JPRS ID: 9086 USSR REPORT ECONOMIC AFFAIRS

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• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000200080023-6
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• Content Type: REPORTS

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JPRS L/9086
12 May 1980
- USSR Re ort
_ p
ECONOMIC AFFAIRS .
CFOUO 9/80)
- FBI$ FOREIGN BROADCAST INFORMATION SER~/ICE
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JPRS L/9086
12 May 19 80 _
USSR REPORT
ECONOMIC AFFAIRS
(FOUO 9/80)
- CONTENTS
INDUSTRIAL DEVELOPMENT AND PERFORMANCE
Procedures for Reequipment of Industrial Plants Examined
(V. Dubrovskiy; VOPROSY EKONOMIKI, Feb 80)..........,,.. 1 -
ECONOMIC MODELING AND COMPUTER TECHNOLOGY APPLICATION
Institute Active in Economic Modeling
- (VOPROSY EKONOMIKI, Mar 80) 15
INTRODUCTION OF NEW TECHNOLOGY
rconomic, Legal Problema of Scientific-Technical. R&D Noted
- (P.A. Sedlov; VESTNIK AKADEMII NAUK SSSR, Jan 80)...... 20
Criteria for Evaluating New Technology Examined
(A. Koshita; VOPROSY EKONOMIKI, Feb 80) 33
a- CIII - U55R - 3 FOUO) ,
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_ INDUS'TRIAL DEVELOPMENT AND PERFORMANCE
PROCEDURES FOR REEQUIPMENT OF INDUSTP.IAL PLANIS EXANIINED
Moscow VOPROSY EKONOMIKI in Russian No 2,Feb 80 gp 105-114
[Article by V. Dubrovskiy: "The Technical Reequipment of Operating Enter�
prises"]
[Text] Ir_ the decisions of the 25th CPSU Congress and subsequent Plenums
_ of the party it was noted that there are serioL~s shortcomings in capital
construction, which significan+.:1y lower the eff`ectivenesa of capital in-
vestments. The basic reasons for the lowering of the efficiency of
c~?pital investments were reviewed in the course of a discussion which has
opened in the pages of this journal.l Among the reasons that have been
noted is the failure to make requiaite use of ~he poasibilities of the
terhnical reequipment and reconstruction of er~terp;.ises now in operation.
In the decree adopted by the CPSU Central Committee and the USSR Council
or Ministers on the improvement of planning, a system of ineasures has been ~
se~ forth to eliminate these shortcomings. It is aimed at the further in-
crease in the effectiveness of capital investments and, above all, the entire -
technical reequipment and reconstructio~i of op~rating enterprises. The
intensification of production is one of the basic objects of investmen~
policy. Now, as is noted in the dtcree, rneans for the new construction
and expansion of operating enterprises will be allotted irf the require-
_ men;s of the national economy cannot be met by operating enterprises,
taking into account their re:onstruction and technical reequipment.
The decree makes it mandatory to put into operation all reserves and eco-
nomic lerers, and to speed up the fulfillment of this important national-
economic task. In our view, in order to achieve high efficiency in the -
recor.structior, and technical reequipment of operating enterpri.ses, basic
a~tention must be focused, above all, on the further elaboration o� metho-
dological and organizati~nal questions.
In ehe preparation of "Basic Directions for the Development of the Nation-
al Economy of the USSR in the Years 1976-'980" with a view to increasing
the productivity of the work with regard to the composition of planning -
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estimates and the technical-economic substantiation of projects of tech- -
nical reequipment, reconstruction and expansion of operating enterprises,
and with a view to the realistic determination of deadlines for operations ~
" to be carried out, these concepts were more preciaely defined in a joint
decision of the USSR 5tate Planning Commission (Gosplan) and tl~e USSR
State Committee for Construction (Gosstroy). However, as the experience
of the intensification of production has shown, the existing definitions
of technical reequipment and reconstruction of operating enterprises do
not allow their clear delimitation in practice. The technical reequiPment
- of operating enterprises conatitutes a complex of ineasures (withQUt expan- -
sion ~f the available production areas) envisaging the increase of the
technical level of individual sectors of production, integrated sets of
machinery and installations via the introduction of new technology, the
mechanization and automation of production processes, the modernization
and replacement of obsolete and physic~lly worn equipment with new, more
productive equipment. Reconstruction is complete or partial (with regard .
to a single project) reequipment and reconstruction of production (without
the construction of new and the expansion of operating plants of basic
- production function, but with the installation, if necessary, of new and
the expansion of operating projects of auxiliary and service functiona)
with the replacement of obsolescent and physcially worn equipment, the
- mechanization and automation of production, the elimination of dispropor-
tions in technological Zinks and auxiliary services, which guarantee an
increase in the volume of p~coduction on the Uasis of new, more modern
technology, the expansion of the assortment or the increase in the quality
of products and other indi~ators with lower expenditures and shorter dead-
lines than in the case of the construction or the expansion of operating
enterprisea.2
The principal difference between technical reequipment of operating enter-
prises and reconstruction consists in the fact that reconstruction is
carried out in accordance with a single plan for the entire enterprise,
while technical reequipment, as a rule, is realized on the basis of in-
dividual Iocal plans and estimates. However, in the sectorial plans for
capital investments the difference between technical reequipment and re-
construction is frequently relative, not always do the proposals of the _
enterprises with regard to the technical perfection of production agree
with the position of the ministry in the determination of the concrete
composition of operations. Probably, this is one of the reasons for the
fact that in the lOth Five-Year-Plan the share of capital investments ~
aimeci at the technical reequ.ipment and reconstruction of enterprises in-
creased insignificantly for industry as a whole--to ~3.6 percent by com-
parison with 20.2 percent in the 9th Five-Year-Plan.
The measures being realized in practice with regard to the technical re-
equipment and reconstruction of operation enterprises differ little from
new construction. Let us refer to the experience of work in this direction _
of a number of Moscow enterprises, and above all such large enterprises as
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the ~toscow Automobile Plant imeni Likhacliev (ZIL), the Automobi.le Plant
imeni Leninskiy Komsomol (AZLK), the First State Bearing Plant (GPZ-1).
f In these plants a great deal of work has beer. done during the last few
years with regard to the technical reequipment and reconstruction of
operating factories. At ZIL more than 90 auto~nated lin~~s have been intro- _
duced and 70 all-round -~echanized sections. At AZLK 28 all-round mechan-
ized sectors, 135 technological flow-lines, and 45 automated lines have
been established, 92 percent of the machine tools operate in an automated
mode. At GPZ-1, in the course of technical reequipment and reconstruction,
3 fully automated plants, turning out more the 40 percent of the total -
number of bearings manufactured by the plant, have been put into service,
as well as 74 mechanized lines.
A signi�icant growth of capacities by virtue of technical reequipment and
reconstruction of operating factories in these plants is envisaged for the
long term. Thus, in the leading plant of the association ZIL the old
buildings will be demolished and a building complex for the production of
automobile bodies, a building complex for light automobiles, a welding and
- assembly complex, a motor transport plant, power management pr�;fects _
and everyday service facilities will be built. Significant co.zstruction
work will be carried out at the branch plants: at the Moscow Carburetor
Plant a new production complex will be built, at the Moscow Motor Assembly
Plant--storage and everyday service facilities. -
At the AZLK a new pressing complex, a die shop, a block of inechanical
shops,will be built, and press and accessories production will be expanded.
Significant volumes of work will be carried out on new territory in the
course of the technical reequipment and reconstruction of the First State
Bearing Plant (GPZ-1). During the firse phase, the capacities of the
first section of the starting complex (40,000 square meters of new terri-
tory) will be introduced. The second phases envisages the construction of
a wood processing plant on a new industrial arza.and the construction of a -
_ profile rolled metal plant on operating territory. During the third phase
the capacities of the second section of the starting complex on new terr.i- -
tory will be in~:roduced (almost 50,000 square meters), the construction of
_ the thermal plant will be completed, as well as the reconstruction of the _
foundry on the operating industrial area.
The replacement of obsolete equipment as a basic element of t~e intensifi- -
cation of production, in accordance with the decision adopted by Gosplan
and Gosstroy of the USSR, is a distinctive sign of the technical reequip-
ment,~as well as the reconstruction of operating enterprises. In practice
this means freedom in the selection of reproduction forms if we are
talking about increasing the tech~sical level of production by virtue of -
the introduction of new technology. The experience accumulated during the
years of the 8th and 9th Five-Year-Plans with regard to the cdrrying out .
of reconstruction cf enterprises aimed at increasin~ the technical level
of production testifies to the fact that under conditions ~f the multi-
c
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purpose character of reconstr.uction measures, the priority of expenditt:res -
for equipment, in particular for replacement, is by far not always ob- ~
. served. As a result of the non-objective assessment of the technical level
of enterprises, the economic effect of the replacement of obsolescent and _
physically worn equipment frequently is absorbed by significant volumes of
non-productive expenditures for the construction of secondary projects, `
and in a number of cases by expenditures called forth by th~ proportional
participatio*~ of enterprises in the construction of city purification in-
, stallations included in the combined financial calculations of the recon-
struction projects. Thus, of the total volume of capital investments ex-
pended during the firat phase of the reconstruction of the Benderskiy Silk
Combine (1971-1974), only 17 percent of all fu.nds were directed toward the
replacement of obsolete equipment, almost 25 percent constituted expendi- -
tures for the construction of auxiliary and service-type projects, trans- ~
port management and communication.
According to the new plan for the reconstruction of the Benderskiy Silk
Combine at a total p:ice of ~1 million rubles, the expenditures for basic ~
production are projected in an amount of only 24.4 million rubles. Mean-
while the reconstruction of the combine presupposes, above all, meeting
= the Moldavian Soviet Socialist Republic's needs in regard to silk cloths
and the expansion of their production from 24.3 million to 59.7 millic^
linear meters. This is why the main task is the reeqvipment and the in-
crease of the machine park with highly-productive equipment.
For the national economy as a whole, of the total volume of capital in-
vestments directed toward the reconstruction and expansion during the
last years, only 9 percent went for reconstruction without the construc-
tion of buildings and installatians.4 Without a doubt, the social results
of the intensification of production (the installation of service and edu-
~ cational building complexes, dining halls, professional and technical
schools, plant clinics, etc.) can now already no longer be regarded as
something secondary, but nevertheless the technical reequipment of sectors
of the national economy is a basic task, since an increase in the share of -
equipment in the volume of capital investments of 1 percent leads to a~
growth in the output of production of approximately 7-8 billion rubles.
Probably it is necessary to strengthen the priority of expenditures for
the replacement of obsolete technology in one of the reproduction forms so
as to increase control over their use and to draw a clear distinction be-
- tween such expenditures and expenditures incurred as a result of a change
_ in the profile of the products turned out, as a result of the expansion of
production, the achievement of social results of the intensification of
production, and other particular motives for undertaking reconstruction.
The expediency of such a measure is confirmed by the existing practice of
renovating the production apparatus. The growth of expenditures for the
expansion, reconstruction and technical reequipment of operating enter-
prises according to the five-year-plans does not reflect the real expendi-
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tures for the intensification of production. Thus, the proportion of
capital investments for the expansion, reconstruction and technical re-
equipment of operating enterpri;~es in 1965 equalled 61 percent of the
total volume of capital investments on projects of a production character,
in 1977 it increased to 69 percent.6 The stiare of expenditures for the
replacement oF obsolete equipment in the total volume o` c~pital invest-
ments in equipment in the 8th Five-Ye~r-Plan amounted to i3.2 percent.~
In tt~e subsectors of machine building, 7-8 percent o'. the total sum of
_ caF~ital investments directed toward the development of the entire industry
were allotted for the renovation of fixed capital in the 9th Five-Year-
Plan.8 For the national economy as ~3 who~e, the sliare of equipment '
- directed toward replacement amounts to approximately 14 percent of the
total volume of its consumption.9
The average annual~rates of growth of the equipment park in the national
economy have decreased by an insignificant amount in recent years. The
expanded reproduction of the machine park is realized basically to the
detriment of the real removal of the assets. Thus, in 1976 the coefficient ~
of the introduction of t~achines and equipment in industr amounted to 9.G,
_ wt?ile the coefficient of equipment removal was only 2.3,~~ in machine
building and metal-working--13.3 and 2 respectively, i. e., the expansion -
of the functioning equipment park proceeds more than 6 times as intensive ~
than the replacement of its obsolete part.
In our view, the replacement of obsolete equipment could be excluded from
the structure of reconstruction operations and be regarded only as "the
technical reequipment of opera.ting enterprises." The defini~ion~~. of the
structure of reconstruction operations in relatior. to the specific char-
acter of industries is also in need of refinement. The existing defini- _
tion of reconstruction does not reflect the whole diversity of reconstruc- -
tion measures. Thus, at the present time there has been a sharp increase
in expenditures for the preservation of the environment. For example, the
plan for the reconstruction and'techr.ical reequi.pment of the Kiaznetskiy
- Ptetallurgical Combine imeni V. I. Lenin involving a total cost of 905 mil-
lion rubles projects expenditures for the preservation of air and water
basins in the amount of almost 16$ million rubles. An important peculiar-
ity of the investment policy of technical reequipment of operating enter-
_ prises in the current period lies in the fact that it has the character of
spe~ial purpose economic.progra~na. Such, for example, are *_he programs of
technical reequipment of the coal industry, the textile entarprises of
' ~toscow and Leningrad. Zfie technical reequipment and reconstruction of the
enterprises of Sverdlovsk Oblast made it possible to obtain 1 billion
~ubles in additional production while saving 460 million rubles in capital
investments.
