JPRS ID: 10503 USSR REPORT ECONOMIC AFFAIRS

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• Content Type: REPORTS

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~ JPRS L/1050~
10 May 1982
USSR Re ort
. p
ECONOMIC AFFAIRS
' CFOUO 4/82)
~
Fg~$ FOREIGN BROADC~?S~' INFORM~TION S~RVICE
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JPRS L/10503
10 May 1'982
E1SSR REPORT
ECONOMIC AFFAIRS
(~ouo 4/~2~
CONTENTS
PLANNING AND PI.AN Il~IPLEME[~TAZ'ION
Multistage Optimization of Developmental Plans of Public ~
Production
(METODICHESKrYE UKAZ.ANIYA R RAZRABOTKE GOSUDiAR,STVENNYHII
PLANOV EKONO~CHESKOGO I SOTSIAL'NOGO RAZPITIYA 3SSR, 1980) 1
INVFSTMENT, PR,ICES, BUDGET AND FIN.P.NCE
Improving the Mechanism for Planne3 Man~gement of Prices
(A. Yezhov; ~*OPROSY EBON~Ki, Jan 82) 4
INTRODUCTION OF 1~EW TECHDTOI~OGY ~ .
Target Prograirmiing Urged for Scientific-Technical Progress
(N. Fedoren;~o, D. I,'vov; VOPRA.~C EKONOMIKI, Nov 81) 16
I
- a - [IIF - USSR - 3 FOUQ~
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PLANNING AND PLAN IT~L~MENTA`rION
r~'ULTISTAGE OPTIh1~ZATION Or DEVELOPrfENTAL PLANS OF PUBLIC PRODUCTIJN
_ Moscow METODICI~ESKIYI: UKAZANIYA K RAZRABOTKE ~OSUDARSTVENNYKIi ELANOV EKONOTff-
CHESKOGO I SOTSIAL'NOGO RAZVITIYA SSSR i~i Russian 1980 pp 102-103
[Section from book "i~ethodological Inst~ructions for 4lorking Out of State Plans
for the ~conomic and Social Development of the UySR" published by Gosplan USSR,
Izdatel'stvo "Ekonomika"]
[Text] In order to improve the foundation of economic planning, it is
necessary to conduct complex economic mathematical computations for drafts of
long-range plans of econoniic and social development with the help of interre-
lated systems of economic mathematical models.
It is possible to do optiniization of plans with the help of a multistage (multi-
level) s;?stem of rnodels. Tlie bottom` `(base) level for the computations is pro-
vided by sectorial ~ptimization models dev~~oped in accordance with a methodol-
o~;y of optimization of develo~ment and location of�production presented in the
secti.on Ylanning ot Indu::trial Production" of the present "t�Iethodological In-
structions." The intersectorial optimization model, including the intersector-
ial balance of production and production distribution in the national econo~ny
se r?es as tt?e top (consolidated) Ievel.
Models of different levels are are intercoordinated as to manufactured product
mix an.~ expended resources. Product and resource designation used in making
secrorial calcula~tio~is mu~t pErmit the simple aggregation ~f i.,zdicators and
expenditures according to the nom~nclature [nomenklatura] of tt.~e inteMsectorial
balance. The general ~listin~; of products and sectors on the basis of witich
sectorial optimization calcalations would have to be conducted are coordinated
with the nomenclature of the intersectorial balance.
J Sectorir:.'.. calculations are organized and performed in accordance ~aith tYie meth-
odology nf optimization computations of the development and location of produc-
tion. Consolidated optimiz~tion developments are conducted on the basis of the
results of alternative sectorial optimization calculations.
Op+timization calculations�are conducted at all levels utilizing alternatives on
the basis of criteria of opCin~ality with changin~ parameters (indicators).
1
Rl1R (1FFT~'~ s i i 1.4F (1NT ,Y
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In sectorial calculations, a determination of the sector's prod~;czion demands
using a minimum of full adduced expenditures is Che basic way to formulate .
the problem. Calculations should be made for different values of need and
norm of effectiveness of capital investment. No less than two variants
of need are examined: minimum and maximum a~d also no less than two values '
of the norm of eff~etiveness: minimum (15 percent) and maximum (25 percent).
- A total of no fewer than four alternatives of the optimized plan is calculated.
i
On the national-eco~iomic level, alCernative optfmization calculations are per-
- formed for tlie maximum of Che,end producC in the given atrueture with limita~
Cions on the ~total volume of capital investment anc!. labor resources. The pro-
portions of the end product and the limits of capital investment and l~bor re-
sources in this connection are changed within the limits of the real possibil-
' ities of the national economy in the planned period. �A final decision on ~he
plan of development of public production is made on the basis of an analys~~
and comparison of all computed optimized versions. ~
Optimized calculations and their coordination are carried out in r,^:ordance
with the adopted stages of devnlopment~of long-range plans of ecQnumic aad so-
cial development. ~ ~ .
In five-year planning, o~.timization calcul~tior~s are performed fior the S.as~
year of the planned period and in~long-term planning--for the last year of
each five-year period.
As a resulC of p replan calculations on Che national-economic level~ the top and
bottom.levels of proposed outputs o��:production ("br..ackets") are determined
for all sectors (in tt~e non:enclature of tl~e intersectorial balance) . Guided by ~
these "brackets," sectorial administrative and nla~rninp, ~r~a~s develop hyDOthes~s
of ctieed for tlieir products in a more detailed {se~ta~ial) products,Mlist for the
territory of the counCry. ;
- At the stage of basic guidelines for the long-range plan, alternative seclorial
optimization computations are performed (in no less tha~ four versions). The
results are discussed and corrected at ministries responsible for the develop-
ment of sectors and at sectorial departments of Gosplan USSR.
In its final form, each version of the optitaized sectorial ~~lan must contai?~
the following data: volume of production ouCput (in the nomenclature of the
sectorial balance); volume of capital investment; size of labor resources.
The data for all the versions are turned over to the Consolidated Department
of Long-Range Planning as well as to other consolidated and ~ectorial depart-
ments of Gosplan USS1:.
At the national-economic level, tlie results of the alternative sectorial optim- ~
ization calculations serve as initial data for the intersectorial optimization
~ model. Each sector is presented in it by means of calculated alte~natives of
its development: Limitations relatin~ to labor resources aad capital invest-
ment and conditions.of the�ic~tersectorial balance are introduced into the
= model. '
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Calculations are performed for the maximal end product in Riven alternative ver-
sions of its atructure. The comparieon and analygis of the developed drafts in
combin$tion with suppleaeentary calcnlations on the basis of the model ~ake it
possible to select a final version of the national-economic developmental plan.
At the stage o~ development of the fu7.1-seale State Plan of Ecoaomic and Social
- llevelopment of the USSR, additional opCimization calculations are pe~~ormed.
The newly computed versions of development of sectors are in~roduced into the
intersectorial-optimization model, which provides the possibil~.tq of refinin~
consolidated calculations adopted at the stage of basic guidel{nes.
Through the use of the intersectorial optimization model, a balance tie-in is
c:irried out cf se ctorial plans of development and lccation of industry th,~ough
the redistribution of national-economic resourc~s among the sectors for in-
creasing the ot~tput~ of the end prc~duct.
COPYRIGHT: Izdatel'stvo "Ekonomika", 1980
7697
CSO: 81k4/1113 ~
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INVESZZ~IENT, PRICES, BUDGET AND FINANCE
y IMPROVL~TG `THE MECHANISM FOR PLANNED MANAGF.~3ENT OF PRICES
Moscow VOPROSY IICONOMIRI in Russian No 1, Jan 82 pp 91-100
[Article by A. Yezhov]
[Text] In the context of advanced socialist society, as wa~s observed at the
26th CPSU Congress, there are importan~t problems in the field of planned price
- determination. The products list and assortment of products are increasing
- rapidly, the number of prices is growing as a consequence, and flows of price
data are swelling rapidly. There is a considerable speeding up of the rate at
which the processes take place with governed changes in the products list and
' assortment of products, fashion, the balance between supplq and demand, fac-
- tors related to the interaal consistencq of the price system, and the corre-
spondence of that system to its ob~ective fate. All of this makes it neces-

~ sary to discover new methods, procedures and equipment for processing the rap-
idly growing flows of economic information..ctracerning prices, methods that
, guarantee an improvement in the present method of managing pricas.
