened then to be in Washington, D.C., stressed how reasonable Joseph Stalin was prepared to be, and asked the State Department to put pressure on the exiled Poles. Subsequently, Lange served as a go-between for Franklin Delano Roosevelt and Joseph Stalin during the discussion on post-war Poland.

After the War ended in 1945, Lange returned to Poland. He then renounced his American citizenship and returned to the United States in the same year as the new Polish Communist régime's first Ambassador to the United States. In 1946, Lange served as the Polish delegate to the United Nations Security Council. He went back to Poland in 1947, where he continued working for the Polish government, while continuing his academic pursuits at the University of Warsaw and the Main School of Planning and Statistics. Lange was deputy chairman of the Polish Council of State 1961–1965 and as such one of four acting Chairmen of the Council of State (head of state) from August 7, to August 12, 1964.

Academic contributions

The bulk of Lange's contributions to economics came during his American interlude of 1933–1945. Despite being an ardent socialist, Lange deplored the Marxian labor theory of value, being very much a believer in the neoclassical theory of price. In the history of economics, he is probably best known for his work On the Economic Theory of Socialism published in 1936, where he famously put Marxian and neoclassical economics together.

In this book, Lange advocated the use of market tools (especially the neoclassical pricing theory) in economic planning of socialism and Marxism. He proposed that central planning boards set prices through "trial and error", making adjustments as shortages and surpluses occurred rather than relying on a free price mechanism. Under this system, central planners "would arbitrarily pick a price for products manufactured in government factories and raise it or reduce it depending on whether it resulted in shortages or gluts. After this economic experiment had been run a few times, a mathematicians capable of solving complex simultaneous equations would be able to plan the economy[4] If there were shortages, prices would be raised; if there were surpluses, prices would be lowered. Raising the prices would encourage businesses to increase production, driven by their desire to increase their profits, and in doing so eliminate the shortage. Lowering the prices would encourage businesses to curtail production in order to prevent losses, which would eliminate the surplus. Therefore, it would be a simulation of the market mechanism, which Lange thought would be capable of effectively managing supply and demand. Proponents of this idea argue that it combines the advantages of a market economy with those of socialist economics.

By this idea, Lange also argued that a state-run economy could at least be as efficient as — if not more efficient than — a capitalist or private market economy. He argued that this was possible if the government planners used the price system as if in a market economy and instructed state industry managers to respond parametrically to the state-determined prices (minimize cost, etc.). Lange's argument was one of the pivots of the Socialist Calculation Debate with the Austrian School, and the view among English socialists of the Fabian Society at the time was that Lange had won the debate.

His works provided the earliest model of market socialism.

Besides the work on market socialism, he also contributed in various areas. Lange was one of the leading lights of the "Paretian Revival" in general equilibrium theory during the 1930s. In 1942, he provided one of the first proofs of the First and Second Welfare Theorems. He initiated the analysis of stability of general equilibrium (1942, 1944). His critique of the quantity theory of money (1942) prompted his student, Don Patinkin, on to his remarkable "integration" of money into general equilibrium theory. Lange made several seminal contributions to the development of the neoclassical synthesis (e.g. 1938, 1943, 1944). He worked on integrating classical and neoclassical economics into a single theoretical structure (e.g. 1959). In his final years, Lange also worked on cybernetics and the use of computers for economic planning.

The International Institute of Social Studies (ISS) awarded an Honorary Fellowship to Oskar Lange in 1962

Bibliography

• 1934. "The Determinateness of the Utility Function," RES.
• 1935. "Marxian Economics and Modern Economic Theory," Review of Economic Studies, 2(3), pp. 189–201.
• 1936a. "The Place of Interest in the Theory of Production", RES
• 1936b. "On the Economic Theory of Socialism, Part One," Review of Economic Studies, 4(1), pp. 53–71.
• 1937. "On the Economic Theory of Socialism, Part Two," Review of Economic Studies, 4(2), pp. 123–142.
• 1938. On the Economic Theory of Socialism, (with Fred M. Taylor), Benjamin E. Lippincott, editor. University of Minnesota Press, 1938.
• 1938. "The Rate of Interest and the Optimum Propensity to Consume", Economica
• 1939. "Saving and Investment: Saving in Process Analysis", QJE
• 1939. "Is the American Economy Contracting?", AER
• 1940. "Complementarity and Interrelations of Shifts in Demand", RES
• 1942. "Theoretical Derivation of the Elasticities of Demand and Supply: the direct method", Econometrica
• 1942. "The Foundations of Welfare Economics", Econometrica
• 1942. "The Stability of Economic Equilibrium", Econometrica.
• 1942. "Say's Law: A Restatement and Criticism", in Lange et al., editors, Studies in Mathematical Economics.
• 1943. "A Note on Innovations", REStat
• "The Theory of the Multiplier", 1943, Econometrica
• "Strengthening the Economic Foundations of Democracy", with Abba Lerner, 1944, American Way of Business.
• 1944. Price Flexibility and Employment.
• 1944. "The Stability of Economic Equilibrium" (Appendix of Lange, 1944)
• 1944. "The Rate of Interest and the Optimal Propensity to Consume", in Haberler, editor, Readings in Business Cycle Theory.
• 1945a. "Marxian Economic in the Soviet Union," American Economic Review, 35( 1), pp. 127–133.
• 1945b. "The Scope and Method of Economics", RES.
• 1949. "The Practice of Economic Planning and the Optimum Allocation of Resources", Econometrica
• 1953. "The Economic Laws of Socialist Society in Light of Joseph Stalin's Last Work", Nauka Paulska, No. 1, Warsaw (trans ., 1954, International Economic Papers, No. 4, pp. 145–ff. Macmillan.
• 1959. "The Political Economy of Socialism," Science & Society, 23(1) pp. 1–15.
• Introduction to Econometrics, 1958.
• 1960. "The Output-Investment Ratio and Input-Output Analysis", Econometrica
• 1961. Theories of Reproduction and Accumulation,
• 1961. Economic and Social Essays, 1930–1960.
• 1963. Political economy, Macmillan.
• 1963. Economic Development, Planning and Economic Cooperation.
• 1963. Essays on Economic Planning.
• 1964. Optimal Decisions: principles of programming.
• 1965. Problems of Political Economy of Socialism, Peoples Publishing House.
• 1965. ' 'Wholes and Parts: A General Theory of System Behavior, Pergamon Press.
• 1965. "The Computer and the Market", 1967, in Feinstein, editor, Socialism, Capitalism and Economic Growth.
• 1970. Introduction to Economic Cybernetics, Pergamon Press