One oE the basic tasics of special purpose ecor.omic programs is the putting
into operation of all reserves and the exposure of tti~ reserves of all
spheres of material production.il In relati.on to the programs of technical
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reequipment, this is linked i:o the elaboration of plans of technical re-
equipment of enterprises on the scale of industries and within the limits
of large investment projects. Positive experience of such work in in-
diistry exists in the cliemical and petroleum machine building sector. During
the ~Jth l~ive-Ye~r-Pl~~n the development ~nd intra~juction of sucli pl~ins wer~~
complr.ted in 15 plants in the sector. At t}ie present time, plans for the
technical reequipment of 62 enterprises of the sector are being developed.
Flowever, to date there is no single approach to the development of plans
for technical reequipment. The selective investigation we have conducted
of enterprises of the Main Administration tor the Manufacture of ~xcavators
- and Cranes (Glavekskavator), the Main Administration for the Manufacture
cf Construction rlactiinery (Glavstroymash), Lhe Main Administration of Road
Machinery Manufacture (Glavdormash), industrial enterprises of the Molda-
vian Soviet Socialist Republic and a number of rioscow enterprises shows
that these plans are cumbersome, contain a nucr;ber of sections which have
no direct r~lationship to the task of the technical reequipment of produc-
tion. In their composition the developing technology of the elaboration
of the technical, industrial and financial plans is practically cepied,
and they represent, in essence, plans for the technical development of
enterprises in which no difference is made between technical reequipment,
properly speaking, and reconstruction projects. ~
An analysis of inethodological materials also demonstrates the cversatura-
tion of tlie technical reequinment plans of enterprises with measures con-
cerning the perfection of the arganization of production. Thus, the plan
for the technical reequipment oi the enterprises of the Ministry of ~~Ia-
clline Building for Light and Food Industry and Household Appliances co~n-
sists of 15 parts. Along with basic measures concerning thr~ technical
perfection of production, it has also such sections as the scientific
organization of labor, the increase of qualifications and trainin~ of
workers, proposals with regard to shipments of products under subcontcact-
ing arrangements, planning work. The plans for the technical reequipment -
of the enterprises of the food industry of the Moldavian Soviet Socialist
Republic include measures regarding the rational use of material and _
natural resources, the preservation of tt?e environment, the perfection of
' the organization of production. The plan for the technical reequipment of
enterprises of the machine tool and tool building industry (stankoinstru-
mental'naya promyshlennost') encompa~ses 37 different directions of ~he
technical perfection of production.
Undoubtedly, the technical development of the enterprises presupposes the -
_ overall improvement of production taking into account its specific char-
acter. At the same time, it is necessary for the plan of the technical
reequipment of enterp--ises to be more concrete. It is thought that this -
is, first of all, thF. plan for the replacement of obsolete technology with
new technology, with highly-productive equipment, by virtue of which it
must be a component part of the plan for the technical development of the
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enterprise and not substitute for it. Apparently, a directive interrela-
tionship between the plans for technical reequipment and the standards for
mandatory annual depreciation of obsolescent and physically worn equipment,
diLferentiated by sectors of industry, is expedient. This makea the plan
of technical reequipment effective and, whar ia the main thing, reinforces
control over its fulfillment.
In the drafts of the five-year-plans a new decree by the CPSU Central Com-
mittee and the USSR Council of Ministers envisages the development of
balances and calculations of the use of available production capacities and
summary plans of reconstruction and technical reequipment. The delivery of
finistied projects is now the main criterion for assessing the act~vity of
the co~ltracting organizations. Under conditions of planning effective pro-
duction and new construction as a single whole, these measures must in-
crease the level of technical-econocnic grounds in the selection of the
paths of intensification of production and supply with material resources
_ and capacities Ctlos~~.~enterpriaes which have come forward with the initia-
tive of technical reequipment or reconstruction of production now in opera-
tion. Nevertheless, giver~ the mass character of operations with regard to
the technical reequipment and reconstruction of operating enterprises in
regions and large industrial regions, where the development of large con-
struceion programs is envisaged in the long run, strains may arise in the
balance of specialized capacities. The construction and assembly organiza-
_ tinns must determine the priority of projects included in the plan of
operations.
ihe solution of the problem of the formation of tiew specialized capacities
requires the careful substantiation of the contemplated variants of recon- -
struction and technical reequipment, the selection of the most optimal and
least capital intensive among them. The necessity arises to compare,for
each region and industrial complex,the expenditures for the creation of
construction-assembly organizations with the losses that may be caused to
ti,e national economy because of a shortage of available capacities. There-
fore, in order not to divert additional capital investments for the for~a-
tion of new capacities, the enlargement of already existing contracting
organization~ and, first of all, of the repair and b.uilding subdivisions R
is expedienk, in our view. For example, in the Moldavian Soviet Socialist
Republic the repair and building organizations attached to the mini_stries
~re ~iven the ri~hts o� a general contractor, themselves carry out con-
strur_tion work within the limits established for them, engage subcontract-
~ng organizata.ons for the assembly, the setting in motion and adjustment
of equipment and keep accounts with them for work that has been completed. -
Lr_ nn~st be noted that these organizations are active participants in the
investment process of the republic--which significantly reduces the time
periods required for [he technical reequipment of operating factories.
'fi e experience o.~ the Territorial Main A.dmznistration for Construction in
the Western Regions of the RSFSR (Glavzapstroy) of the USSR Ministry of
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Construction, where correction factors w?re introduced for contracting ~r-
- ganizations, taking into account the specific nature of the work in
- operating enterprises, produced positive results. Howe~~r, as became
clear in the course of the experiment, it is inexpedient to entrust large
specialized or~anizutions with amall volumes of work in regard to the re-
construction and technical reequipment of operating enterprises. The
yuestion is not that the basic volume of work in the program of technical
reequipment of operating enterprises be carried out in an economic manner,
but thaC in a number of cases it is much more advantageous and must net be
refused. The widely disseminated practice of the technical reequipment of
operating enterprises in the Moldavian Soviet Socialist Republic revealed _
a nvmber of new organizational forms. For example, in the Moldavian Bread
Industry (Moldkhlebprom) Association of the Pfinistry of Food Industry of
the fiepublic, the department for new technology of the leading enterprise,
which determined the function of each of the subdivisions, was in charge of
the development of the program of technical reequipmer.t of the bread-bakin~
plants. All necessary documentation was wor?ced out by the design office of _
the enterprise. A specialized section, consistiing of the construction
group of the department of capital consrx�uction, metal workers and re~air-
men, and fitters, carried out the introduction of new technology. The
star~ing and adjustment operations were carried out by the engineers and ~
automation specialists of the department of the chief inechanic.
At the Benderskiy Silk Combine the start-up and adjustment work in textile -
production was carried out by assistants to the foremen of operating
plants, responsible for the daily operation of the equipment. In other
factories of the combine metal workers and repairmen with high qualifica-
tions were involved in this work. Work completed on schedule add_.Che
assessment "good" in accordance with a specially developed scale entiCled
workers to receive an increase in the amount of 30 percent of their wages.
_ This resulted in a sharp reduction of the time periods required for jobs
- and guaranteed their proper quality.
- It must be noted that the territorial specialized organizations do not al-
_ ways do the best job in carrying out the assembly and the start-up and ad-
_ mustment work of equipment. Frequently they do not know the specific
= character of the equipment at the enterprises to be serviced, do not bear
responsibility for the quality of work, and drag out excessively the time
_ required for completing the work. At the large enterprises, the sErvices
of the department of the chief inechanical engineer are staffed with
qualified specialists who are able to solve complex technical tasks, and,
what is important, they are interested in reducing the time period re-
quired for completing the work. For this reason, sometimes the technical _
reequipment of production is ~ore advantageously carri~d out by the eftforts
of f:be enterprises themselves--where there is no unique equipment requiring
the participation of chief fitters.
_ In large associations it is expedient to give the specialized sections en-
~
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gaging in the technical reequipment of production the character of vis it-
ing brigades. Having acquired skills an~ accumulated a certain work ex-
perience, these brigades, together with the metal-workers and repairmen
and the service of the department of the chief engineer on the local scene,
- can significantly speed up the execution of auch work. It is very impor-
tant that at the decisive moment of the technical reequipment of produc tion
in one enterpiise---for the period of the withdrawal of operating capac ities
--compensating possibilities can be prepared within the limits of the
- association in another. In the associations the planning and design office
needs to be involved more broadly in the dev~lopmeiit af the planning esti-
mates. For example, at the ~'irst State Bearing Plant the designers created -
approximately 20 models of automatic machines for the control and grading
of components of bearings. On the basis of such models automatic control -
devices are manufactured for the entire bearing industry of the country in
tool-making plants. Moreover, there is thP possibility, not having fully -
completed the draft and rnanufacturing plans, to carry oat necessary adjust-
ments with the manufacturing engineers in all phases, to conduct control
tests and to introduce changes, havin~ already realistically determined
time periods for the execution of technical reequipment work, and at the =
same time to work up.ehe details of the plan for every comp~e~ under con~-
_ struction. -
Planning and design offices in associations and large enterprises that
have taken the initiative of the technical reequipment of production
through their own efforts musC be given the rights of a responsible de-
veloper of documentation and must be placed on the same footing by sta tute -
as the planning organizations. This is es~ecially important in industries
wi~ere the course toward the technical reequipment of production through -
the efforts of enterprises is conditioned by their specific characteris-
tics.
The creation of large design offices in a number of industries, which take
questions having to do with the planning of the technical reequipment of .
production, may be conducive to the solution of the problem. The experi-
ence of such work is available in the machine-tool iadustry of Moscow, _
where special design offices were created. ror example, on the basis of
the cr,anufacturing instructions provided by the Moscow Special Design
_ Office for Automated and Ineegrated Machine-Tools, complexes of automated
lines were manufactured for the technical reequipment of Moscow plants -
= and, first of all, such large plants as ZIL, AZLK, Dynamo and Kornpressor.
Practice shows that the developmant of progressive plans for tec~nical re-
equipment by design institutQS is impossiblz witilout the active assistance -
of the leading specialists of the enterprises. Their participation he lps
to find solutions which most fully take into account contemporary direc-
tivns of development of the plant and industr;~.
Si~ice 1977 aI1 financial resources of capital investments have been con-
centrated in the USSR Stroybank (AlI-Union Bank for the Financing of
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Capital Investmenta). For th~ financing of the technical reequipmer.t und
reconskruction of operati.ng factories, the enterprises use the means of the
fund for the development of production and credit. The role of the fund -
f-or the development of production in the financing of expenditures for the
intensification of production is increasing especially with the publication
of a new decree of the CPSU Central Committee and the USSR Council of
Ministers. Ivow the expenditures for the technical reequipment of produc-
tion are included in the plan of capital construction of the ministries and
departmente.
The effectiveness of expenditures for the intensification of production,
- to be determined along the line "fund for the development of production-- -
credit", in many respects depends on the real maguitude of the fund for
~ development and the level of its utilization, since the credits received
in the first place must be paid off with means from the fr.ind. Unfortunate-
ly, in practice the strictly purposeful expenditure of ineans from the fund
for the development of production is not observed. In the enterprises of
the majority of industries there exists,as a long-established tradition, a _
procedure for the expenditure of the means of the fund, in which--along
_ with the liquidation of indebtedness in terma of bank loana and deductions
_ going into the centralized fund of the ministries--deductions for the re- _
pair and construction of motor high~,~ays are mandatory. _
The selective investigation which we conducted into the use of the means
of the fund f~r the development of production in the largest sectors of
the industry c~f the I~Ioldavian Soviet Socialist Republic showed that a sig-
nificant portion of the means of the fund are expended for the construc- -
tion and repair of roads. Thus, according to the :~iinistry df Light In-
~ dustry of the rioldavian Soviet Socialist Republic, deductions for the re-
pair and construction of motor highways made from means of the fund for
the development of production during 1971-1976 almost equalled the expen-
ditures for production. In this case the expenditures for the acquisition
of equipment at the expense of ineans from the fund for the development of
- production amounted to 26 percent of the total extra-charge fund and ex-
- ceeded the volume of credit received for these purposes by only 17 percent.
_ For the 9th Five-Year-Plan as a whole, the deductions for motor highway
repair and construction from the means of the fund for the development of
production exceeded the dimensions of centralized capiCal:investments
- directed toward the re~-~lacemen~ of obsolete equipment by a factor of 1.9
and non-centralized capital investments by a factor of 1.6, and consti-
tuted 74 percent of their total volume.
According to the Ministry of Furniture and G!ood-Processing Industry of the -
r~:oldavian SSR, of the total fund for the development of production set
down during 1972-1976 only 15 percent were expended for the acq~:~.sition of
equipment. At the same time, the deductions for the repair and construc-
tion of motor highways,made during this period at the expense of the means
of the fund for the development of production by the enterprises of the
ministry, exceeded the volume of centralized capital investments directed
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,
- toward the replacement of obsolete equipment by 9 percent and the volume of
non-centralized capital investments by a factor of 2.1, having amounted to
7'i percent of their total volume. The same kind of correlations between
tl~e deductinns for repair and construction ot motor highways~and the ex-
- penditures for the replacement of obsolete equipment are characteristic
- ulso for the enterprises of the Ministry of Food Industry of the republic.
_ }iere such deductions during 1974-1976 exceeded centralized capital invest-
ments for the replacement of obsolete equipment by 8 percent and non-
_ centralized capital investments by a factor of 2.5. -
A striking contrast can be observed when contrasting deductions for the
repair and construction of motor highways made by enterprises at the ex-
pense of ineans from the fund for the development of production with the
dimensions of credit drawn. For example, in the case of the I~Iinistry of
Light Industry of the Moldavian SSR such deductions during 1971-1976 ex-
ceeded the crediCs obtained for the acquisition of equipm~nt by a factor -
- of 5.5 and the total volume of credits obtained for production needs by a
factor of 2.2. In the case of the Ministry of Furniture and Wood-Proces-
= sing Industry of the Moldavian SSR these deductions during 1972-1976 were _
2 times larger than the credit expended for the acquisition of equipmsnt.