It is an extremely complicated task and one of great importance to set and
ma.intain prices reflecting real economic processes. But, as experience has
, shown, the present mechanism for price management still does not always guar- ~
antee that scientifically sound prices are set and maintainad. It is a very
cumbersome mechanism, and the process of price revision moves rather slowly
and involves ].arge expenditures of labor and money.l Ways of further improv-
ing the mechanism of price management have been defined by the 26th CPSU Con-
, gress, by the decree of the CPSU Central Committee and USSR Council of Minis-
ters entitled "On Improving Planning and Strengthening the Influence of t~�Q
- Economic Mechanism on Increasing Production Efficiency and Work Qualitv," and
~ by the Al1-Union Conference on Pricing Affairs (Moscow, April 1980).. For in-
stance, the "Basic Directions for the Economic and Social Development of the
USSR Over the Period of 1981-1985 and Up to the Year 1990" note: "To improve
the setting of prices in the sectors of th~ econom~ as an important ir~strument
in planned maaagement. To strengthen the effect of wholesale prices as an in-
centi.vre for improvement of the quality of products, for speeding up the orga-
nization of production of highly efficient new technology and replacing out-
dated technology, for ffiore optimum use of production resources and for reduc-
tion of products produation cost. To strengthen state price discipline."
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One of the promising directions for perform3ng the tasks which have been set
is to apply the methods of mathematical economics and el~.:cronic computers i~
the setting of prices; they opea up broad opportunities for improving the man-
agement of prices of products in v~rious sectors of the economy. Constructive
experience haa already been gained in the use of computers in price setting
within the framework of the first and second phases of the autumatic price
data processing system (ASOI tsen).
Comprehensive use of co~puters in pricing for setting price~, price rf~�iew and
for monitoring observance of state price discipline faces scienzists with new
tasks and makes it necessary to do further work on the foundations of'pricing
theory and methodolo~y. an important theoretical question, one which also has
great practical importance, is the question of the criteria in the planned
ma.nagement of prices which the entities setting prices might use to 3udge
whether they need to be revised. By the criteria of planned management of
prices we mean integrated indicators that representatively reflect change in
the set of ob~ective factors that lie both on the side of th~ value basis of
the price and also in the field of the price proper, and which signal the need
to review the prices in effect and also indicate the direction in which they
should ~e changed.
It is important to distinguish the ob3ective foundations (content) of the cri-
teria for planned management of prices from the forms they takE. By the ob-
~ective foundations of these criteria we mean the set of economic relations
which "unify" the price with its value basis and which influence the ne~d for
review of the prices in effect. A study of the set of relations between the
value basi.s of. the price and the price itself presuppo~es in turn that we dis-
tingui~h between the terms "the price's ~elative independence" and "the
price's stabil{ty interval," which are close, but not identical, and reflect
economic processes iia the formation of prices rahich differ in their depth and
breadth.
The price's relative inde~endence refers to the relat3ve independence of its
movement from the value basis. The deviat~.ors of the price from value which
occur in this result from the fact that the price, as a form of value, is sub-
~ect to the effect of such specific factors as, say, the relatior~ between sup-
ply and demand, fashion, etc. The price`s relative independence has ob3ec-
tively imgosed Iimits which depetad on the extent to which the planned price
has developed as an economi~ form. The limits of the price's relative inde-
pendence also depend on the kind of price involved. For example, these 1im-
its are considerably narrower for wholesale prices than for retail prices.
The reason for this is that the retail price experiences to a greater degree
than the wholesale price the influence of facCors which lie outside the value
basis, since the product is brought ~hrough the retail price mechanism to the
"final" consumer and by virtue of that fact experiex~.ces more the effect of the
conditions of consumption than the conditions of production, ~y contrast with
the wholesale price. Further, depending on what sphere in the process of re-
production the price serves, it will be influenced to ~ greater or lesser de-
gree by the value basis.~ If the price "serves" productive consumption, it
experiences a considerably greater influence of its value basis than does the
price which is "serving" personal consumption (for example, the retail price).
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- This occurs because the wholesale price (a~ an "interm.ediate" price between
producers and final consumers) is less influenced by the conditions of con-
sumption and nonvalue factors (demand, fashion, etc.).
The price's stability interval characterizes the time limits of the price's ~
relative independence of its value basis and is a m~:asure of the price's "au-
tonomy." The price's stabtlity interval is an intermediate link in the as-
- cending (from abstract to concrete) chain of cognition "value--pri~e." It
characterizes the degree to which the concrete (t'.e price) reflects the more
abst-ract (the value). The greater the ma~nitude of the price's stability in-
terval, the more rarely corrections need to be made in the prices in effect.
And conversely, as this interva]- shrinks, the ob3ective nee3 arises to review
them more often.
The size of the price's stability interval, which is a function of its rela-
~ tive independence (self-sufficiency), is det~rmined by the relations between
the value and the price. The more highly developed these relations, the
smaller the magnitude of. the price's stability interval. This is explained by
the circumstances which follow. As the money form of value the price must in
the final analysis reflect its value content. A more highlq developed content
(other conditions being equal) presupposes that it is reflected more straight-
_ forwardly in th~.s or that form. The state of the price's value basis is de-
termined, to be specific, by the extent to which directly social relations are
developed in it. As directly social relations become stronger, encompassing ~
t:~e "lower stages" of the essence of the price's va~.ue basis and of the price
itself as a category oi directly social production in the socialist stage of
development, it increasingly takes on the traits of a planned valuation (for
the time being still in the value form) of the expenditures of social labor.
The magnitude of the price's stability interval decreases as a result. Since
the process of development of directly social relations is irreversible, the
- process of reduction of the price's stability interval, which brings about the
need to review the prices iii effect more frequently, ia also irreversible.
By the forms of the criteria we have been examining we mean the set of indica-
tors which furnish evidence that a revision of prices has become unavoidable.
In the econoraics literature such forms are provisionally placed in two groups:
qualitative and quantitative.2 The first group includes: updating of the
product list,3 a change in the price's structural scheme (mathematical model);
production of a higher-quality product which is in demand; an increase in the
output of a product which is not selling out at the present prices; revision
of standards, etc. The criteria in the first group do not take into account
all th~ basic factors in price forniation. Their use is not always advisable;
this especially a~plies to products wtcose prices are calculated on a computer.
In addl.tion, these crtteria are not accurate enough. The second group is made
up of sectorwide profitability rates of a product of the same kind.
- The qualitative a1d quantitative criteria are closely interrelated, and the
need to revise or preserve the prices in effect is governed by the set of
them. The criteria in the second group are more general; a change in the cr3.-
teria in the first group ultimately causes a change in the criteria of the
second group and is registered by them. The practical application of criteria
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- in the second group is also.limited, since they do not take into account a
number of important objective factors (for example, the degree of satisfaction
- of society's need for the product, the balance between supplv and demand,
Ptc.).
The criteria in the first and second groups have played a constructive ro:Le in
improving prices. They are being used succe~ssfully even at the present time.
But new ob3ecti~ve indicators are needed whe?~ the computer is used in pricing
and as the processes of price management gradually "go electronic." To be
specific, development of a universal summary criterion of the planned manage-
ment of prices is very promising. This summ~ary criterion, as a synthetic in-
dicator, should if possible be one that considerably facilitates the work of
_ bodies setting prices at all levels, on~ which prepares more favorable soil
for use of up-to-date computers in pricing, one which makes it possible to
standardize the system of managing the prices of products of the various sec-
- tors of the economy, and one which improves the quality of price monitoring.
At the same time, this c~iterion has to reflect the entire cycle of reproduc-
tion, which determines the formation of p~anned prices. What is needed first
of all in developing such a criterion is to determine the basic factors in
formation of the price's objective basis and the laws which are operative in
formin~ its magnitude.
The bases of the planned price are the socially necessary expenditures o~ la-
bor (ONZT), which in t~e context of commodity-money relations take on the form
- of value. The ONZT and value are reflected in the.socially necessary work
time (ONRV). K. Marx remarked that "the work time socially necessar_y is that
- required to produce an artiele under the normal conditions of production, and
_ with the average degree of skill and intensity prevalent at the time.i4 The
socially normal conditions of production (of reproduction) are determined by a
- number of dynamic factors and are mobile themselves therefore. The variable
chara~ter of the socially normal conditions of reproduction imparts dyna~mi.c
- behavior to the magnitude of the ONRV. But not all economists acknowledge
- this. Consequently, the3 treat the socially normal conditions ~f reproduction
~a stable conditions which do not depend on consumption. That accounzs for
the static nature of conceptions of the quantitative determinacy of the ONRV.
For instance, some economists believe that the ONRV comes ,3bout as an average
quantity, while'others regard it as a weighted averi~.ge. Still others su~pose
that the ONRV tends toward the maximum actual level, yet others toward the
minimum actual le~~el, yet another group that it tends toward a normative level
established in advance, and so on.
Ttie question of the factors in foru~.tion of the ONRV is ~lso treated in dif-
ferent ways. For instance, some scient~.sts point above all to the dependence
of the ONRV on the 1eve1 of technology and manpower, denying the role of so-
cial need anc~ social utility in the mechanism of their formation. Other econ-
_ omists, recognizing that social need as a definite role in the process of
forming the ONRV, denies sociai utility as a factor in this process. A third
group, on the contrary, recognizes social utility as a factor ir. the ONRV and
denies that the social need is such a factor. There are also scientists who
- take into account the definite role of each of these factors in the mechanism
for formation of the ONRV, but who represent it in different ways.
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The idea of factor analysis of the ONRV occurred to the founders of Marxism.
In "Kapital" K. Marx repeatedly to~uched upon the questions of the vigorous in-
fluence of the factors of social need and the social utility of labor (work
time) on the process of forming the ONRV.S This was pointed out by F. Eagels
as well.s Their writings contain an abundant methodological legacy that helps
to elucidate many present-day problems in price formation.
A. Mendel'son was one of the first economists to note the need for further de- ~
velopment of the ideas of K. Marx and F. Engels in the field of factor analy-
sis of the category ONRV. He paid particular attention to the fact that
K. Marx and F. Eagels attributed an active role to social need in the labor
theory of value.~ Later V. P. ~'yachenko attempted to demonstrate thp role of
various factors in the mechaniem of forming the ONRV under oocialism. On the
basis of the c~.assic works of Marxism and Leninism, he furnished the basis for
the active effect of social nesd on their formation under the conditions of
public ownership of the means of production.8 In particular, V. P. D'yachenko
examined how the degree of saturation of social need makes it'possible to die-
cover the socially normal conditions of reproduction, which quantitatively de-
termine the ONRV.
But researchers into the category of the OiNRV were unable to ~xplain how every
factor in the UNRV "fits" into the labor theory of value. Yet the la~ter cir-
cumstance has fundamental importance. The principle of monism, whicr. holds.
that social labor is the basis of val~e (ONZT, ONRV), is a fundamental point
in the labor theory of value. All the other factors have to be derived from
_ labor as its constituent element.
The production of use values presupposes expenditures of work time, which are
a function of the personal and material factors of production, since any work
process requires the presence of the sub~ects of labor (that is, the people
engaged in producing the use values needed by society) and means of produc-
tion. The unity of the personal and material factors, which ensure the normal ~
- flow of the wark process, is an indispensable condition for formation of the
ONRV. This characterizes the ONR9 from the standpoi~nt of production itself
and expresses the social possibility of expendiCures of work time (labor).
The production of use values is always purposive; consequently, expenditures
of labor and work time are always purposive. The labor process is detei~-mined
by the basic economic law of socialism, which orienta producers expending work
time toward satisfaction of social needs. Aggregate social needs corr~spond
to total expenditures of work time, and individual needs, as integral compo-.
nents of the aggregate social needs, correspond to indi.vidual expeuditures of
work time. But in and ot itself the need (aggregate, individual) is neutral
to the expenditure~ of labor, and only the degree of its satisfaction is in-
dicative of their need. Consequently, the level of satis~faction (saturat:.on)
of the social need characterizes the ONRV from the standpoint of consumption
proper and represents the social necessity of expenditures of work time (la-
bor).
Work time, which ensures satisfaction of social needs, ~igures at the same
time as socially useful work time. The utility of work time (labor) is social
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in nature and depends above all on which needs it is aimed at satisfying.
Work time aimed at satisfying more important social needs will possess greater
utility. Thus deciding the question of which actua.l expenditures of labor
will be recognized as necessary by society and which will not will also deper.d
on the greater or lesser utility of work time (degree of utility of work tim2).
The degree of utility of work time characterizes the ONRV from the standpoint
of the unity of production and consumption and represents the social signifi-
cance of wark time.
All these factors operate as one and as a group determine the process whereby
t~e ONRV is formed. At the same time, each of them plays a~trictly defined
role in this process. Social labor li~s at the basis of the ONRV. In quanti-
tative l.erms the ONRV will depend on which enterprises in the sector have the
conditions of reproduction which society recognizes as necessary. It is so-
cial need, which determines the group of enterprises manufacturing the bulk of
the products of the sector (within the limits of the given need) that makes it
possible to establish the socially necessary conditions of reproduction.
The social need also makes it possible to determine precisely which enter-
prises of the sector operating under the socially normal conditions (the given
enterprises differ in their individual expenditures of work time) have indi-
vidual raork time that coir~cides with the socially necessary work time. For
instance, when the social need is satur.ated, the magnitude of the ONRV will be
formed as the weighted average of. individual expenditur~s of work time at en-
terprises operating under the so~ially normal conditions. When the social
need for the product has~not been saturated, the socially normal conditions of
reproduction will gravitat~e,toward worse conditions and correspondingly the
ONRV will gravitate toward the maximum individual work time ~mong the enter-
_ prises operating undex the socially n~rma.l conditions, and when it is oversat-
urated, it will gravitate toward the minimum work time among such enterprises.9
Let us ana].yze a structural model of the wholesale price, which has not under-
gone ser~ous changes since the twenties and at present takes this form:
Diagram 1
Product's pro- Enterprise's Sales Markup
_ duction cost profit Turnover
- tax Exgenses of the Profit of the.
Enterprise wholesale price sales organization sales organization
Industry wholesale price
The model of the wholesale price includes a nwnber of factors which can be
broken down ~~~?to two groups: variable and provisionally constant. The fac-
tors in the f irst group exert a vigorous influence on the price's stability
interval and therefore determine the limits of the relative independence of
the price and its dynamic behavior. They include the value of the expended
means of production (c) imparted to the finished product and a sizable portion
of the newly created value, specifiaally that value created by the necessary
9
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labor (b) and a portion of the surplus labor (mv), which is expressed in the
basic and supplemental wage. The factors in the second group a.re either rig-
idly fixed in the price (for example, the turnover tax as a modified form of
a portion of the value of the surplus product) or are sub~~ct to slight fluc-
tti~tions as a function of changes in the factors in the first group (for exaul-
ple, the portion of the value.of the surplus product, expressed in the form of
~ transfers to economic incentive funds or the unassigned rema.inder of profit).
The factors in the f irst group are identically reflected in the value and in
zhe production cost.10 The production cost takes up a sizable share (more
than 70 percent) of the wholesale price and has a tendency to increa.se. An
analysis of the structure of an industrial product's production cost (see Ta-
ble 1) shows that the factors in the first group account for the ma~or "por-
tion."
Table 1. Structure of the Production Cost of Industrial Output in 1980 (in
current prices; relative to the total of all production costs, in
percentage)
Industrial Machinebuilding
Sector as and Metal Manu- Light
~ Factor a Who1e facturing Industry
Ra.w materials and bas3c supplies 62.4 58.8 85.5
Awciliary supplies 4.3 3.6 2.6
Fuel 3.4 1.1 0.3
Power 2.5 1.9 0.7
Depreciation 7.7 6.6 1.6
Wages and social insurance deduc-
- tions 14.8 22.5 8.5 ~
Miscellaneous ' 4.9 5.5 0.8
It follows from the table that the share of c(a factor in the first group) is
80.3 percent in the structure of the production cost of the entire industrial
output. In light industry it exceeds 90 percent. The production cost is a
sufficiently ob3ective and reliable point of reference in setting and revising
prices. But as greater demands are made concerning their soundness, it has
become necessary to improve the proceeses of its determination. The relevant
measures were drafted at the All-Union Conference on Pricing Affairs (April
1980). "In order to improve the economic soundness of prices and net output
standards and so that they correctly re�lect the socially necessary expendi-
tures in a product's production, it is recommended that ministries and depart-
ments improve their recordkeeping and official calculation of production cost,
tighten up their classification of costs and improve the methods of distribut-
ing indirect costs among products.i11
Experience in the setting of prices makes it possible to f~ame the conclusion
that one of the most important indicators of the need to revise existing
prices and to set new ones is profitability.12 But a change in profitability
' is in large part determined by a change in the production coat. The depen-
dence of the price on various factors characterizing its stability interval is
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manifested basically as a tendency and must be taken inta account by the sum-
mary criterion for planned management of prices. It was cliscovered in the at-
tempt to su~stantiate the sector, profitabiliCy indicator, determined according
to Eormula (1), as such a sole crite.rion that this indicator does not take
into accoun*,a number of factors that lie outside the bounds of production
proper:
- R = (P/F) � 100 percent, ~1)
in which R--profitability of the product of the n-th sector, P--profit, F--
value of fixed productive capital and working capital sub~ect to allowances of
enterprises in the n-th sector participa.ting in production of the product.