" The norm of expenditures for local needs, projected in the amount of 0.2
percent of the sales volume, obligates enterprises to make such deductions
regularly. According to the existing situation, expenditures for the re-
pair and construction of motor highways must be made from several sources.
However, in practice the only real source is the fund for the development
of production. Thus, of the total volume of deductions for local needs
in the case of thP Ministry of Light Industry of the Moldavian SSR the
means from the fund for the development of production constitute 92 per-
_ cent, in the case of the Ministry of Furniture and Wood-Processing In-
dustry of~the Moldavian SSR--94 percent, in the case of the Ninistry of
Food Industry of the Moldavian SSR--88 percent. Thus, on the one hand,
the means of the fund for the development of production are inadequate for _
the financing of the technical reequipment of operating enterprises and
the enterprises are forced to obtain credits, and on the other they are
expended for goals which have no di.rect relationship to the increase in ~
the technical level of production. Thus, during the 9th Five-Year-Plan,
industrial enterprises of tinion-~epublic, republic and local subord;.nation
of the ~foldavian SSR transferred 41 percent of all means directed toward
- the rep~acement of obsolete equipment for production-oriented projects
from the fund ~or the development of production to the repair and construc-
tion of motor highways. This is appx~oximately 1.2 ti.~es larger than ex-
penditures for the technical reequipment and reconstrucbi.~on of enterprises
in the sectors of industr~~ for which capital investments were allotted
- directly by the Council of Ministers of the Moldavian SSR. It suf�ices
to say that only by virt~~e of the means from the fund for the development
of production transferred by the enterprises of the Mi.nistry of Light In-
dustry of the Moldavian SSR for local needs during 19'/1-1976 was it pos-
sible to replace the obsolete means of work, retired during this period,
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_ by 62 percent.
Under thc new conditions of financing the technical reequipment and recon-
ytruction of operating enterprisea it is imposeible to accept such a pro-
cedure of expF~ndin~ means from the fund for theldevelopment of pr~duction.
Uf course, expenditures for the repair and conat-tuction of mo~or tiighways
are necessary; however, in our view, the means from the fund for the de-
velopment of production must be excluded from the compasition of the _
sources oE financing expenditurea for local needs. Apparently it is Px-
pedient to create a special source of expenditures for these purposes.
The improvement in the amorti~ation policy and the termination of the
Einancing of expenditures for the repair and conatruction of motor high-
ways from means coming from the fund for the development of production
does not deny the necessity for credits. Precisely now the enterprises
will more often resort to credit services for the iieeds of technical re-
equipment since under the new conditions of financing credit is unlimited,
and the potential possibilities of the fund in terms of the liquidation of
_ the credits obtained will be significantly higher. Particularly advan-
- tageous is the liquidation ef credits by means of tt;e fund for the develop-
_ ment of production when the work in regard to the technical reec~uipment
of enterprises are c.ompleted ahead of schedule, since in this case the
rate of interest is reduced.
At present the All-Union Bank for the Financing of Capital Investments
(Stroybank SSSR) grants creditss taking into account the total volume of
the proposed expenditures. According to the new state of affairs, if the
fund for the development of production turns out to be inadequate for the
repayment of the credit, the enterprise may direct a portion of its profit
toward the repayment of the credit---the portion which remains after deduc--
tions to economic incentive funds, payments for credits obtained earlier,
~ and payments into the budget. Evidentiy, this point must be more precise-
ly defined, i. e., a p:o~edure must be set down for the repayment of a
_ credit in those cases where work in regard to the technical reequipment of -
plants and sections and the reconstruction of individual factories, called
f.orth vy a change of technology, the expansion of production or the neces-
~ sity of improving working conditions, is carried out simultaneously and
the enterprise obtained credits, since the means of the fund for the de-
velopment of production did nat suffice. In our view, measures of the
technical reequipment of production based on credit must, first of all, be
- repaid by means from the fund for the development of production. Loans
- for the reconstruction of production units called forth by significant
capital investments and the time periods required for such work, in these
cases must be repaid f.rom profit. This makes it poseible to control the
the use of capital invest.nents and to speed up the time period required
- for the execution of reconstruction work, since a material interest on the -
- part of the collectives will be created in the timely completion of the
work. '
)
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'The All-llnion Bank for the Financing of Capital Investments has issued in-
structions obligating all institutions of the bank to give all possible
assistance to enterprises in the matter of the technical reequipment of
production. However, to rely only on the indicator of credit efficiency ~
_ is impossible alone for the r~ason that the practice of its calculation
_ now in operation does little to encourage the strengthening of bank con-
trol. The easence lies in the fact that the average indi.^at~r of credit
effectivenesa calculated by the institutions of the bank ofteil times does
not take into consic'eration the specific characteristics of t:~e subsectors
_ of the industry and thus does not always reliably reflect the effectiveness
_ of the loans obtained. It is inferred not from factual data concerning
_ the output of production for the past period, but from accounting data,
and for this reason it has an exceedingly provisional character.
The existing system of ineasures envisaging stxict bank control over the
character of the use of loans must be supplemented with apecial statutes
allowing the institutions of the All-Union Bank for the Financing of Capi-
tal Investments not to accept the plans submitted by the ministries for
capital construction with an insufficiently effective structure of capital
investments and to require the priority of expenditures for the replace-
ment of obsolete technology, and then to control the credits expended.
The problem of the effectiveness of the technical reequipment of operating
enterprises during the current stage of development encompasses a wide -
range of questions. The task consists in the acceleration of the process
vf the technical reequipment of production--having perfected the organiza-
_ tional forms of the realizati~n of such work, the forms ~f stimulating the
ecoi:omic initiative of the enterprises and having utilized all possible -
sources of financing.
~ FOOTNOTES
1. See, in particular, Academician T. Khachaturov, "Puti povysheniya
effektivnosti kapital'nykh vlozheniy" [Ways of Increasing the ~ffec-
tiveness of Capital Investments), VOPROSY EKONOMIKI, No 7, 1979.
_ 2. See "riovostroyka, rekonstruktsiya, rasshireniye" [New Construction,
Reconstruction, Expansion], EKONOMICHESKAYA GAZETA, No 15, 1975, p 9.
3. See EKONOMIKA STKOITFL'STVA, No 11, 1976, p 68.
_ 4. See V. K. Fal'tsman, "Intensifikatsiya razvitiya proizvodstvennogo
apparata" [The Intensification of the Development of the Froductian
Apparatus], VOPROSY EKONOMIKI, N~ 1, 1978, p 10.
1~
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_ 5. See M. G. Chenr.emirov, "Povysheniye effektivnosti kapital'nykh vlozhe-
niy--zadacha kompleksnaya" [The Increase of the ~ftectiveness of Capi-
tal Investments Ys a Complex Task], EKONOMIKA STROITEL'STVA, No 4,
1977, p 5.
6. See NARUUNOYL K1iUZYAYSTVO SSSR V 1977 G. STATISTICHESKIY EZHEGODNIK.
[The National Economy of the USSK in 1977. A Statistical Yearbook],
_ Izdatel'stvo Statistika, 1978, p 355.
7. See N. V. Ivanov, N. A. Zelenskiy, "Puti obnovleniya parka oborudova-
niya" [Ways of Renovating the Equipment Park], VESTI~;IK rIASHINOSTROENIYA,
No 6, 1975, p 88.
8. See A. P. Bulkin, "Rol' mashinostroyeniya v investitsionnykh program- _
makh narodnokhozyaystvennykh kompleksov" [The Role of .;achine Building
in the Investment Programs of Plational-Economic Complexes], INVESTI- �
TSIONNYE PROBLEMY NARODNOKHOZYAYSTVENNYKH KOMPLEKS4V, Ploscow, 1976,
p 256.
9. See IZVESTIYA AKADEr1II NAUK SSSR. Seriya ekonomiche~kaya, No 2, 1975,
- p 53. .
10. See "Dlarodnoye~khozyaystvo�3bSR za 60 let" [The Nationsl Economy of the
USSR After 60 Years], Izdatel'atvo Statistika, 1977, p 190.
11. See V. P. Krasovskiy, "Effektiur.ost' tselevylch ekonomicheskikh pro-
gramm" [The Effectiveness of Special Purpose Economic Programs],
VOPROSY EKONOMIKI, No 12, 1976, p 39.
' COPYRIGHT: Izdatel'stvo "Pravda", "V~prosy ekonomiki", 1980
8970
CSO: 1820
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ECONOMIC MODELING AND COMPUTER TECHr10LOGY APPLICATION
INSTITUTE ACTIVE IN ECONOMIC MODEI.ING
Moscow VOPROSY EKONOMIKI in Russian No 3, Mar 80 pp 3-5
[Unsigned article: "Scientific and Scientific-Organizational Activity of
the Central Mathematical Economics Institute of the IISSR Academy of Sc~-
ences"] -
[Text] The decree of the Presidium of the USSR Academy of Sciences enti-
tled "On the Scientific and Scientific-Organizational Activity of the Cen-
tral Mathematical Economics Institute of the USSR Academy of Sciences in
the Period 1470-1978" notes that the institute, guided by the tasks out-
lined in the 24th and 25th CPSU congresses and pleaums of the CPSU Central
Co~ittee related to improvement of nanagement of the national economy and
- to more thorough intensification of social production, has carried on a.
definite effor~ to develop and deepen that direction in economic science
known as mathematical economics.
The inatitute has made a aubstantial contribution to development of a new
field of economic science--mathematical economic modeling--and has been en-
ergetic in helping to set down the procedural foundations for effective use
of electronic computers in managing the national economy and its constitu-
ent entities and also creatioa of the methods of systems analysis and im-
- provement of the economic mechanism for management of the planned economy.
~ The institute has done research on the following topics: the theory of op-
timum functioning of a socialist economy; the economic and social. problems
of long-range development of the USSR national economy; theoretical and
methcdological problems of long-range economic planning and creation of the
computerized system of planning computations (ASPR); methodological under-
_ pinning and experimental construction of systems of models of optimum plan-
ning of the national economq, sectors and industries and multisector com-
plexes.
In recent years TsEHII [Central Mathematical Econamics Institute of the USSR
Academy of Sciences] has brought out such publications as "Problems of Op-
timum Functioning of the Socialist Economy," "Economic Laws af Socialism
and Optimum Solutions," "Integrated National Economic Planning," 10Optimiza-
_ tion of the Economy," "Forecasr.ing the Growth of a Socialist Economy,"
15
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"Modeling National Economic Processes," "System of Models of Optimum Plan-
- ning," "Economic Problems of Conservation of Resources," "Basic Principles
in Methods of Optimalizing Development and Location of Production," "Needs,
Income, Consumption. Methodology for Analyzing and Forecasting the Pros-
perity of the People," etc.
The institute made a contribution to the drafting of the Comprehensive Pro-
gram of Scientif ic-Technical Progress and Its Long-Range Socioecanomic Con-
sequences. ~
Various models of the planning and management of enterprises and industries
in the context of ASU [computerized management system] have been put through
experimental verification and delivered for practical use. ASU's have been
set up in a number of large enterprises, ministries and departments with _
the guidance of the institute as to methods and with its direct participa-
tion. Jointly with other organizations the institute developed models for
optimalization of the pxoduction program and capital investments, for loca-
tion of production, for optimum utilization o� productive resources, and
for optimalization of relations between suppliers and consumers for the
chemical, cement, coal and other industries. With the institLte's partici-
pation preplan optimalization computations were made on the basis of these
models for a number of branches and subbranches of material production.
The "Reco~nendations on Methoda of Drafting Comprehensive National Economic
Programs" were prepared by the institute and approved by the Council for
Examination of Ma3or Social and Economic Problems of USSR Gosplan. With
the institute's participation methods were also created for determining the
efficiency of utilization of new techaology, inventions and production in-
novations in the national economy, of economic assessment of mineral de- -
posits, of calculating the optimum sequence for compiling price books, etc. _
Measures have been adopted to improve the planning of scientific research -
and to make the activity of graduate study more orderly.
But there are still substantial shortcomings in the institute's work. ~Jork .
is going slowly on the most urgent problems of the national economy. In .
theoretical and applied research little atten~ion is b~ing paid to studying
strategies for the transition of the socialist economy from the extensive
to the intensive type of reproduction, for speeding up scientific-technical ;
progress and for increasing production efficiency.
There is a lag in developing the methodological foundations of applying the '
methods and models of mathematical economics in planning and management and ~
of optimum utilization of all opportunities for expanded eocialist repro-
duction. A number of ~naterials prepared by the institute are in need of '
more thorough substantiation in the field of political economy. .
Research on the problems of the optimum functioning of the economic system ~
are not always up-to-date and purposive. Due attention is not being paid
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to the problems of the quantitative determinacy of socially necessary
costs, social utility, and creation of inethods of ineasuring it. ~
The methods cf national economic forecasts and practical pro~ects in the
forecasting field sti~l are not comprehensive in nature. The theory and
methode being used as the basie for research on problems of long-range
for~casting are incomplete. Up to the present no one has succeeded in
overcoming the difficulties in correlating the scientific-technical fore-
casts and the socioeconomic forecasts. Research on setting up information
syatems has not been coordinated.
Among the institute's publications there are poor examples which have been -
- rightly criticized.
Some of the institute's subdivisions are not oriented toward solving the
principal problems they have been set. There is a shortage of specialists
with education in the field of political economy, especially people with
high qualific.ations who have mastered the methods of mathematical econom-
ics. Some ~f the staff inembers are superficial in their understanding of -
the probl.ems of the national economy.
.
Many methods and models of mathematical economics that have been developed
- and tested experimentally are still not being sufficiently used in the
practice of planning and managing the national economy.