Just like the value, the pric~ is a categnry of reproduction, and the price's
- stability interval is characterized by factors lying both in the field of pro-
duction and also in the field of c~nsumption. Formula (1) needs to be per-
fected to "capture" the relevant factors. For this formula to be capable of
use as a model of the suumnary criterion in planned management of prices, it
has to take into account the socially necessary production cost in the deter-
, mination of profit. By the socially necessary groduction cost we mean that
production cost which characterizes the use value produced under the given so-
cially normal conditions of reproducti~n ~nd at an average level of skill and
intensity of labor.
Formation of the socially necessary production ~ost is analogous to forma.tion
of the ONRV previously examined. Once again the socially normal conditions of
reprQduction, which will always occur at enterprises manufacturing the bulk
(in the general case more than 50 percent) of the given product, are fundamen-
tal. In this case the socially normal conditione of reproduction can be con-
_ cretely stated on the basis of the social demand anc:, more precisely, from the
degree of saturation of social demand.13 If the social demand is satisfied
without a remainder (demand equal to supply), the socially norma.l conditions
of reproduction will correspond to enterprises where the individual expendi-
tures of labor coincide with the weighted average expenditures for the product
of the sector. If the social demand is not fully saturated, the socially nor-
mal conditions of reproduction would "shift" toward enterprises where the ex-
penditures of labor (production cost) are higher than the average for the sec- .
tor. When Che social demand is oversaturated, a"shif t" occurs in the direc-
- tion of the expenditures (production cost) which are lower than the average.
- As a function of the real conditions of reproduction of the given product,
then, we should insert in the numerator of Formula (1) that magnitude of the
- production cost which will correspond to the product produced under the so-
cially normal conditions of reproduction, that is, the socially necessary pro-
- duction cost. The formula of the sector profitability indicator, when modi-
_ fied in this way, can in our view be applied in practice as a model of the
summary criterion for planned mana~ement of wholesale prices. In this case it
is possible to stand free of the effect of fashion and the social factor on
the wholesale price, since they have a negligible influence on wholesale
prices.
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We wi11 explaim the operation of the model of the su~ary criterion for plan-
ned management of prices with a hypothetical example.
- Table 2. Depehdence of +the Wholesale Price on th~ Su~nary Criterion
= Profit of Enterprises Value of Fixed Productive Capital
Commodity Price in Secto.r (millions and Working Capital Sub~ect to
(rubles), Ts of rubles), P Allowarices (millions of_ rubles), S
Tsl 10 80
g .
6
Ts2 20 80 .
16
12
Ts3 30 80
24 .
- 18
Socially Necessary Production Chaage of Price:
Cost of Product as a Function Profitability, a) Upward
of Economic Conditions R= P/F b) Dowaward
(millions of rubles), S (percentage) c) No Change (0)
[Tsl] a 40 12.5 0(+)
b 70 10.0 0(+)
c120 7.5 +
[Ts2] a 40 25.0 0
b 70 20.0 0
c120 15.0 ~ 0
[Ts3] a 40 37.5 0(-)
b 70 30.0 0(-)
i~ c120 22.5 0
Let us suppose that at a price equal to Ts2 the profit of enterprises in the
sector is 16 million rubles, t~!e value of fixed productive capital and working
capital sub~ect to a1loWances used in produGtion of that product is 80 million
rubles. We asswne that the co~odity's unit production cost at enterprises
manufacturing the bulk of the output is 40 rubles (minimum), 70 rubles (aver-
age) and 120 rubles (~naximum). We will determine these magnitudes on the
scale of the sector by multiplying each one by the number of commodities pro-
duced by the sector, which is equal to 1 millio~ units. As a fuaction of the
level of satisfaction of social d~mand (social need) for the commodities, we
insert in the nume~ator of t'he formula of the aummary criterion the~corre-
sponding value of the socially necessary production cost (we obtain the corre-
sponding profit and the magnitude of the summary criterioa).
Suppose that demand for the commodities is fully satisfied; then uader Che
. conditions which correspond to Variant 2(Ta2) in Table 2, and at a~ocially
necessary production cost of 70 million rubles (weighted average), the profit-
ability of the sector's product is 20 percent (base level). If on those same
12 ,
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~
premises the ~ocial demand (need) is "oversaturated" or "n~t fully eaturb~ed,"
this will glve evidence of a change in the socially normal conditions for r~-
production of the product, and consequently, of a change in the magnitude of
the socially necessary production c~st. Then we insert into the numerator of
the formula for the criterion the minimum (40 million rubles) or maximum (120
million rubles) magaitude of the production cost, respectively. There wi11
then be a change in the magnitude of the criterion, which will be equal to 25
or 15 percent, respectively.
N~w let us suppose that because of altered conditions of production in the ~
sector (while the price for the g3.ven product has r~mained unchanged) there
has been a rise in the socially necessary production cost, and the profit of
enterprise~,_,~,~ the sector has dropped to 8 million rubles. Then tire ma.gnitude
of the criterion drops to half and goes to 10 percent. But if under those
same conditions there is a change in the level of saturation of social demand,
- the magnitude of the criterion will be equal to 7.5 percent, which will make
~ it necessary to revise prices of this product (since the change in the magai-
tude of the criterion exceeded 50 percent of the base level). In this c~ase
the price should be raised. An analogous situation would be typical of Vari-
ant 3, only in this case (3a, 3b) the price would have to be lowered.
Thus the summary criterion for planned management of prices ean be represented
in the form of a standardized indicator of profitability whose level is calcu-
lated as a function of the level df satisfaction of socia.l demand (need) for a
given product from the corresponding magnitude of the socially necessary pro-
duction cost at enterprises in the sector manufacturing the bulk of the given
product and operating under socially norma~ conditions. Use of this crite-
rion will make it possible to reflact more fully in~prices a change in the set
of price-forming factors lying both in the plane of prod=~ction proper and also
in the plane of consumption. This will in turn promote more effect3ve use of
the system of wholesale prices as an economic lever for increasing the effi-
ciency of Che soc3alist economy.14
The proposal for revision of prices in effect when this is economically ad-
_ visable for groups of products does not contradict the principle that prices
should be revised once every 5 yea.rs, which is provided for in the decree of
the CPSU Central Committee and USSR Council of Ministers dated 12 July 1979.
In outlining the basic ways of improving the price mechanism the decree,
first, is oriented toward the need to make planned prices more flexible as an
important factor in strengthening their role as an incentive.ls Second, it
- reflects the difficulties involved in organizing and conducting price revi-
sions by the traditional methods. Third, it also records the fact that plan-
ning agencies are not always prompt in taking into account price changes that
occur within the period covered by the 5-year plan.
Use of the sumioary criterion for planned management of prices within a subsys-
tem of the automat~c price data processing system will be conducive to im-
provement of price setting as an important instrument for planned management
in accordance with the decisions of the 26Ch CPSU Congress.
13
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FOOTNOTES
. 1. For ins*ance, the 19~7 price reform was ia preparation for about 5 yeara,
and sizable funds were spent to prepare it and carry it out. A huge aranr
of engineers, technicians, economista, scientists and admiaistrative per-
sonnel were employed in preparing it. The newly introduced prices have
played a constructive role, but they "became outdated" rather quickly;
that is, they ceased to reflect the conditions.of reproduction with euffi-
cient accuracy. This was manifested in the diversity of product profit-
ability and in the decliae of the incentive role of prices, and it made it
necessary for subsequent partial changea to be made in them. Yet often
when such a reviaion was taking place, the economic conditions of a prod-
~ uct's production and sale changed to such a degree that the new pricea
worked out, even before they took effect, "became out of date" and there
wae no point in introducing them. Revisions of the prices.of particular
coum~odities, as experience has shown, have con$equently "overflowed" to
become general revisions. The use of stepped prices is limited, since
they operate "blindly"--it is very difficult for them to take into account
possible changes in the economic conditions of a product's production and
sa1e. Ne~ methods need to be developed for the planned management of
pricea.
2. R. N. Plotnikov and A. S. Gusarov, "Sovremennyqe problemy teorii i ~
praktiki tsenoobrazovaniya pri sotsializme" [Current Problems in the The-
ory ~nd Practice of Price Formation Under Socialism], Izdatel'stvo
"Nauka," 19~1, p 477. ~
3. According to data of the USSR State Cou~ittee for Prices, a rise in the
relative share of new products to 25-35 percent makes it necessary to re=
vise the prices in effect.
4. R. Marx aad F. Engels, "Soch." [Works], Vol 23, p 47.
- 5. R. Marx and F. Engels, "SoCh.," Vol 23, p 177; Vol 25, Part I, pp 199,
202, 203; Vol 25, Part II, p 186, etc.
6. K. Marx and F. Engels, "Soch.," Vo1 20, p 321; Vol 21, p 191, etc.
7. A. Mendel'son, "The Concept of the 'Socially Necessary~ Labor' as an Ele-
ment in Marx' Theory of Value," POD ZNAMENEM MARKSIZMA, No 7-8, 1922,
pp 155-157; A. Mendel'son, "On the Question of Different Versions in
Treatment of the Concept 'Socially Necessary Labor,"' POD ZNAMENEM
MARRSIZMA, No 4-5, 1923, pp 230-244.
8. "Nauchnyye osnovy planovogo tsenoobrazovaaiya" [Scieatific ~oundatioas of
Planned Price Formation], Izdatel'stvo "Nauka," 1968, pp 13-39.
9. For more detail, see A. N. Yezhov, "Patteras of Formation of the Sociallq
Necessary ~cpen3itures of Labor Under Socialiem," IZVESTIYA AKADEMII :JAUK
SSSR. SERIYA EKO~TTOiMICHP.SKAYA, No 1, 1981, pp 66-8A.
1!~
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_ � 10. Tha variable factors are represented ia c, v and in part in m ia the form
of the snpplemental wage (bonus), which is added to v. The remainder is
expreseed in the provisiomally constaat factors. The product'r~ produc-
. tion cost, ~ust like its value, includes.the component (c + v). More-
- over,~a negligible portion of the wage .(v) is deducted for social insu~-
ance, and it therefore pertains to the factors i.n the second group. But
in the further analysis we can neglect thie factor, since in quanritative
~terms these deductions are negligible aad apply equally to the value and
the production cost. In addition, the production cost includes~one other
portion m, which is manifested in the form of deductions for social in-
surance, but it figures in the form of factors in the second group. We
shou.td note that in quantitative terms the iudividual elemeats c, v and
_ part of m, represented in the value and in the product~ion cost; may coin-
cide (the special case), but they may differ slightly.
11. "Rekomendatsii Vsesoyuznogo soveshchaniya po voproaam taenoobrazovauiya,
~ sostoyavshegosya 7-8 aprelya 1980 g." [Recommendations of the All-Union
Conference on Pricing Affairs, Held 7-8 April 1980], Preiskurantizdat,
1980, p 5.
_ 12. If the change in profitability (in the general case) exceeds 50-100 per-
cent, it becomes ob3ectively necessary to revise the prices in effect
(see K. N. Plotnikov and A. S. Gusarov, "Sovremennyye problemy teorii i
praktiki tsenoobrazovaniya pri sotaializme," p 478).
13. If the levels of the essence (ONZT) and the content (value) of the ob3ec-
tive basis of the pri~e corxespond to the social need of one of the most
important factors in determining the socially normal conditions of a prod-
uct's reproduction, the level of the form (production cost) will corre-
spond to the social demand, which here takes the form of the social need.
_ But not every demand will figure as a~factor in determining the socially
normal conditions of reproduction which quantitati~vely determine the so-
cially necessary production cost; but onlq that social demand which quan-
;itatively expreases the sacial need. The social demand, which deviates
qua~ntitatively from the social need it expresses, will figure as a factor
of the price to the extent that this deviation occurs.
14. In carrying out the proposed approach, attention should be paid that su-
_ tomation affects not only the process of price management, but indeed all
processes related to drafting and ad3usting multiannual and current plans
. for development of the couatry's national economy, in which possible
changes of prices withia the 5-year period will be taken into accouat by
means of indices of price changes over the medium-term ppriod. Construc-
tive experience in the use of these indices has already been ggiaed in
the 9th and lOth Five Year Plans.
15. WQ eacamined the flexibility of prices in the context of optimum combina-
tion of the stabilitq and mobility of planned prices. Price stability is
an important advantage of soc~alism. At the same time stability has ob-
~ectively conditioned limits which are rather mobile. Beyoad those lim-
its the plarmed.price begins to lose its advantiag~s and is turned iuto a
brake inhibiting production.
COP'YRIGflT: Izdatel'stvo "Pravda", "Voprosy elconomiki", 1482
- 7045 15
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INTRODUCTION OF NEW TECHNOIAGY
~
TARGET PROGRAI~IIIJG URGED ~'OR SCIENTIFIC-TECHIdIC~AL PROGRESS
{ �
Moscow VOPROSY LKONOMIKI in Russian No 11, Nov 81 pp 3-14
[Articla by N. ]'edorenko, member of the academy, and D. L'nov: "Economic
Strategy aad Sc:.entific-Technical Progrese"] ,
[Text] The platined pro~ess of applying the advances of science and technology
to the economy ~�equires improvement of the entire system whereby the economy
is managed and c:onsistent implementation of the party's economic strategyo
- Scientific-teclu~ical progress has a leading place in carrying out that strat-
. egy and is a po~?erful mesne of increasing the effi~;iencq of social production
~ and of accompliF:hing the transition of industrg?, agriculture, construction and
other sectors to predominantlq intensive methods of conducting economic activ-
ity.
. . The need for widespread application of scientific-technical advances to pro-
duction is determined in the present stage by the conditions of reproduction
that have come about. The limited nature of the raw materials, supplies and ~
manpower whi~h societ;~ possesses to pursue its socioeconomic goala.is being
~ felt more and more; ever greater resources are being drawa into development of
the nonproductiou a~here. It is also neceseary to take into account invest-
ment of capital in re~construction of enterprises whose products are ex~remely
necessary to the national econoury as well as in other pro~ects of the uaified
. national economic complex.
The only way out of the situation that ha.s taken ahape is to increase the ef-
fective yield from the minerals and other raw materials miaed and to seek out
additional potential for raising labor productivity that will offset the drop
in the growth rates of the abls-bodied population. That is why speeding up
~ acientific-technical progreas is still one of the moat important tasks in man-
aging the national economy during the llth Five Year Plaa and in the imm~ediate
future thereafter. ~
1 A mighty production ar?d scientific-technical potential has been built in our
~
cou~txy so that basic research can be conducted alaMg�~all the~linea�of sci-
ence and technologq. Ebery year about 4,000 new models of machines, equip-
ment, pieces of apparatus and instruments are put into production iu the na-
; tional econonry. Approsimately the same number of inventions and efficiency
proposals are used in production. In 1979 alone pe~formance of ineasures
ir
~f.
~ .
~ ' 16
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related to new technology in the industrial sector made 592,000 workers avail-
- able, and the resulting economic benefit amounted to 4,479 million rubles.
The sum total of the savings froffi using inventions and efficiency proposals in
1979 was 6.3 billion rubles.
Yet an analysis of the conditions for applying scientific-technical advances
indicates shortcomings in this field which are holding back technical progress
and the rates of development of production. The output-capital ratio in the
industrial sector was 17.5 percent lower in 1978 than it was in 1970.* The
~ average annual growth rate of the productivity of social labor was 5 percent
between 1966 and 1979, as against 7.9 percent over the period 1951-1965.**
The rates of reduction of production cost have been slowing down in a number
of sectors of the economy. According to available ca~culations, every per-
centage point of growth of the national income during the 9th and to some ex-
tent the lOth Five Year Plans required a 1.4-percent growth of productive cap-
ital, a 1.2-percent growth of physical inputs and a 4.2-perceLt growth of la-
bor input.
There are several reasox~s for such a contradictory situation. Let us dwell on
some of them. Scientific-technical development is usually approached from the
standpoint of the established practice of current planning of production on
the basis of the level already attained. Autonomous planning of the develop-
ment of science and technology predominate is not sufficiently linked to
the ultimate socioeconomic results.