The Presidium of the USSR Academy of Sciences has approved on the whole the
results of the scientific research effort of TsEMi in the period 1y~0-1978.
It has been deemed indispensable to concentrate the e�forts of the insti-
tute's staff on study of the problems of planned management of the economy
and of raising its efficiency. The first-order problems are a further rise
_ in the theoretical level and strengthening of the practical orientation of
research, preparation of recommendations on scientific methods of improving
planning and management of the national ecanomy and its individual entities
on the baais of extensive use of the methods of mathema.tical economics and
electronic computers. There is a corresponding ueed to further intensify
research in the following fields and make it more effective:
i. development of a methodology of long-range and medium-term forecasting
of economic development, including ~ustification of growth rates and the
structure of social production, develapment of the most important interaec-
cor nari.onal economic complexes;
ii, creation of a methodology for integrated national economic planning
and construc~ion of systems of mathematical economic models of economic de-
velopment of the country ae a whole, of intersector complexes, of sectors
and industries, of union republics and of economic regions, as well as of
incarporating them into the ASPR, including soluti.on of the problems of -
correlating mathematical economic models with the technological scheme for
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drafting national economic plans and linkage of the different sections of
plans;
iii. work on the theory of systems for management of sectors and indus-
tries, associations and enterprises using computer equipment to perfect the
ecunomic mechanism and organizational structures;
iv. study of the problems of perfecting the planned economic mechanism for
managing the socialist economy, including the problems of planned price
setting, economic assessment of national economic resources, optimalization
of conservation of resources, organic combination of physical and value =
proportions of the plan;
v. development of new methods of modeling economic processes and their
software, including creation of algorithms and packages of applied programs
for linear, nonlinear and discrete optimalization and for solving statisti-
cal and stochastic problems.
The Presidium of the USSR Academy of Sciences has ordered the institute to
take an active part in preparing materials for the llth Five-Year Plan for
Development of the National Economy and for compiling the long-range plan
of the country's socioeconomic development; to see to the further develop- -
ment and comprehensiveness of studies of the political-economic foundations
of the system of optimum functioning of the socialist economy and compre-
hensive mathematical economic models for planned management of the national
gconomy; to devise a methodology for constructing computerized management
systems; to raise the level of research on scientific methods related to~
the Comprehensive Program of Scientific-TecHnical Progress and Its Long-
Itange Socioeconomic Consequences; to adopt measures toward a further rise
in the scientific and theoretical level and practical significance of the
institute's publications and reco~endations; and to see that the problems
are posed in concrete terms and thoroughly elucidated.
The Presidium of the USSR Academy of Sciences has assigned the institute's
directors the following duties: in order to increase the effectiveness and
practical significance of the r.aults of scientific research, to take steps
to strengthen relations with USSR Gosplan, ministries, departments, associ-
_ ations (enterprises), and subdivisions of academies of sciences of the
- union republics developing mathematical economic models of planning and
management; to be more persistent in implementing measures to introduce the
methods and models of mathematical economics into the practice of planning
and managing the national economy and to prepare specific recommendations
in this area; to improve the organizational structure and scientific-orga-
nizational activity of the institute with a view to concentrating energies
on the main lines of resear~h and improvement of their planning; to take
effective steps to increase the number of specialists with education in the
field of political,economy; to enroll in specialized graduate study pri-
marily persons who have education in political economy and mathematical _
economics.
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The decree reco~neads that the institute's directors and academic council
take a mo~e exacting stance in evaluating the results of the creative ac-
:ivity of scientists when they are being reappointed to a new term and when
- scientific-technical personnel are being certified.
The Presidium of the USSR Academy of Sciences has ordered the institute to
prepare recomnendations on raising the scientific and theoretical level and
practical significance of publications in the ~ournal EKONOMIKA I MATEMATI-
CHESKIYE METODY.
COPYRIGHT: Izdatel'stvo "Pravda," "Voprosy ekonomiki," 1980
7045
CSO: 1820
19 ~
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run ~rrtl:tAL USL~ UNLY
IN'1'RQI)UG'fION OF NFW TCCHNOLOGY
ECONOMIC, LEGAL PROBLEMS OF SCIENTIFIC-TECHNICAL R&D NOTED
Moscow VESTNIK AKADEMII NAUK SSSR in Russian No 1, Jan 80 pp 31-40 -
[Article by P. A. Sedlov, candidate of economic sciences]
[Text] The system of integrated planning, financing and stimulation of
scientific-technical progress was first created and successfully applied in
_ our country. We draft plans for new technology and utilize specific meth-
ods of financing and material incentives aimed at speeding up the rates of
scientific-technical develo~ment. But now because of the strengthening of .
economic methods of managing production and the developffient of economic
legislation there is a need to make the system for planning and stimulating
scientific-technical progress more comprehensive, to improve the interre-
latedneas of the individual parts of this economic mechanism.
Within industries this system is called up~n to perform a whole range of
- tasks. They include planning the creation, production and application of
- new technology (at the manufacturiag enterprises they plan both the output
of series-produced producte and also organization of production of new
technology; the distribution of resources between these two principal types
_ of operation, as well as production capacities, needs to be done on a nor-
_ mative basis); improvement of the method of setting prices on new types of
products so as to take into account that distribution of the econo~:c bene-
fit to the national economy which would give an incentive for new technol-
ogy both to manufacturers and consumers; compensation for the higher cosCs
relat~d to putting new technology into production; reimbursement in the in-
centive funds of enterprises of the losses resulting from those same
causes; material incentives of collectives for advances in scientific-tech-
_ nical progress financed from funds earmarked for the awardiag of bonuses
for economic performance, and finally, specific incentives for workers of
enterprises and organizations for developing new technology and for putting
it into production.
It ia a question, consequently, of creating those economic conditions (and -
not merely incentive methods) which "fully correspond to very rapid paseage
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of new ideas along the entire chain--from the invention to larg~-scale pro-
duction and set up a dependable economic barrier to the manufacture of out-
dated products."*
The epecific solution to the economic probleme enumerated above ia provided
for by meana of law, set forth in the relative normative documents, which
should contain a atrict set of rules governing the operation of the indi-
vidual elements of the system. At the same time.efficient operation of the -
economic system must be achieved by using the motivation of enterprises,
organizations and individual woikers.
_
Under present conditions it is frequently unprofitable for enterprises to
put new technology into production. During the period of its being put
into production the higher costs and higher labor intensiveness have an ad-
verse effect on the indicators of enterprises' economic performance. Col-
lectives are working intensively, expenditures are rising, but the size of
the incentive may be smaller.
According to statistical data for the industrial sector as a whole, during
the Ninth Five-Year Plan the profitability of the manufacture of all new
- products was lower during the first 2 years than the average profitability
of marketed products. Thereafter, beginning in the third or fourth year of
production depending on the type of product, the profitablity of products
increases and begins to exceed the average. In surveys conducted by the
Central Statistical Administration of 1,900 enterprises in 10 machinebuild- ~
ing ministries the profitability of marketed output was 17 percent in 1974
and 17.3 percent in 1975. At those.same enterprises the profitability of
new products put into production was 14.4 percent in 1974 and 14.3 percent
in 1975 (that is, 2.6 and 3 points lower, respectively).
At enterprises in the machinebuilding sector the size of the fund from
which financial incentives are paid for economic performance is as a rule
- 10-12-fold larger than the fund from which bonuses are paid for new tech-
nology, and the amount by which incentive funds are reduced for underful-
fillment of the fund-regulating indicators (rise of labor productivity,
level of profitability and growth in the vol~e of marketed output) by just
1 percentage point can exceed the entire amount of funds used to pay bo- -
nuses for creation and application of new technology.
When fund-regulating indicators are underfulfilled by ~ust 1 percentage
point, the material incentive fund of the Ministry of Machine Tool and Tool
Building Industry (according to the rates established for that industry)
_ would decrease by an amount approximately equal to the size of the fund
from which bonuses are awarded for new technology. In light industry,
* L. I. Brezhnev, "Report of the CPSU Central Committee and the Next Tasks
of the Party in the Domain of Domestic and Foreign Policy," in the book
"Ma.rerialy 7IXV s"yezda RPSS" [Proceedings of the 25th CPSU Congress], Mos-
cow, 1976, pp 48-49.
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where the rate of the deductions for new technology is lower than in ma-
chinebuilding, the total amount of the reduction of the material incentive
fund would be threefold greater than fhe fund from which bonuses are paid
for creation and application of new technology. _
Figures on the industrial aector as a whole, on individual industries and
on enterprises confi~W the need to adopt special effective measures aimed
at strengthening the motivation of enterprises and their workers to put new
technology into production. The decree of the CPSU Central Committee and
USSR Council of Ministers entit].ed "On Improving Planning and Increasing
the Impact of Economic Instruments on Production Efficiency and the Quality
of Performance," adopted in July 1979, ia aimed at improving economic meth-
ods of managing the process of putting new technology into production.
The basis of the system of economic incentivea to encourage scientific-
technical progress, as indeed for managing the socialist economy as a
whole--is planning. The list and acope of pro~ects related to new technol-
- ogy, standards pertaining to outlays to put it into productian and the eco-
nomic benefit from its application should be set forth within the framework .
of a unified plan. Planning targets for current production, especially
_ with respect to the rise of labor productivity, the volume of sales, profit
and profitability should be assigned so as to take into account the impact
which the processea of putting new technology into production has on enter-
prise performance. And finally, enhancing the role of planning in economic
stimulation of scientific-technical progress consists of developing and ap-
plying sound norms pertaining to the higher costs of putting new technology -
into production, to reimburseable losses in incentive funds, to the time
- during which reimbursement is to be made, and so on; without this the en-
tire syatem cannot function normally.
Until recently only targets for application of new technology financed with
capital investments were asaigned to the enterprise in the technical, in-
dustrial and financial plan (in the group of indicators pertaining to capi-
tal construction): that is, targets whose purpose is the retooling and re-
construction of capital. The actual introduction of the new product in
physical terms would be calculated and approved at the enterprise itself.
It is clear, however, that the target for putting a new product into pro-
duction will have the force of a directive only if it is included in the
principal producta list whose nonfulfilZment has an effect on formation of
incentive funda. -
Nor until recently have specific rates and standards that take into account '
the peculiarities of the period in which new technology is being put into
production been applied to planning and supporting the output of new prod-
ucts with the necessary production capacities, manpower and financial re-
sources, wage fund and economic incentive fun3s. In the chapter entitled
"Drafting of Norma and Standarda" of "Tipovaya metodika razrabotki pyati-
letnogo plana proizvodstvennogo ob"yedineniya (kombinata), predpriyatiya"
[Standard Method of Drafting the Five-Year Plan of the Production
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Aasociation (Combine~, EnterpriseJ (Moscour, 1975) norme and standarda were
not eavisioned pertaining to the consumption of raw materials and supplies,
labor intensiveness nor tha need for equipment concarning the conditions
for putting new technologq into production.
The method for drafting these norms and standarde should take into account
the complexity of putting new producte into production and variation of the
norms and standards according to Che periods for putting new technology
into production. The general methodological approach to determining stand-
ard coeta could in this case be the following one,
An item-by-itmt costing is done for th~ products to be put into production. =
Neceseary additional eapenditures are determined for each item bq recordin~
and analyzing actual costs of analogous pro3ects under similar conditions,
and then they are totaled. The costs of standardized (standard) parts and
opera~iona are determined preciselq, while coats and additional expendi-
tures for the production of components and assemblies pertaining only to
the new product are calculated on the basis of similar examples and so as
to take into account the experience in the most efficient manufacture of -
models alreadq being produced p� the given form of technology. After this
has been done, a calculation needs to be made on the basis of the data ob-
_ tained of the cost increase coefficients for each item and the overall co-
_ efficient for the entire product. Then, taking into account variation of
profitability from year to year during organization of the production of -
the new product, the standard period for reimbursement of the higher cost
is determined and the degree of reduction of the cost increase coefficients
is determined by calendar periods (this kind of work should be done by the
head scientific research inetitutes for subindustries for each product
type). Drafting these standards will make it possible to determine more -
accurately the rates used in forming the industrywide Unified Fund for De-
velopment of Science and Technology tYeFRNT), which has been provided for
in the decree of the CPSU Central Co~ittee and USSR Council of Miniaters.
- An intensive search is beiiig conducted in our country for new forms and
' methods of glanning and stimulating scientific-technical progress.
In the electrical equipment industry and certain other industries the plan- ~
ning of new technology is based on the principle of pr~ject continuity--
from scientific research to organization of the production of new products
ar ado~tion of grogressive manufacturing processes. Intraministerial ~ob
orders are used as a planning instrument; ~Ihey call for fulfillment of all
thQ phases of the projects, they designate those responsible, they specify
the technical-and-economic parameters of the sut~3ects of the pro~ects,
sources of financing and other data ~ndispen$able to successful creation
and introduction of new technologq. The 3ob orders are in turn used as -
the ba8is for compiling annual topic plans of scientific reseasch insti-- ~
tutes and deaign bureaus and enterprise plans for putting new technology
into production. This procedure eliminates the gap between R&D pro,jects
~nd the effort to put the result into production ax?.d makes it possi~le to
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monicor the entire group of projecta phase by phase as they are being car-
ried out. The new planning procedure has made it possible to reduce the
timE: required to create new technology anc~ put it into produrtion by ap- _
proximately one-third and in certain casea even more.
The decree of the CPSU Central Committee and USSR Council of Ministers en-
tit.led "On Improving Planning and Increasing the Impact of Economic Instru-
meuts on Production Efficiency and the Quality of Perf4rmance" called for
completion in 1980 of the convexsion of enterprises and organizations of
industrial mini3tries to the coat-accounting system of organizing effor~s -
to create, put into production and apply new technology on the basis of ~ob
o:ders. It ia important to generalize the experience of using ~ob orders
in various industxies and to standardize both the planning method and also
its forms. This experience shauld also be used in organizing and planning
~~fforta that ].ie outside the framework of intraindustry relations, specifi-
cally in fulfillment of comprehensive scientific-technical programs.