Shortcomings in the organization of capital investments and capital construc=
tion, especially the lengthy periods of time (on the order of 8-12 years) for
erecting new enterprises, sharply reduce the real return from scientific-tech-
= nical progress. Not uncommonly a progressive design of a new construction
prnject, one that meets the highest r~quiremeats of the world level, by the
time construction is completed and rated capacity is fully attained is already
"passe" when it begins to function. In renewing the fixed capital of the na-
_ tional economy by nearly 50 percent in a period of 8-10 years, we still are
� :~ot raisi.ng the efficiency of capital investments. It is precisely here, in
~ur opinion, that the principal cause 3s to be found for the inadequate return
from scientific-technical progress.
So far a unified system of criteria laas still not been~built up for evaluating
_ the efficiency of economic measures and alterna~ive versions of new technol-
_ ogy. The economic interests of developers, producers and consumers of new
technology are often at cross purposes. Th~ existing organizational forms for
management of scientif.Lc-technical progress are aot always appropriate to the
specific nature of the processes taking place.
Improvement of thQ economic mechanism for managing scientific-technical prog-
ress is a complex prob'lem with many levels and will yield the expected ults
only under the conditions of unswerving implementation of a consistent sa_
* V. Krasovskiy, "Economic Potential: The Unused Portion and the Return,"
VOPROSY EKONOMIRI, No 2, 1981, p 92.
B. Plyshevskiy, "Production Efficiency and the Price," VOPROSY EKONOMIKI,
No 2, 1981, p 19.
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syn.;:hronized measures to implement the principles governing the conduc�t of
economic activity which were set forth by the 2tith CPSU Congress, as a body
and in their relationship to one another.
~ Strengthening the Orientation of Plans for Scientific-Technical Developmenti
Toward Specific Ob3ectives
The planning of science and technology embraces two directions: the first is
related to the partial improvements of designs of machines, the creation of
new modifications of instruments and equipment, the improvement of the quali-
tative parameters of a product, and so on; the second includes the transition
- to fundamentally new technological systems, qualitatively new generations of
machines, and new models and types of products.
The f irst direction in scientific-technical progress is predominant in pro3ect
~ planning practice: traditional technology long ago mastered is partially im-
~ proved and manufactured in larger quantities; equipment which has become wide-
spread in other countries is purchased. There is no dout~t that the potentiaZ
for economy to be achieved along this line of scientific-technical progress is
still far from exhausted. The emergence of new and more powerful models of
turbines, tractors, dieael engines, machine tools and other types of machines
and equipment considerably reduces the product's materials intensiveaess and
capital int~naiveness and raises labor productivity. But it must be taken
into account that this yields a beneftt only in the first years of the im-
provement of the traditional technology. In the subsequent stages it drops,
and when a certain limit is reached, use of traditionacl technological princi-
ples not uncommonxy results in an outright loss.*
This situation can be illustrated with the example of the increasing size of
steam turbines and the rise of their parameters. The transition from turbines
with a capacity of 50,000 kw aud steam parameters of 90 atmospheres and 530� C
to turbines with a capacity of 500,OOQ-800,000 kw and steam parameters of 240
atmospheres and 580� C makes it possible to decrease the coneumption of stand~
- ard fuel on the order of 80 grams per kilowatt-hour of electric power. But
this rise of fuel economy, as an analysis has shown, occurs extremely unevenly.
Of the 80 grams of fuel saved, 72 grams, or 90 percent, are achieved in the
transition to turbines with a capacity of 300,000 kw, and only 10 percent
through the transition to larger t~urbines (500,000 and 800,000 kw). The econ-
omy from raising the steam parameters also has a tendency to dwindle, and this
results from the existence of a definite techaological limit on the riae of
the efficiency of thermal machines. At the same time the cost.of the larger
unit increases in inverse proportion to the fuel economy achieved.** Obvi-
ously a further rise in the efficiency of generating el~ectric power can be
achieved not by increasing the unit capacitiea of the machines now in opera-
tion, but by m~king the transition to a fundamentally new.techno~ogy fer
* T. Khachaturov, ffiember of the academy, and D. L'vov,'"Speeding Up Scien-
tific-Technical Progress and Raising the Efficiency of Social Production,"
VOPROSY EKONOMIKI, No 8, 1966, p 13.
M. A. Vilenskiy, "Po leninskomu puti sploshnoy elektrifikataii" [On Lenin's
Road ta Complete Electri~ication], Izdatel'stvo "Nauka," 1969, pp 67-68.
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direct energy conversion and to apparatus that is qua'itatively new when com-
pared to the design of present-day thermal turbines.
When only the first direction of scientific-technical progress is used, the
rise in costs and prices of new technology created on the principle of mod-
ernization begins to exceed the increase in the effective benefit--productiv-
- ity, capacity, and so on. For instance, for one of the recent models of a
grain combine this ratio was 1.4:1, for a new tomato-picking combine it was
1.8:1, for new models of 25-ton trucks it was 1.6:1, and~for a universal lathe
2:1. The price per unit capacity of power transformers has risen 29 percent,
that of steam turbines 22 percent, and so on.
Finally, ttYere is a~certain potential for economy that can be used even within
the limits of the first directioa of scientific-technical progress, since 3.ts
size is such that it cannot be altog~ther ex:~austed during one or two 5-year
periods. But at the same time this line of technical progress cannot be re-
garded as the strategic line, since the possibilities for further improvement
of a major portion of traditional equipment and technology are limited.
The basic potential for economy lies in organic combination of both the first
and second lines of scientific-technical progress. From the moment it is put
into production in industry and replaces the old technology, the new technol-
ogy augments the overa~l potential for efficiency in pursuing the first line
of progress. In this respecfi it possesses a kind of dual potential. It is a
question of a prior orientation toward creation of fundamentally new equipment
and processes and then subsequently improving them over a certain period of
time. The second direction opens up possibilities for comprehensive intensi-
fication of production, which is accompanied by a substantial rise of labor
productivity, economy of physical resources, improved ~nse of productive capi-
tal and a rise of the economic benefit to the national ~=~~~onomy.
If both lines of scientific-technical progress are to be pursued, the system
for planned guidance of the process of creaCing scientific-technical advances
and their use in production is in need of further improvement. This will
bring about a redistribution of resources, a change in the sectoral structure
of the economy, and the perf.ormance of new measures to improve the economic
- mechanism for management of production. It evidently will take one or two 5-
year periods to carry out this kind of restructuring of planning. In any
case, the real economic benefit from it will be obtained beyond the limits of
the llth Five Year Plan. But this is a strategic gain, one that grows in its
- scale in�economic consequences. It cannot be compared at all to the current
saving that is achieved by i.ncreasing the size of the production run of exist-
- ing technology, a saving that dwindles as time gasses.
That is why even today we should define thE possible outlines of changes in
the economy and also evaluate the socioeconomic consequences and neceseary
conditions of carrying out the state's long-range technical policy. The first
step on that road should be developing a qualitatively ne~w conception of long-
range socioeconomic and acientific-technical development. For instanc~, when
' one of the versions of the long-range development of the ec~nomy over a 20-
year period was being worked out, a 2.5-fold increase in the size of the
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nationa? income used for consumption and accumuJation was pro3ected. Certain
changes were also outlined in the compositi~n of th~ final product related to
redistribut~on of res~urces ~o.the advantage of the nonproduction sphere: for
example, an increase in the share~of fixed nonproductive capital to 37 percent
of the total amount of fixed capital, while the share of workers employed in
the nonproduction sphere rose frpm 26 t~ 36.3 percent. Uver the 20 years un-
der consideration the volume of resources used for consumption was to increase
2.7-fold.
Such high growth rates of the final social product and the associated struc-
tural changes cannot~be achieved solely oa the basis of the rirst line of aci-
entific-technical progress. In large part they in fact di:tate use of the
seeond direction. That is whx the next step in carrying out technical policy
should be to select and substantiate fundamentally new technological proce-
dures. This problem can be solved within the.framework of the comprehensive
program for scientific-technical progress provided that the methodological ba-
sis for working it out is expanded, that qualitatively new elements are in-
cluded in it to guarantee the ob3ective economic ~ustification of the develop-
ment strategies which are chosen. It is a question ~of building a model of
scientiftc-technical progress aggregated at the level of the national economy
and of including it in all forecasting calculatiionse
The ultimate goals of long-range socioeconomic dev.elopment and the pro~ected
size and composition of the final social praduct ahould be taken as the points
~of departure in substantiating the requiremente that must be met by the tech-
nical method~ of achieving them. Each of the possible technical methods must
guarantee a growth of the final produc~ of the given magnitude, but taith dif-
fering inputs of labor, physical resources and productive capital, that is,
they would be characterized by their particular indicators of efficiency: la-
bor intensiveness, capital intensiveness and materials intenaiveness from the
standpoint of the national economy. The future level of the specific indica-
tors dependa on the on~ hand on the existing (forecast) dynamic behavior of
resources and changes in the material and technical base of production, while
on the other it depends on the possible discrepancy between the conditions to
be ensured by those methods and the final neer.i of the national economy. The
degree of that discrepancy f igures as a form of society's social assignment
concerning the development of science and technology (the second direction of
scientific-technical progress). In essence the social assignment results from
the fact that performance of a portion of the tasks of long-range development
is not gu~ranteed by the scientific and technical spadework already done. But
by no means does this signify that that spadework exhausts all the possibili-
ties for science and technology that exiaC. Reliance on the spadework that
exists is determined to a considerable extent by the inertial nature of the
technical policy of the sectora of the economy. As experience has shown, ma-
3or developmenta not uncommonly prove to be outside the limits of that policy.
and their practical reai~zation is held~back because of the lack of backing
for wha~ might be called the rear experimental echelons of academic science.
An equally important impetus for the development of new ideaa atid for defining
possible ways of realizing them in practice would be to present to "big aci-
ence" requirements imposed on the level of indicators of labor intensiveness,
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~ capital inrensivenesa and materials.intensiveness from the standpoint of the
national economy insc;~ar as that level is not assured by the scientific~tech-
nical spadeGOrk. Unless that level is attained, no way can be found to full
realization of the socioeconomic goals. It has to be taken into account~that
an interrelationship exists between th~ ob3ectives and the means of realizing
them. The goals do not emerge in and of themselves, but under the impact of a
large number of factors, among which a substantial role is played by the ex-
isting 1eve1 of social technology and by a reckoning of the potential which
science realis.~ically possesses. Changes in the system of goal-oriented de-
velopment exert in turn an influence on the technological methods in the sec-
tors of the economy, speed up or slow down the output of resources, and so on.
The existence of this interrelationship between objectives and means does not
vacate the general proposition of the purposive orientation of scientific-
technical progress.
As a practical matter it follows from that proposition that the initial compo-
nent of the long-range plan for development of science and technology must be
not the spadework development that already exists, but promising alternatives
- for changing specific indicators of efficiency (labor intensiveness from the
standpoint of the national economy or productivity, capitai intensiveness or
the output-capital ratio, and the materials intensiveness of the social prod-
uct), which furnish the economy access to achieving the socioeconomic goals.
and which meet the forecast restrictions on resources. But the whole point is
that the dynamic behavior of those indicators is not as a rule all in the same
- direction. Improvement of one indicator of social technology is usually ac-
companied by a worsening of some other indicator. For instance, productivity
= might rise, and the output-capital ratio dxop, or the latter's increase could
in turn be accompanied by a rise in materials intensiveness, and so on. What
is needed, then, is a kind of economic resultant, which would indicate how
the summari indicator of production efficiency would behave given a particular
i;ynamic beliavior of the indicator of social technology. Total expenditures of
labor (live and embodied) required to achieve a given production result are
naturally taken as such a resultant. But appropriate weighting factors are
necessury to the transition from specific efficiency indicaCors to a aummary
indicator or to their economic resultant.
There are various methods for this kind of weighting. For example, it has
been proposed that inputs of past labor be converted to live labor by means of
appropriate work equivalents. A method of imputed costs has become widespread
in our pro3ect planning practice in which the rate of efficiency of capital
investments figures as the coefficient for reducing heterogeneous cost ele- .
ments (current and capital) to a common denomtnator. In the theory of optimum
planning a modified form of imputed costs is in use which relies on so-called
objectively conditioned assessments of heterogeneous economic resources.
Without entering into an analysis of inethods of imputing costs, we will note
what they have in common--heterogeneous cost elements $re reduced to a common
denominator, for which purposA total labor expenditures are used. To deter-
mine the latter it is expedient to use rates of efficiency in the employment
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of resources (labor resources, capital investments, etc.) which can be ob-
tained from the structure of relevant macroeconomic models.*
Specific indicators of efficiency are converted by means of these rates to a
9ingle aummary indicator--the benefit of scientific-technical progress to the
national economy. In general form this indicator represents the growth of the
economy of resources over two comparable periods (o~e year compared to an-
other taken as the base, or the first year of the 5-year plan compared to the
last, and so on). The economy itself achieved in a particular year of the
planning frame is determined by the difference in the.net output and imputed
inputs of resources (labor investments in fixed productive capital). The pe-
culiarity of this indicator is that the economy of resources related to use of
the version for retooling production that is under consideration is compared
to the economy which would be obtained if the planned magnitude of the fi.nal
output were produced under conditions of an unchanged technical base, that is,
if the level of the specific indicatora of the e~ficiency of utilization of
economic resources did not change. We regard the indicator of the economic
benefit to the national economy, then, as a summary indicator of scientific-
technical progress.
Wherever the benefit is higher, other conditions being equal, the le~el of
scientific-technical progress is also higher. If the level of the specific
indicators does not change, the benef it of scientific-technical progress wi11
be zero; that is, there is in fact no progress in economic terms. But this
does not mean, of course, that scientific-technical progress ceases to exist
as a process of refinement of knowledge and of its materialization in the form
of improved implements and sub3ects of labor and improved forme for organiza-
tion and management of production. In this case we a're talking about economi-
cally progressive new technology that reduces inputs of resources for a given
volume of production. It is this task tha.t scientific-technical progress 3.s
expected to perform for social production as a whole, for its sectors, or for
major regional industrial complexes. And it does not count here that cerCain
measures in the creation and use of new technology for a specialized or some
other particular purpose may not yield a direct economic benefit.
Society cannot allow a drop in the ultimate efficiency as a whole for the sum
total of ineasures pertaining to new technology. This means that the require-
ments imposed on the bulk of the new technology realized in the national econ-
omy must be higher so that the economic benefit obtained from it appreciably
exceeds the losses from use of specialized equipment which does not yield a
direct economic return. These higher requirements are reflected in the stand-
ard rates of efficiency of utilization of economic resources, which are uni-
form for a11 sectors of the national economy, in the sectoral differentiation
of the indicators of social technology, in the differing rates of development
of sectors which determine that sectoral structure of the economy which is
best from the standpoint of the criterion aelected (maximum benefit of scien-
tific-technical progress).
* S. M. Movshovich and Yu. V. Ovsiyenko, "On Definitions and Use of the Rate
of Efficiency of Capital Investments," EKONOMIKA I MATEMATICHESKIYE METODY,
- Vol XIII, No 4, 1977.
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J When the p~oblem is stated in this way, at the.leve'! af a model the iterative
vrocedure can be performed to select.the best variant of social technology,
inclucl~ng a unit devoted to expert evaluation in order to settle questions
pertaining to possible reconciliatian of the indicators of goal-oriented de-
velopment should they improve by comparison with the social standards, norms
and indicators of economic~efficiency. The indicators and norms of the effi-
cient utilization of productive resources in the best alternative are taken as
- the reference figures or the social assignment for development of science and
technology in the relevant sectors of the economy. Their level and rate of
development determine proportions in the distribution of resources among the
sectors of the economy. So, in assigning values to them in the plan, we are
thereby determinir.g as well the total volume of appropriations required to
achieve the goals that have been set on the new or$anizational and technical
foundation. Within t??e limits of those appropria,tions it would seem advisable
to create an all-union fund for scientific-technical progress. The special-
purpose orientation of that fund presupposes unity in carrying out technical
_ and investment policy and a splicing of the plan for scientific-technical de-
velopment with the capital construction plaia,
The transit~ion to goal-oriented development of science and technology also ne-
cessitates a n?-,~ approach to methods in drafting long-range and medium-term
normative planning documents in the form of a summarization of target programs
for scientif ic-technical progress. In such a scheme the following mechanism
might be adopted in composing tt:~.m. Once they receiv~ the reference figures,
the sectors would draf t alternative versions of programs for scientific-tech-
nical and organizational development of production, indicating deadlines, the
volume of capital investments, their distribution in time aazd among partici-
pan~s, and also the volume of other resources which are in short supply. Each
such program should ultimately gua.rantee the creation of integral technologi-
c.al systems encompassing an entire production process and based on an interre-
lated system of ~achines.