We ahould note that the new planning procedure in the electrical equipment
lnduatry has not touched upon the system of indicators which should reflect
more fully the task of increasing efficiency in develo~ing new technology
and putting it into production. When the "start-to-finish" method of plan-
ning is used, ''start-to-finish" indicators should also be used in our opin-
ion. For the level of Che scientific research institute (design bureau}--
pilot operation--industrial enterprise such indicators might be the list of
projects governed by compleCion dates, the economic benefit to the national
economy frnm application of the new products ox manufacturing processes,
the technical level of the latter (group of quality indicators), the stand- ~
- ard pro~ect cost or cost ,justified by technical-and-economic computations,
and an indicator related to cost-accounting motivation (cost-accounting
benefit, the size of transfers to economic incentive funds that depend on
the economic benefit to the national economy).
~ The bonus syatem now in effect for creation and application of new technol-
ogy calls for the size of bonuses to be dependent to a Gertain extent on
the calculated economic benefit of the new development, though the size of
ttie bonus fund depends on another indicator--the wage fund. In the eco- _
nomic incentive system used in the electrical equipment industry the size
of the incentive fund has already been linked to the economic benefit, but
the benefi~ itself is the ultimate result of effort in the domain of scien-
tific-technical progress--so far it is not assigned in the plan. -
= a
The CPSU ~entral Committee and USSR Council of Ministers have decreed that
the economic benefit from performance of scientific-technical measures is
to be assigned in 5-year plans in a breakdown b3~ years. In our opinion, to -
put it concretely, one ought to plan the national economic benefit, which
wauld be determined from imputed costs and would serve as the basis for
choosing the best variant of what is to be used in production.
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But the way matters often stand in practice at the present time is this.
- Having selected the beat version on tfie basis of the calculated benefit,
people then seem to forget about the calculated benefit. When the result
of the effort is applied, the benefit obtained may be leas than was antici-
pated, but Che size of the incantive ia determined from uniform standards
in effect. It therefore seams tc sa expedient to plan the national eco-
_ nomic benefit as an indicator which will serve as the principal criterion
in settling the queation of use of the particular result in production..
_ But then the size of the incentive should be differentiated. If the plan
and calculated benefit is attained, then incentive funds should be paid in
the planned amount. If the benefit is greater than that calculated, tk~en
it makea sense to raise the rate. Yet if the benefit proves to be leg~
than that calculated--meaning that perhaps the best version was aot chosen,
the rate of the incentive must be reduced. ~
Moreover, it is indispensable to work out a method of determining the cost-
accounting benefit of new technology. Using such a method one would be
able to plan apecific assignments for enterprises as to the actual economic
bene~it to be derived from applying scientific-technical advances.
Fu1fi11mEnt of the assignments of superior organizations concerning new
technology that arise out of the tasks in development of the subindustry,
the induatry and the induatrial sector as a whole and which are simed at
ensuring development of the national economy is no less important than man-
ufacturing the products on the principal producta list. For that reason
nonfulfillment af these assignments should be reflected in the assesament
_ of enterprise performance, in the formation of incentive funds, and in the
' eize of bonuses paid to supervisorq personnel and persans responsible for
th:z failure of these efforts.
Up to now fulfillment or nonfulfillment of assign~ments for new technology
has not in practice been linked to the evaluatior? of economic performance
and formation of enterprise incentive funds. In accordance with the decree
- of the CPSU Central Committee and USSR Council of Ministers on improving
the economic mechanism, the cost of 3obs of an industrial nature related to
putting new technology into production and to its application and financed
- with the funds of the uni�ied fund for development of science and technol-
ogy will be included in th:e total volume of output, and standard profit ~
will be credit.^_d on the relevant groups of products. This is an important
step forward toward unification in the unified system of evaluation of the
results of economic performance and of putting new technology into produc- ~
Cion. _
As this principle is imglemented, we propose that certain measures be taken
which would incorporate proposals that would make for a further convergence
of the planning and evaluation of enterprise performance.
Every measure plannzd in the domain of technical progress, not only those
_ related to organizing the production of new products, should be evaluated
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in value terms (applying the relevant standarda) and ehould be included in
the total volume of sales (both in the aseignment and in the report). The
value of all ,jobs of an industrial nature, which would also include general
overhauls, modernization of an enterprise's equipment and vehicles done by
the given enterprise's production personnel proper, would be included in
~ the volume of sales in accordance with the procedure now adopted. We pro- _
poae that the range of ~obs of an industrial nature whose cost is included
in conanodity output (eales) be expanded so as to include the cost of per-
forming all assignments for new technology. If we include the cost of ef-
_ forta to modernize equipment, why not include in the volume of sales t't?e
cost of creating a new manufacturing procesa whose application in subse-
quent years will make it possible for the enterpriae to obCain a consider-
ably greater profit than use of the equipment that has been overhauled or
modernized? The cost of pro~ecta related to each item of the plan for new
technology should moreover be taken into account independently, and not
mere~.y as part of the sum total of pl.antwide or shopwide expenditures.
Then the actual volume of commodity output could be determined so as to
take into account performance of assignments for scientific-technical prog-
ress, in just the same way as fulfillment oi assignments for deliveries in
accordance with contracta and 3ob orders. Nonfulfillment of an assignment
_ arising out of the plan for technical progress, analogous to any delivery
unfulfilled, means nonfulfillment of the plan for the volume of commodity
output. T:zus assignments for product deliveries and for technical progress
in effect come together within th~ framework of the unified economic plan,
and the plan of scientific-technical progress is the most important section
9f the technical, industrial and financial plan and of plans of other types
and at other levels.
The volume o~ commodity output ahould include the coet of new products, ex-
perimental prototypes, efforts to retool the production operation and to
asaimilate new manufacturing processes, pilot and experimental operations
after deduction of the cost of the equipment purchased which is used to
fulfill assig;.iments for application of n.ew technology, which are envisaged
in the group of indicators for capital construction and in new manufactur-
- ing processes to be assimilated. Thue the volume of sales will no longer
~ be an expreasion of gross output, but of fulfillment of the plan for the
specific products list.
If any ~ob related to new technology is not performed, it is deducted in
quantitative value terms from the planned assignment for the volume of
_ sales, and then nonfulfillment of the assignment for any item on the list
(one of which is new technology) will signify nonfulfillment of the plan in '
general and will have an impact on indicators of labor productivity, prof-
itability, and so on.
It would be wise to include the cost of all these efforts in the volume of -
salea, not limiting this group to a single source of financing--the Unified -
Fund for Development of Science and Technology.
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The process of setting prices on new technology has great importance to
economic stimulation of scientific-technical progresa.
The price of a new produc;t should be advantageous both to the manufacturer
and tfl the ~onaumer. The specific cost per unit of the useful benefit must
decrease--that is one of the basic requiremeate which new technology must
meet. Thia requirement waa reflected in the decieioag of the CPSU 25th
Congreas and has been put in practical terme in documents on methods. But
its fulfillment is not always being aanitored by legal aervices as yet.
The requiremente of policymaking bodies are not alwaye being followed out
in the norniative documents of mi~istriea and departments. If the use of -
prices to stimulate scientific-technical progress is to be made more effec-
tive, certain changes must also be made in the methodology for price deter-
mination; to be specific, the present procedure for determining the size of
incentive supplements and ceiling prices needs to be improved.
In determination of the size of the incentive supplement, which is calcu-
lated in fractions of profitability, preference has so far been given not
to the most efficient products, but to products with high productian cost,
since in practice profitability of a particular product is determined by
the ratio of the profit to ite production cost. It would be advisable to .
determine the size of the premiwn in percentages of the economic benefit to
the national economy. Proposais to that effect have been worked out in the
Economica Institute of the USSR Academy of Sciences.
Calculation of the ceiling price on a new product now takes into account
the upper limit of that price. but thia creates conditiona for manufacCur-
ing a product which is not advantageoue to the coneumer. What do we have
in mind? As we know, the price's upper limit aignifiea that level of the
price where the new product is equal in efficiency to the one being re-
placed from the consumer's atandpoint. If we take into account the addi-
tional coets of preparing the production of the new technology for accep-
tance, then actually the upper limit o� the price makes the new product
disadvantageous for the consumer.
The method of determining the ceiling price must be improved in such a way
as to guarantee that an appropriate share of the benefit to the national -
economy is obtained both by the manufacturer and also by the consumer aad
so as to prevent the creation and production of inefficient technology.
The ceiling price therefore should be determined not on the basis of the
= upper limit of the price, but on the basis of its lower limit, which takes
into account reimbursement of ~ustified costs of producing the product and
affords standard profit to cover formation of economic incentive funds. If
the maximum posaible fraction of the benefit to the national economy which
_ can go to the mr~nufacturer (the minimum fraction of the benefit necessary
to the consumer ~rill remain) is added to the lower limit of the price, then
we will ohtain the size of the ceiling pric.e.
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Compensation of the higher coste of new technology ahould even now be made
out of the Unified F~nd for Development of Science and Technology. But if
we are to provide a sound solution to the queation of full compensation of
enterp~iae coste from the YeFRNT, we must be able to determine the level of
those costs that was actually neceasary. We cannot make reimbursement with
the funds of the YePRNT for losses reaulting �rom bad management. For that
reaeon the list of costs for induetriee and for apecific types of technol-
ogy should be revised, etandard times anci amounts of compeneation should be
: established for products and manufacturing processes that ensure achieve-
ment of equal profitability between the new technology and the tec~nolo~y
being replaced (methodological basea for calculation of the norma are given
above) .
Reduction of profit, the drop in profitability, and consequently the related `
loases on incentive funds should be restored for each unit of the new prod-
uct through compensation of higher costs from the YeFRNT, which is formed
at sound rates. Enterprises which have compensated the higher costs will
obtain standard profit for each new product (eatablished in the price for
the period of large-scale mrinufacture), and the incentive premium will cre-
ate certain advantages for them during the period of putting the new tech- -
nology into production.
PuCting new technology into production reduces the volume of sales, and
this means losses on incentive funda. The higher labor intensiveness of
new products and preparation of production for output of the new technology
reduce the number of new producta as compared to the volume of output of
the products being replaced which could have been obtained using the avail- -
able capacitiea of the machine Cool, the shop or the enterprise.
Higher labor expenditures should be taken into account in the production
plan and in planning the wage fund, and.losses on incentive funds are reim-
bursed to thE tuterprise from funds earmarked for this purpose--from the
YeFRNT or the centralized incentive fund. In this connection it is neces-
sary to know precisely in what amount and over what period enterprises
should be reimbursed losses on incentive funds. This also requires having
a method for determining losses and the standard rate at which they are to
be reimburaed.
The possibility which has now been provided for of reimbursing loases on
incentive funds of enterprises which successfully put new technology into
production from reserves of economic incentive funds cannot be successfully
- realized because these reserves perform the task of a compensatory mecha- ,
nism regulating formation of funds as a function of the performance of the ~
- induatry as a whole.
We must look favorably on replacement of previous sources for financing new
technology with the YeFRNT. Financing has now become more orderly. Payment
_ for completed pro~ects or ma~or phases instead of allocating funds to sup-
port scientif3c research arganizations has had a substantial impact toward
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improving the reaults of R&D pro~ects and toward shnrtening the time it
takes ~o complete them. At the same time certain ahortcomings have turned
u~ in the actusl practice of forming and ueing the YeFRNT.
Firet, thia fund is not formed on the baeis of atable rates nor in a plan-
ned volume. The rate of tranafers to the YeFRNT of the electrical equip-
ment industry hae varied as follows from year to year: 13 percent of
- profit ia 1969, 16.6 percent in 1972, and 32 percent in 1975. Enterprises
have al8o had an unequal share in creating this fund: the tranafere have
been made at different rates ranging from 3 to 87 percent.
Second, both in heavy industry and also in the electrical equipment indus-
[ry the share of the YeFRNT used for the costs of putting new technology
into production is decreasing, and the relative share of outlaqs for R&D
r pro~ects is increasing. In the Ninth Five Year Plan the share of unfin-
ished R&D projects financed from the YeFRNT incr2ased 2.6-fold in the elec-
trical equipment industry, while at the same time the volume of completed
~ projects increased only 1.4-fold over that period.
It would seem wiae to make a strict division of the resources of the YeFRNT
on planning principles with respect to their purpose and to separate re- -
porting into two parts: funds used for R&D and funds earmarked for putting
- new technology into production. The ratio between theae parts should be
determined by the tasks in developing the industry. Moreover, there is a
need to improve the method of usiag the YeFRNT.
The decree of the CPSU Central Commo3.ttee and USSR Council of Ministers on
improving the economic mechanism calls for formation of an YeFRNT in a11
industrial ministries and departmenta conducting efforts to create new prod-
ucts and manufacturing processes. Implementation of this principle requires
economic substantiation of the procedure fvr formation of thie fund, the
drafting of norms and standards and legal regulation of the enpenditure of
funda so as to take into accouat the experience of using the YeFRNT in cer-
tain industries.
Full compensation of higher costs and reimbursement of the enterprise for
lossea on incentive funds related to putting new technology into production
merely place it in equal economic conditions with those manufacturing prod-
ucts put into production previously. But additional efforts are always re-
quired to put new technologq into production. In order to motivate the
production collective to develop new technology and put it into production
a�ter compensation of the higher costs and reimbursement of losses on in- -
centive funds, this collective must be additionally rewarded both from the -
material incentive fund and also from apecial fundso
As a function of the complexity and technical level of the product and the
capital-~w~nrker ratio of the eaterprise, between 10 and 25 percent of the
material incentive fund is now spent in connection with development and ap-
plication of ne~a technolagy. Engineers and technicians of design and
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process engineering subdivisions, of inechanization and automation divisions
involved in developing new products and manufacturing processes and in per-
fecting equipment are paid bonusea on the basis of the overall indicators
of the enterprise's economic per~=ormance, though they perform the same work
as staff inembere of ecientific research institutea and design bureaus who
are paid incentives from apeci8l bonus funds for new technology. Indica-
tors of technical progrese ought to be used in awarding bonuses to these
and other specialists: the ecoaomic benefit and the technic~l level of new
products and manufacturing proceases.
The special system of ince~ntives for advances in the domain of scientific-
technical progress should remaia solely for efforCs performed in the inter-
est of the entire industry or the entire national economy. Material incen-
tives paid to personnel of industrywide scientific research and design or-
ganizations are part of this syatem. The experience of the electrical
equipment industry will prove useful in working out auch a system. Forma-
tion of incentive funds in this industry is related to the application of -
new technology. Profit has become the principal source of incentive funds
_ in this industry, and the rates of the transfere are linked to the economic
benefit of the new technology.
The procedure for awarding incentives is the most finished element of the
new system for planning3 financing and economic stimulation of the efforts
related to Che creation of new technology and to putting it into production.
_ But for all the common principles governing application of this syetem in
various industries, we note a certain difference in the procedure for form-
ing incentive funds. These differences are moreover to be explained, in
our opinion, mainly by the poor legal preparation of the documenta. Cer-
tain experiments in thia area conducted on an experimental basis and with-
out proper legal reguiation are acquiring permanent statua at the end of
_ the experim~nt on a nonauthorized basis, but this is neither economically _
nor legally ~ustified, and it has no normative basis.
We need a unified normative act for all industries which are undergoing con-
version to the cost-accounting system for organiz3ng pro~ects to create new
technology, put it into production and apply it on the basis of job orders.
Such a document is being drafted, and its content should strictly regulate -
the conditions for formation of economic incentive funds.
We wil"1 sum up what we have said.
Enterprises and organizations can be motivated to perform pro~ecta related
to new technology rapidly and competently only by interrelated application
of all economic levers and the entire integrated system of planning and
economic incentives that uses the methods of plannin~, price sett3ng, fi-
nancing and incentivea.
- The system's operation should begin,with planning. All asaignments to de-
velop new technology and put it into production are included in the topic
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plans of acientific reaearch, design and process engineering organizations
- and in the appropriate aectione of technical, industrial and financial _
plans of enterprises. Differentiated rates ahould be used in aeeing that
the enterpriee has the production capacities, manpower and other resnurces
to fulfill asaignments for new t~chnology and to perfona all ite other ac-
tivities.
The price is an instrument of planning. Therefore the method of determining
pricea of new products for induatrial and technical purposes ahould give
preference to new technology in computation of such indicators as the vol-
~sme of sales, profit and profitability. The use of premiums, deductions
and ceiling prices should create advantages for manufacturers of new tech- ~
- nology over enterprises which $re mar~ufacturing products put into produc-
tioa long since. Consumers of new technology should be guaranteed that
they will derive a portion of the economic benefit through application of _
ceiling prices and adherence to the requirement that the coat per unit of
useful effect is lower when the price for the new teehnology is set.
The manufacturer's costs in the initial period of putting the new technol--
- ogy into production are usually higher than those taken into account on the
costing sheet when the price is determined. To eliminate the adverse ef-
fect of thia period on indicators used to evaluate the performance of en-
terprisea, the mechanism of compensating the higher costa is uaed. The
manufacturing enterpriae receives compensation for the higher coats from
specfal funds (YeFRNT) for each unit of the new product, so as to enau~e =
that atandard profit incorporated in the price and in the incentive premium
- is obtained from the very first product.
Aside from compensating the higher costs for each new product in the period
_ when it is being put into production, the enterprise should be reimbursed
loeses on incentive funds related to reduction of the volume of output dur-
ing that period as compared to the volume which could have been obtained
producing the products manufactured previously. The source of the reim-
bursement should guarantee standard replenishment of incentive funds.
The effect of these elements of the integrated system needs to be strictly '
interrelated both in terms of the size and also the time set for each type
of technology. In each individual period of putting new technology into
productioa a comparison of standard costs and results whose stability is
ensur~d by applying the special funds will make it poss~ble to determine
the actual contribution the collective makes to the cause of acientific-
technical progreas.
Use of the plan, the price and the compensatory mechanism makes provision
for entarprises manufacturing new technology to obtain higher profits than
- those manufacturing products put into production long since. A portion of
this profit goes to economic incentive funds. The formation and distribu-
tion of incentive funds is t~ie task of the last e].ement in the integrated
system--material incentives paid to workers for advances in the domain of
scientific-technical progress.
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In this case tncentives are paid both from the material incentive fund, ~
which is formed in accordance with the results of economic activity, and
also from special funds earmarked for payment of incentives for creation of
new technology and for putting it into production. Distribution of the re-
:sources of the incentive fund among enterprises, organizations and ~�ndivid-
ual workers should take into accouat their contribution to fulfilling as-
signmenta for new technology. The aize of bonuses and awards should be set -
so as to take into account indicators reflecting the economic benefit and
the level of the technology crz~~ted.
The smo~th functioning of all the elements of the aystem for planning and
stimulating scientific-technical progress can be guaranteed only if there
is the proper economic substantiation of the syetem's mechanism and legal
formulation of the normative documente, whose number should be reduced to a _
minimum and whose content must not allow differing interpretations of iden-
tical elements.
The scholars of the USSR Academy of Sciences are doing a great ~eal of work
in this area. 'Ma.ny institutes of the academy, among them the Economics In-
stitute (the head organization coordinating scientific research pro~ects in
the field of the economic problems of scientific-technical progress), the
Central Mathematical Economice Institute, and the Institute for Social Wel-
fare and Economic Problems are concerned with the economic grnblems of cre-
ating new technology.
The scholars of the academy are giving important aid to Gosplan, the State
Comc,ittee for Science and Technolagy, the USSR State Committee for Labor
and Social Problems in drafting documenta that define and regulate the ac-
tivity of minietries, departmenta, associations, enterpriaes and organiza-
tiona in the domain of scientific-technical progress. A great deal of work
ia being done under contracts concernins creative cooperation to provide
_ methodological and methoda assistance to ministries, enterprises and acien-
tific research organizatians with respect to perfecting the procedures used
to plan, finance and economically atimulate efforts to create new technol-
ogy. The sympoeium devoted to the economic and legal questions of stimulat-
ing scientific-technical progress, which the Institute of Government and
Law and the Economics Institute held in 1979 by decision of the Presidium ;
of the USSR Academy of Sciences has playsd a definite role in this activity.
The tasks set by the 25th CPSU Congress related to improving th~ mechanism
�ox planning and stimulating sci~ntific-technical progrese can be success-
_ fully performed only through the ~oint efforts of scientists and practi~
tioners--economists and legal experts.
COPYRIGHT: Izdatel'stvo "Nauka," "Vestnik Akademii nauk SSSR," 1980
7045 ~
CSO: 1820 -
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INTRODUCTION OF NEW TECHDiUT,OGY
CRITERIA FOR EVALUATING NEW TECHNOLOGY EXAMI;+TID
- Moscow VOPROSY EKONOMIKI in Russian No 2, Feb 80 pp 56-66
[Article by A. Koshita: "Criteria for Etiraluating Ef~ectiveness oP New
Technology"]
- [Text] Under the conditions of developed socialism, ever new demands axe
placed upon the methods a.nd structure of economic management, on the tech- _
nical level of production, and on the quality of the produced product.
The Decree ~f the CPSU Central Committee and USSR Council of Ministers
"On Improving Planning and.Strengthening the Effect.of the Economic Mech-
anism on Raising Production Efficiency and Work Quality" definea the areas
of further economic growth on the basis of the intensive development of
production. Among them an important role is given to accelerating scien-
tific and technical progress, to improving all work in the area of capitel
construction, and on this basis, optimizing the ratio between expenditt;ses
and results for the purpose of increasing the economic effect of manufac-
turing and utilizing new equipment.
A solution to the~problem of raising national economic efficiency of new
equipment, in our opinion, cannot be reduced merely to ensuring a.n exceed-
ing of the conswner's savings over the expenditures on development and man-
- ufacturing, regardless of the degree and measure (the absolute total and
percentage) of such an exceeding. For this reason it is.important to es-
tablish the optimality of the manufacturer's expenditures on achieving the -
_ expected economic effect from employing the new equipment. In other words,
it is essential to establish technically sound expenditure rates for ob- _
taining the designated improvements in the technical and economic operating
parameters oP the neK products.
The efficiency level of new equipment and capital investments laxgely de-
- termines the growth rate of production, and the methods oP calcuZating
this define the criteria for determining the national economic effective-
ness of the decisions to be taken to build the pro~ects, and to develop,
manufacture and employ new implements of labor, automation, control sys-
tems and other types oY equipment. The efficiency calculations for capital �
investments and new equipanent, regardless of the advances made by economic
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science, require further generalization of practice as well as an improve-
ment and theoretical basis. An important question in the theory, method-
ology and practice of determining national economic effectiveness of new
equipment is the question of to what degree this equipment should provide
a rise in the consumer's savings in comparison with an increase in the ex-
penditures on its production e,s a whole.
= The calculated economic effect from the use of the new equipment as stated
by the developers is accepted as the basis for ~udging the results of the
activitiea of sectorial science and the design organizations and assoc~a-
tions (enterprises). This effect is one of the crucial factors in the
setting oP wholesale prices and figuring the tota7. profit for the new arti-
cles, and ultimately serves as a source for creating the economic and ma-
terial incentive funds of the collectives engaged in the development, de-
signing and introduction of new products into industrial production. The
share of the effect channeled into the economic and material incentive
funds is greater the larger the calculated effect stipulated by the de-
velopers of the new equipment. Here a rise in the effectiveness of the end
national economic results and an increase.in the income o~ the state budget
should outstrip the growth of the economic and material incentive funds of
the developers and manufacturers of the new equipment. However, in prac-
tice the growth rates of the caleL~lated effect given by the manufacturer
of the new equipment are far Prom always charac~eristic of the growth
r~,tes of the real income of the national econo~y. The calculated effect of
employing new equipment; without:a comparison with the increased expendi- ~
tures of the manufacturer for achievin~ the effect, does not reflect its
end national economic effect.
An analysis of the normative doc~ents for setting economic effectiveness
of production and the use of new implements of labor indicates that a solu- -
tion to the question of putting any new equipment or machine into series
production is taken by the developers and manufacturers, as a rule, even
with a minimum exceeding of the effect of its use (for 5 and more years)
over the production expenditures. Here the economic effect of the new
product over several years is compared with the particular expenditures on
its creation and production, since the ad,justed expenditures do not include
the expenditures on development, the establishing of the production methods
and the development of the new article up to the second (and in a number
of instances, the third) yeax after the start of series production. For
_ this reason, the real effect from the creation and use of new equipment
_ can be obtained by society in observing certain proportions in the exceed-
in6 of results over the expenditures on the given equipment.
As is known, the economic effect of new implements of labor in use ov~er an
extended time is determined by the formula:l
1See "Metodika (Osnovnyye Polozheniya) Opredeleniya Ekonomicheskoy
_ Effektivnosti Ispol'z~vaniya v Narodnom Khozyays~ve Novoy Tekhniki, _
Izobreteniy i Ratsionalizatorskikh Predlozheniy" [Procedure (Ba,sic Provi-
sions) for De~ermining the Economic Effectiveness of Using New Equipment,
Inventions and Rationalization Proposals in the National Economy],
Izdatel'st~�o Ekonomika, 1977, p 8.
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E _ [Z � B2.Rl+~n + ~Ii-I2)-On(K2-Kl~ . -
1 - Z2] A2~ ~1)
B1 R2+On R2+On
where E--the economic effect ad~usted ~or the year Yor the ~ervice life
(to obsolescence) from the production and use of new equipment, that is, _
the r.ational economic effect, in rubles; Z1 and Z2--the ad~ usted expendi-
tures oP a unit for, correspondingly, the base and new product; Bi, B2--
the annual volumes of product (work) produced in using a unit of, respec-
tively, the base and new product, in physical units; B2/B1--a coefficient
considering a rise in the productivity of a unit of the new means of labor
in comparison with the base (a); R1 + pn/R2 + On--a coefficient considering
a change in the service life of the new means of labor in comparison with
the base (s); R1 and R2--the share of deductions from the balance sheet
value for complete replacement (renovation) of the base and new means of
labor (calculated as amounts inverse to the serviie l~ves of the products -
and determ.ined considering their obsolescence); I1, I2--annual operating
outlays of the consumer in his using of, respectively, the base and new
_ means of labor calculated for the volume of product (work) produced using
the new means of iabor, in rubles (I1- I2= AI); Ki and K2--the ancillary
capital investments of the constmmer ~(capital investments not considering ~
_ the value of the designated means of labor) in using the base and new
means of labor in a calculation for the vo}ume of product (work) produced
using the new means of labor, in rubles (K2 - Ki = aK); Ori -the normed effi-
ciency coeY~icient (0.15); A2--the annual volume of producing the new -
means of labor calculated per year (in pY~ysical units).
A new implement of labor is considered sufficiently advantageous for
society with at~y positive result in calculating the economic effect using
formula (1), although in a number of instances only minimum efPectiveness
is achieved corresponding to ita normed coefficient (On = 0.15). Such an
approach to evalua.ting economic efPectiveness of the new implements of
labor means, in essence, that individual develope~s and manufacturers are
not oriented at achieving a maximum national economic effect, considering
- as sufficient a minimwm exceeding of the increase in the effect for the
cons~er (E~} of the neW equipment over the increase of the ad,justed expend-
itures (Z2 - Z1), that is, that the ca.lculated effect of producing and em-
_ ploying the new equipment be greater than zero (E > 0).
The inadvisability of producing new equipment the economic effective of -
which insignificantly exceeds the normed coefficient of effectiveness (On)
can be shown from the following exa.mple. The productivity (a) and dura-
bili.ty (S) of a new ma.chine tool (N) are, respectively, 2- and 1.5-fold
greater than the machine tool being replaced (B) With ad~usted expenditures
(Z1) of 15,000 rubles. Over a period of 5 years of operation, the new
~ machine tool provides the cons~er with a savings in current operating
expenditures (~I) and ancillary capital investments (AK) totaling 26,000
- rubles. Here the manufacturer pro~ ects that the ad~usted expenditure~ oP
the new machine tool (N) are 70,500 rubles. In accord with the calculations
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using formula (1), the economic effect (E) of the new machine tool (N) over
5 years of operation will be 500 rubles (E = Z1 �a � S+ pI + pK- Z2 = 15� 2�1. 5
+ 26 - 70.5); the increase in the calculated effect of using (E~) the new
machine tool (N) is 56,000 rubles (E~ = Z1 � a� S+ ~I + OK- Z1 = 15�2�1.5 + 26 _
- - 15). -
As we see, for a rise in the effect for the consumer totalin~ 56,000 rubles
- in using the new machine tool over 5 years, the manufacturer "takes" from .
society even during the current year an additional 55,500 rubles in the _
form of material, energy, labor and financial resources for producinQ the _
- machine tool (N), not counting the expenditures of the same resources for
the development, preparation and introduction of it into series production, ~
as well as for developing the production of new types (shapes) of inetal and
preassembled articles. With such a ratio of the expenditures and results -
in producing and using new equipment (if the new equipment does not provide
a fundamentally different effect, that is, does not satisfy qualitatively
new needs of society), the national economy not only does not receive an
additional savings, but over the 5 years even loses in comparison with a
situation where the designated resources, including expenditures on re- -
search and development, were used for expa.nding the production cf a pre-
viously developed product with a minimum effectiveness of 15 percent.
The introduction of a competitive selection of the most effective designs
for all models of new (modernized) machines, equipment and devices would
also help tc raise the effectiveness of new equipment being developed,
along with the above-indicated necessity of' optimizing the ratio of expend-
itures and results. The development of the narrow specialization of scien-
tific research and design orgeniz~,tions ev~n within one sector, a].ong with
numerous positive results, has led to a situation where the development of
new (modernization) end designs of imp].ements of labor, with the exception
of preassembled units (parts), in practical terms is the result of the -
creativity of specialists in one department (subdepaxtment) of an insti-
tute or design bureau. As a rule, a separate specialized institute (de-
sign organization), in turn, is concerned with the development of pre-
assembled axticles.
= This leads to a situation where, in develoging new machines and equipment
or their complexes (systems), use is made of the only (or at best, extreme-
ly limited number) existing design of the preassembled products (units)
which are not always suitable for tne machines being developed, and for
this reason do not isprove their design and operating performance. Such
facts are often encountere3 also in modernizing the implements of labor _
for which production has been halted on previously manufactured preassembl-
_ ed articles, while the advantages of the parameters of new standaxdized
articles are not employed in the final machines.
The shortcomings of the princi~le of ~udging the effectiveness of new equip-
ment from its normed level have already.been commented on in economic lit~
erature. In this context, the opinion has been voiced that for raising'the
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degree oY comparability between expenditures and results, and for strength-
eninP the relationship between the national economic effect and the econom-
ic accountability one in determining the economic effectiveness of new
equipment, it is advisable to proceed not from the normative amount of
effectiveness On = 0.15, but rather from the level of the long-range (R~)
or the actusl profitabi~ity (Ra) achieved in ~the sphere of employing the
variation oP new equipanent being designed.2 If the actuFil proPitability in
the sector exceeds 15 percent, then the use of a new implement of labor
i which produces an effect only on the normative level (15 percent) and does -
not improve the achieved economic indicators ~f the sector, is also not
sufficiently effec~ive frott the viewpoint of the user. In such an instance,
an orientation to the actual or long-range profitability level, and not the
normative ~^oePficient (On) is ~ustified.
However, an evaluation of the effectiveness of new articles for the con-
sumer in terms of the lcng-range proYitability (R~) o~ their use instead
of the normed coefficient (On) does not solve the problem in essence, a1-
though here the condition will be met that On < R~ > Ra, that is, the level
of the long-range profitability is higher than the achieved (actual), and
also higher than the normed coePficient for the effectiveness of the new
equip~ent. The use of the indicator oP actual (Ra) or even the long-range
(R~) profitability as a criterion of effectiveness can ~ustif`y the develop-
ment,.production and use of insufPiciently effective new products, if the
products being replaced were loss or low-profit. But the main thing is
that the problem is not solved of an optimum, most effective ratio for re-
sults and expenditures as a whole for the national economy. For this
reason the achieving oP simply greater profitability on the basis of em-
ploying the new equip~ent ~han was achieved by the old, previously develop-
ed equipment, but also a slightly greater savings per unit of expenditures
in con~arison with the normative coefficient On = 0.15 cannot be the aim of
designing ne~r equip~ent for achieving the highest effect with least expend- -
itures. In our opinion, the ensuring of an optimality of expenditures fbr
the creation a.nd output of new equipment, in comparison with the expected
effect of its use, is possible by a differer.t method, and namely by sound
norming of the expenditure proportions of the ma.nufacturer for obtaining
the calculated se,vings by the consumer in one-shot a.nd current expendi- -
tures. The normative coefficient (On) here is kept as ~ general criterion
for the mini.mum acceptable I.evel in the effectiveness of using new equip-
- ment, but cannot be a measure of optimality for the ratio of results and -
expenditures in assessing the effectiveness of production and the use oP _
. new equipment.
Formula (1) for the calculation of the annual economic effect merely shows _
the component elements of the effect for the consumer as.a result of em-
ploying the new equipment, but does not determine the optimum structua�e of
2See L. Shevchenko, "Effectiveness, Price and Obsolescenae of Equipment," ~
= VOPROSY EKdNOMIKI, No 6, 1979, pp 22-33. ~
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savings and additional expenditures on achieving it. Here the components
of the effect are primarily the changes in one-shot expenditures (Z1�oc� S
- Z1), current expenditures (I1 - I2) and ancillary capital investments
(K2 - K1) of the consumer. It is advisr~ble to divide the savings in cur-
rent operating expenditures of the consumer (~I= I1 - I2) into the savings
of current eXpenditures oP the first type (pIl) which is a direct conse-
quence of a rise in productivity (the volume of work) oz" the new means of -
labor (a) and its duraeility (S), and the second type of savings in cur-
rent expenditures (pI2) formed as a result of an improvement in the other
qualitative technical and operating characteristics (parameters) of the
new means of labor.
The first typ~ of savings in the current expenditures of the consumer (~I1)
includes primarily the savings in the wages of workers due to a rise in pro-
ductivity, routine maintenance and repairs, and so Forth. The second type
(~I2) can include the savings obtained by the consumer due to a change (im-
provement) in such parameters as a rise in the efficiency of the units, the .
cos f o� electrical equipment, a reduction in the no-load losses (for trans-
formers), a reduction in thE proportional consumption rate of fuels and lub-
ricants (in using internal combustion engines), ~,nd so forth.
The greatest effectiveness of additional expenditures by the manufacturer
on obtaining the expected savings is determined depending upon the type of
savings from the use of the new me~.~~s of labor. This, ir~ turn, makes i~
possible, with limited expenditures, to achieve the greatest effect. The
- possibility of a limitation, that is, a norming of expenditures for obtain-
_ ing the correspor,ding total savingsz stems from the essence of the method- ,
ological principles in determining the economic effectiveness, and is sub-
stantiated by the resulta of an analysis and generalization of the prac~ice ~
of creating and using a new product. ;
_ The necessity of limiting (in a minimum amount) the expenditures of all -
types of resources to ensure the highest effectiveness is paxticularly ur-
gent in the selecting of optimum variations for the design of new machines ~
by designers (production engineers). In this stage of developing the new ~
equipment, its absolute and relative (proportional) ec~~norr{~r and national
' economic ePfectiveness are determined. A substantial savings in material, ~
la'~or and financial resources is achieved precisely at this stage, when
the questions are settled of the technical level, the quality a.nd progress-
iveness of the new equipment. As for the stage of manufacturin~, that is,
the possibility of providing a savings of resources by improving the manu-
facturing methods for the new equipment, and using the internal production ~
reserves, this is limited by the design of the new machine, by its advan- ~
tages and shortcomings. For precisely this reason the determining of the ~
_ national economic effectiveness of new equipment using the entire arsenal
of inethods for calculating the useful effect and the limiting of expendi-
tures for achieving this is an essential condition for setting the speci- ~ ~
fications for the designir.b of new products. -
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In designing new equipment with greater productivity (a) and durability
(S), a change in the manufacturer's expenditures should be directly depend-
ent upon a rise in the designated par~meters. The establishing of such a
directly proportional dependence will also be the limit for the growth of
the designated expenditures. In procedural terms this can be set proceed-
ing from the conditions of raising the econott~y of the new design. With an
increase in the size of the new machines, that is, with a rise in their
unit capacity (productivity) and durability within the limits of obsoles- .
cence, the proportional expenditures per unit of the designated paxameters -
should not rise but rather decline. This can be se~n from the results of
_ analyzing numerous data on the dynamics of the change in the proportional
ad,justed expenditures per unit of capacity (productivity) Por such uniform
articles as all types of internal combustion engines, electric machines,
turbines, turbo- and Y~ydrogenerators, and so Porth. For the consumer to
achieve a savings in the one-shot expenditures within a certain amount, on
the basis of employing a new machine, the manufacturer cannot design an in-
- crease in the same volume for the ad3usted expenditures on producing the
_ given machine. Although frequently this may be encountered in reviewing
the calculations made by manufacturers for the effect of new products.
The first premise for the optimality oF a ratio in the one-shot expendi-
tures and the expected results can be formulated in the following manner:
the increase in ad~usted expenditures for producing the new means of labor -
of only increased productivity (AZa) or durability (~Z~) cannot exceed the
increase in the potential savings of one-shot expenditures for the consumer.
This can be expressed by the equation:
~Za + ~ZR ~ Z1 � a� S- Z1, (2)
wher~ Z1--the ad~usted expenditures for producing the implement of labor
to be replaced; ~Za, ~Z~--the increase in ad,~usted expenditures for the
manufa.cturer on raisiug, respectively, the productivity and durability of
a new implement of labor in compaxison with the analogous parameters of
the one to be replaced.
An equality in both parts of formula (2) is the limit for the increase in
the ad,justed expenditures of the manufacturer on raising the productivity
- and durability of the new implement of labor. However, optimality is
ac hieved in instances when a savings is provided in producing a new imple-
ment of.labor of increased productivity and durability (the left-hand part
of this equation is smaller than the right-hand). Under this condition,
= equation (2), along with reYlecting the li.m~ting of the opti.mum ratio of
expenditures with results, characterizes the possible (potential) savings
for the consumer in one-shot expenditures as a consequence of using the
new implement of labor, and the real savings will equal the actual positive
result. The observing of this premise for the optimality of the ratio of _
- expenditures and results on producing and using new equipment will make it
- possible to ensure not only high econo~y in employing a new product, but
also a progressive desi~ of the given equipment and manufacturing method,
and as a consequence of this, a savings in all types of resources.
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When the conditions of the first premise are not observed, the proportional
i.ndicators for the economy of the new product, as a rule, worsen in com-
parieon with the indicators of the one being replaced, and this ,jeopardizes
the progreasiveness of ita design, manufacturing methods or the reliabil-
i~cy of the planned expenditures on producing the new products. Thus, the
- productivity (a) of a new high-frequency unit (heater) model VChD2-265/81
- is 1.8-fold higher than the productivity of the model being replaced.
Durability (s) and the other operating parameters of the new unit are the
same as the one being replaced. The ad~usted expenditures for the product
being replaced (Z1) are 1,500 rubles. With a rise of 1.8-fold in the use-
ful effect of the new high-frequency unit as its productivity (a) rises,
that is, with the growth in the potential savings of the consumer in one-
shot expenditures calculated in accord with the right-hand pext of formula.
- (2), they are 1,200 rubles (Z1 � a� s- Z1 = 1,500 ^ 1.8�1.0 - 1,500 =1,200),
while the additional ad~usted expenditures (~Za) on the growth of the pro-
- ductivity of the VChD2-265/81 in the first year of series production, ac-
cording to the initial design of the manufacturing plant, equal 1,900
_ rubles, including 1,300 rubles due to the additional expenditures on ma-
terials and purchased semifinished articles. The total amount of the ad-
,justed expenditures (Z2) for the new unit is 3,~+00 rubles (Z2= Z1 + pZa =
- 1,500 + 1,900). Consequently, ~Z2 > Zla - Z1.
This means that for the new high-frequency unit, they did not observe the
conditions of the first premise for the optimality of expenditures and re-
- sults. In other words, the manufacturing plant, in improving ~ust one
parameter of the unit (increasing its productivity by 1.8-fold) provides
for a rise of more than 2.2-fold in the ad~usted expenditures (3,~+00
rubles:1,500 rubles). Such a ratio of expenditures and results was ~usti-
fied by the plant by the Pact that for the given product a positive total -
� savings is achieved as calculated according to the above-given formula (1)
for determining the economic effect.
An analysis has shown that the overstating by the manufaeturer of the plan-
ning calculations for the ad,justed expenditures on the new high-frequency
unit was caused by a rise in the proportional metal and labor intensiveness,
and led to an un,justified worsening of its econo~y. Thus, the full costs
of a unit of productivity and weight of the new unit were, respectively,
58.4 rubles and 5.1 rubles, and for the unit being replaced, 35�5 rubles
and 4.3 rubles, that is, they rose by 1.6-1.9-fold. Here the proportional
val~ae of the materials (including the purchased semifini~hed articles) per
unit of productivity and weight of.tr.e new unit increased, respectively,
by 1.2-1.4-fold, and the total labor expenditures by 1..4-1.6-fold.
The desi~ calculations of the manufacturing plant were made in terms of
the conditions of beginning the development of production without consider-
ing the requirements of the develop~d production process for series manu-
~'acturing of the new unit. From the results of the analysis, the manufac-
turing plant made corrections in trie initially submitted calculations.
The ad~usted expenditures (Z2) Por the VChD2-265/81 unit were increased
_ proportionat,el,y to the growth of its productivity:(~Z2=Zla-Z1=1,200 rubles). '
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There is reason to expect that under the conditions of series production
Por the new unit the actual expenditures will be ].ess than the design ones.
This stema Prom the reliable pattern of a subatantial dec].ine in expendi-
tures under the conditions of series production in comparison ~rith the
initial period.
The use of individual types of new implements of labor with increased pro-
ductivity and durability causes a change (growth) i~n the e.ncillary capital
expenditures (OK) for the consumer. Ultimately this reduces the fncrease
in the useful effect of the new implements by the amount of AK. For such
new i.mplements of labor, the ad~usted expenditures of the manufacturer on -
incr~asing productivity (pZa) and durability (aZg) should be less or at
least equal to the possible savings oP the consumer in one-shot expendi-
tures (Zla�S - Z1) as reduced by the total increase in the related capital
investments (pK). An essential consequence of the growth of productivity
and durability o~ new equipment is a decline in the first type of current
- oparating expenditures (DIi) for the consumer as a result of sauings in
the Wage fund of production workers (as a consequence oP the growth of
labor productivity), the saving of production energy, expenditures on
routine maintenance, repairs, and so forth.
If, with an increase in the productivity (the volume of w~rk) and the dura-
bility of a new implement of labor, in comparison with the one being re-
placed, for example, by 2-fold, the consiuner doubles the number of workers~
and their total wages, as well as the total expenditures on production
energsr, routine maintenance and repair of the new implement of labor and
. other related expenditures, such equipment, as a rule, cannot be consider-
ed new or progressive since it does not provide an effect in use. And a1-
though this savings o~ the conswner (oP the first tyge) is often a calcu--~
lated one and not reflected in the normative and technical specifications,
the rise in the productivity and durability of the new equipment cannot
help but lead to the f~rmation of a savings for the consumer. Thus, a
change (reduction) in the first type of operating expenditures (~I1) fcr
the constm~er is not only a consequence but also an essential condition for
economic effectiveness from the growth of the productivity and durability
_ of new implements of labor.
- From this stems the second premise for optimality in the ratio of results
and expenditures from the use of new equipment. If the new implements of -
labor differ from the ones being replaced solely in increased productivity
and durability and do not satisfy the qualitatively new needs of society, .
then the savings for the consumer in the first type of current operating
expenditures (~I1) should not be accompanied by additional expenditures of
- the manufacturer (above the total ad~usted expenditures) on the growth of
the productivity (pZa) and durability (aZs) of the new means of labor. The
obtaining of an effect by society due to employing qualitatively new equip-
ment is fax from always capable of being expressed in a monetary savings
or calculated by Pormula (1). It must also be considered that the dynamics
and ratio of manufactui�er's expenditures on the development and initiating
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of production of such a new type of equipment will also have its particular
features.3
Thus, a rise in the ad,justed expenditures on producing new implements of
labor having increased productivity (power) and durability is considered
to be an optimum under the condition that the total of this increase will
7.~g behind the total rise in the useful effect for the consumer due to the
one-shot expenditures (proportione,tely to the growth of the productivity
and durability of the new machines), while the use of the new machines will
ensure the obte,ining also of an additional savings in the first type uf
current expenditures (~I1). Here the total and the feasibility of the ad-
ditional savings for the cons~er for the first type of current expendi-
tures will be greater the more the productivity and durability of the new
implements of labor rise.
However, the presence of an additional savings for the consumer in the
first type of current expenditures cannot be used for establishing the -
validity of an additional increase in the manufacturer's expenditures for _
new equipment above a limit of their optimum amount as calculat~d in ac-
cord with formula (2). For achieving the long-range (over the service life
of the new equipment) savings in the first type of current expenditures, in
particular for the wages of maintenance personnel, in the process of oper-
ating the new implement of labor, even in the current year additional work-
ers (basic and auxiliary) must be brought in for the process of manufactur-
ing this implement of labor and the assemblies (articles) comprising it.
The total of their wages, considering the ad~ustment of wages over tris
same time to the initial year, will equal or exceed the wages accepted in �
the calculation of the operational effect.
Let us examine an example. A new centering semiautomatic lathe (with pro-
gram control) model 1B732F3, in the process of operation, over its service ,
life until the first ma~or overhaul (8 years), according to the manufac-
turer's calculations, will provide a savings of ~+~+,700 rubles for current
expenditures, in compa,rison with the operation of the old semiautomatic
hydraulic copying lathe (without program control) model 1B732. The produc-
_ tivity of the new semiautomatic lathe exceeds the productivity of the old
by 2.3-fold. For producing a unit of the new semiautomatic lathe, includ-
ing the creation of the numerical control unit and other components, the
manufacturer spent 1~+,000 rubles on the wages of additionally used basic
workers (not counting the wages of engineers, technicians, white collax
personnel and auxiliary workers). The total amount of tk~e ad,justed expend-
itures on the new semiautomatic lathe, according to the manufacturer's cal-
culations, were around 102,000 rubles, in comparison with 40,300 rubles on ~
the one being replaced, that is, this had risen by more than 2.6-fold,
while productivity had gone up ~ust 2.3-fold. The remaining operating
characteristics (parameters) were unchanged.
3See A. Konson, "The Effectiveness of Qualitatively New Equipment," VOPROSY
EKONOMIKI, No 2, 1979.
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A comparison of these data indicates that the use of the new semiautomatic
lathe provides the consumer with a savings totaling 1+5,000 rubles in the
first type of current expenditures (DI1) over the 8 years. But for produc-
ing this semiautomatic lathe it is e~sential to hire additional workers,
engineers, technicians and white collar personnel, and their total wages,
considering a,n ad~ustment for the year over this same time (8 years) will
be more than 50,000 rubles, including 35,000 rubles above the optimum limit.
An analysis of the pro~ected ad~usted expenditt�res has shown that their
overstatement was caused by excessive expenditures on producing the numeri-
cal program unit and other preassembled article,~, as well as by the in-
creased internal expenditures of the machine tool building plant during
the first years of developing the output of the semiautomatic lathe. As a
rule, such expenditures should be financed fr.om the unified scientific and
technical development fund set up in the sectors from deductions from the
additional profit of the serially produced and previously developed product. -
The more rapid growth of expenditures over the rise in the productivity of
new implements of labor, if their other operating parameters are not im-
~:~^oved and they do not ensure qualitatively new results, is a consequence
ot shortcomings in organizing the output of new equipmEnt as well as in the
system of financing the increased outlays oP the initial period of develop-
' ing and producing the product. Such an outstripping of expenditures can
be ~ustiPied only in those instances when in developing the new implements
_ of labor, in addition to a change in productivity or durability, a substan-
tial improvement is provided in the other important operational paremeters
such as increasing precision characteristics, reducing consumption rates -
and lossea oP resources used in the process oP operating the new equipment.
As a result of using new equipment which, along with (or regardless of) the
rise in productivity and durability, improves the above-noted technical and
economic operational characteristics, the consumer gains a savings in the
second type of currAnt operating expenditures (~I2). As a rule, the manu-
facturer spends additional money on improving these operating parameters
of the new equipment. However, in this instance, not all the manufactur-
er's additional expenditures can be considered sufficiently ePPective sole-
- ly because they are below the consumer's savings on the second type of cur-
- rent expenditures (DI2) obtained over a number of years from improving the
quality parameters of the machines.
The ratio of such results and expenditures for the manufacturer (in addi-
tion to the confox~m.ity of the results to the normative effectiveness coef-
Picient) should also meet definite li.mit proportions, that is, the manufac-
turer's expenditures on i.mproving the quality paxameters cannot be simply
restricted by the amount of the useful effect for the consumer, but rather
should be in definite limited proportions with this. What should these
proportions be? Calculations indicate that for new equipment with a serv-
ice life of at least 6 years, the optimum ratio for the second type of sav-
ings (~I2) obtained by the consumer for this time and the manufacturer's
expenditures for these purposes should be no lower than a ratio of 2.5:1.
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Only with such a ratio do the manufacturer's expenditures provide a sig-
nificant savings for the national econorr~y.
The establishing of the ad~usted optimum proportion in the ratio of expend-
itures and results consists in the Pollowing. The manufacturer's expendi-
tures on improving the second type of quality parameters of the new equip-
ment (~Zm2) to be included in the ad,justed expenditures (Z2) do not reflect
_ the full expenditures by society on these purposes. The full expenditures
on improving the quality parameters of the new means of labor (in addition
to the growth of productivity and reliability) include, in addition to the
direct outlays by the manufacturer, in addition the expenditures on re- ~
search, development and the embodiment of the idea in metal,~on the produc-
tion of new types of materials and preassembled articles which realize a
qualitative change in the parameters of the finished article. Such addi-
tione.l parameters are not reflected in the ad~usted expenditures directly -
on producing the new implement of labor (Z2), since they are repaid by
society (from the budget or from the unified scientific and technical de-
velopment fund formed from the profits of previously developed equipment
to be replaced).
Consequently, the manufacturer's expenditures on improving the designated
quality parameters of a new implement of labor, considering the listed
additional expenditures, are increased in comparison with the ad,justed ex-
penditures (Z2) by almost double (and more for individual types of equip-
ment). These must be considered in determining the national economic ef-
fect of the new equipment. In order to consider them in determining the
effect from the difference in the ad~usted expenditures using formula (1),
it is essential to provide an optim~ limiting (by 2.5-fold) for the ex-
ceeding of the second type o~ savings (~I2) received by the consumer in 6
years over the total expenditures of the manufacturer (~'~,m2) considered in -
the ad,justed expenditures on the new implement of labor (Z2) for improving
, its other quelity parameters.
A new machine consid~rin~ all the operational parameters cannot be con-
sidered effective if its use over its life will save an equal or slightly
greater amount of labor than is spen~t on manufacturing it. As for the
savings for the consumer (~I2) over the lif~ of the new machine, this only
in a proportion of not less than 2.5:1 can provide society with an addi-
tional effect and recover the additional national economic expenditures on
improving the second type of qua,lity parameters for tY~e given new equip- -
ment. ,
From this derives the third premise ~or the optimality of the ratio between
- expenditures and results: additional manufacturer's expenditures (~7~2) on
improving such quality operational parameters as improving the precision of
machining, the efficiency of the machines, and reducing the specific con-
sumption of production energy and all types of fuel, lubricants in operat-
ing the new equipment, and so forth, will bring the national econorqy a
real tangible effect, if the consumer's savings ad~usted for the year for
the second type of current operating expenditures (~I2) over the life of
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the new equipment will exceed these expenditures by at least 2.5-fold.
Undoubtedl,y, depending upon the types of new equipment as well as the na-
ture of the changing quality operating parameters of the second type, the
_ established overall proportion for the optimality of expenditures and re-
sults can be differentiated. It is advisable to consider such a differen-
tiation in the sectorial procedures for determining the economic effec-
tiveness of new equipment. -
A significant portion of the new ma,chine building products are developed
and put fnto production not to replace previously developed products but
rather to perform new production functions. It is essential to work out
- overall and sectorial provisions for calculating the economic effectiveness -
of developing and employing equipment which broadens the parametric series
oP the machines, equipment and instruments for performing new production
functions. In our vie~r it is possible to determine the optimum limits of
expenditures on developing and producin~ new types of the same parametric
series of implements of labor on a basis of utilizing normative parametric
methods (a multifactor correlation dependence of expenditures on parame-
ters, a point evaluation of machine parameters in terms of optimum expendi-
ture limits, and so forth). The use of these methods makes it possible to
work out such standards in the sta,ge of setting the specifications for de-
signing new models of implements of labor, that is, when the technical
level, the quality and economy of the new equipment are being established.
Here conditions will be created for the broad and effective use of elec-
tronic computers for calculating the expenditure limits.
_ These, in our view, are the general outlines for the basic premises for
limitin~ the manufacturer's expenditures to achieve their optimum ratio
with the results. The realization of these premises will make it possible
to ensure the development, production and use of new highly efficient equip-
ment with the least expenditures of all types of resources. An optimiza-
tion of the ratio of results and expenditures lies at the basis of raising
the national economic effectiveness of new equipment and the end results
of the work done by the scientific research and design organizations, asso-
ciations and enterprises. Their consideration will help to improve the
procedures and practices of evaluating the effectiveness of the decisions
being taken in working out and putting new implements of labor into series
_ production. In our view, it is advisable that the sectorial scientific
research institutes engaged in the designing and development of new imple-
ments of labor, work out reco~nendations for the product groups or types
for defining the optimum ratios of expenditures and results, and on the
basis of these, optimum expenditure limits. Greater efficiency of the
new implements of labor will also be aided by the ,joint work of the manu-
facturers (developers) and the users in the area of clearly defining and
regulating the entire complex of technical and economic para.meters for the
new equipment and reflecting these in the specifications for its designing.
COPYRIGHT: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1980
10272 E~
cso: 1820
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