The justification of the alternative versions of the programs would take into
account the requirements of the target-program method in such a way that the
assignments concerning the volume and mix of products and services produced by
the sector would take the form of fixed resultant figures. The efficiency
criterion would be the minimum standard costs for attainment of the final fig-
ures, in which the relevant standard efficiencies in utilization of productive
' resources are taken as constraints. The indicators of the sector's capital
intensiveness and labor intensiveness, determined by the reference figures,
would reflect only the lower boundary �or the sectors. This means that if a
version can be proposed which within the limits of the given constraints en-
sures lower labor intensiveness and capital intensiveness (than was envisaged
by the reference figures and also by other possible alternative versions of
the programs), then preference must be given to that version.
The figures of the best version must be sub3ected to analysis from the stand-
_ point of the interrela~ionship it ensures between sectoral and regional pro-
duction tasks and also with respect to their fit with its other indicators
- (important from the standpoint of the sector). Once the different versions of
the sector's programs have been worked up, the best of them are submitted to
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the d3.rective planning authorities--USSR Gosplan and the State Committee for
Science and Technology, which analyze, reconcile and balance the sectoral pro-
grams for scientific-technical development c~ith respect to resources, stages
and deadlines. Intersector target programs of scientific-technical progress
are consequently composed, and their summary comprises the national-economic
level of the plan for development of science and technology. This allows for
iteration in working out the program section: in case of a clash with respect
to resources or deadlines, the sectors receive corrected reference figures.
This continues until comple~e internal consistency is obtained with respect to
resources, deadlines and the physical mix, in accordance with the system of
socioeconomic goals of the long-range plan.
The resources required to carry out the program section of the plan for devel-
opment of science and technology.must be reconciled with the resources of the
all-union fund for scientific-technical progress. If balance with respecti to
physical resources and personnel is to be maintained within that fund, it is
obviously advisable to work out those resources in a breakdown by sectors and
also a breakdown by regional industrial complexes. From the very outset,
then, each sector and ma~or regional industrial complex is assignesl that por-
- tion of the resources of the all-union fund which can be used for development
of that sector or complex in the context of the interests of the national
economy. I~ is that portion which figures as the first restriction in selec-
- tion of the best alternative version af the program for scientific-technical
development of the sector or regional industrial complex.
The transition to target-program methods o� planning acientific-technical
progress makes it possible to solve still another urgent problem with the ap-
propriate method. This is the comprehenaive development of systems of ma-
chines that cut across sectors and guarantee that an entire production cycle,
including not only the basic processes, but also auxiliary processes, is
placed on a new technical basis. To that end it is advisable to plan crea.~:ion
of systems of interrelated machines for integral technological processes than
the creation of individual ma.chines or types of equipment. In this case as-
signments for new technology will at best have an impact on the performance
indicators of the enterprise applying that technology. Of course, every fin-
ished set of machines that is developed must be introduced at an industrial
facility. It is only under production conditivns that it is possible to de-
termine what gain in productivity, specific investments, the output-capital
ratio, consumption of materials and energy, and so on, will come from use of
the new complex of machinES or the system of those machines and that one can
ma.ke a comprehensive evaluation of the ultimate efficiency of the new technol-
ogy.
- Improvement of Economic Methods of Managing Scientific-Technical Progress
The prerequisites have now come about fur the shaping and further improvement
of the economic mechanism for managing scientific-technical progress as the
basis for perfc~rming long-range socioeconomic tasks. Experience has been ac-
_ ' quired and summarized in carrying out complex and large-acale scientific-tech-
nical programs, and many progressive conceptions for improvement of the eco-
nomic mechanism of management have been discovered and defined. Experiments
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have been conducted and serious steps have been taken toward a radical im-
provement of the~economic manage~ent of the economy as a whole.
But the reorientation of the economic mechanism in the direction of scien-
tific-technical progress is an extremely complicated task. Its accomplishment
calls for a set ot 3nterrelated measures to be carried out in stages. In car-
rying out the CPSU's economic strategy each of these stages is a link deter-
mining the directions of the state's economic and technical policy in the cor-
responding time interval. Carrying out the measures envisaged by the decree
of the CPSU Central Committee and USSR Council of Ministers entitled "On Im-
proving Planning and Strengthening the Influence of the Economic Mechanism
on Increasing Production Efficiency and Work Quality" is an important link in
that chain.
Now the task is stated this way: The economic mechanism in all its parts must
function according to uniform methodological principles of increasing ult~.mate
production efficiency from the standpoint of the national economy. Perfor-
mance of that task will require creation of certain conditions, the first of
which are these: correlating the plan for devel~pment of science and technol-
- ogy with the capital construction plan, making the transition to normative
methods of resource allocation, strengthening the relationship between prices
and the plan, orienting all levels of management toward increasing the effec-
tiveness of scientific-technical progress, making the transition to an incen-
tive system based on the final re5ults for the national economy, gra~3ually
broadening the forms of financing that have been adopted, and guaranteeing a
- balanced linka�e between f~nancial plans and production plans. We will exam-
ine some of these conditions.
Correlating the Plan for Development of Science and Technology With the Capi-
tal Construction Plan. The scientific-technical progress which will determine
the technical level of production and its material and technical base in 10-15
years is taking material form in the cap3.ta1 investments being carried out to-
day. Unless the correct orientation of capital investments is ensured, and
the entire investment process bent to the task of raising production effi-
ciency, it will be hardly possible to expect an appreciable improvement of the
final indicators of economic growth in the future.
At present 70 percent of capital investments are assigned to reconstruction
and retooling of production. At the same time the share of output that meets
the requirements of the superior quality category is still disproportionately
low. The plan for development of science and technology has to become the
initial base of the capital construction plan. The bulk of capital invest-
ments should be set aside to carry out scientific-technical programs as the
vehicles of new scientific-technical developments. The total volume of those
investments might even serve as the principal source for formation of the all-
- union fund for scientific-technical grogress. It would be best to use the re-
sources of that fund to work on the most important scien~ific-technical prob-
1ems, to carry out target scientific-technical programs, to create integral
technological systems and to apply especially important and efficient inven-
- tions and engineering developments.
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In this connection one cannot but touch upon the problem of resource alloca-
tion in the various stages of the unified process of creating ne2a techaology:
research (including basic science as well), applied pro3ects and application
of new technology. At the present time one of the stages of the cycle has un-
dergone the greatest development, that stage in which a disproportionately
large technical backlog of innovations is being created for subsequent appli--
cation. But because the plant and equipment of pilot plants is inadequate,
they have been unable to cope with this flow of technical innovations being
created. Not uncommo~ly the result is inefficient expenditure af funds for
development of more and more new designs on the one hand, while on the other
it is not possible to thoroughly perfect a design before it is launched into
series production. That means numerous ad~ustments and finishing touches dur-
ing the stage of initial application, which makes the experimental prototypes
and first production runs more expensive. Often, moreover, troubleshooting
and elimination of deficiencies in this stage are �100-fold or 1,000-fold more
expensive than it would be to refine the design more thoroughly in the aecond ~
stage.
Nor are the necessary rates of development being altogether guaranteed even in
the first stage. Meanwhile it is�here that work is being done on the moat im-
portant key problems of science, whose soZution is most crucial to development
of technology, of the economy, of production and of science itself. I_i ea-
sence it is here that the long-range strategic ~padework of scientific-techni-
cal progress is built up. Equipping this stage of the cycle, then, yields a
sizable benefit, one which is not defined by a reduction in expenditures of
labor, but by a reduction in the completion time af scientific research pro3-
ects and the time for conducting scientific-technical experiments. It is ap-
parent that the level of the amount of capita'1 per scientist employed in sci-
ence must in time approach the level of the capital-worker ratio in industry.
' The bulk of the rssources of the all-union fund for scientific-technical prog-
ress should be co~itted to performing the assignments of the natioaal eco-
nomic plan for developmen~ of science and technology. But it would be wrong
to think that the remainder of the capital inveatments would in this scheme be
used without taking into account the requirements of scientific-technical
progress. Were that the case, a tremendous number of ineasures for new tech-
- nology and for improvement of organization and management would not be. in-
cluded in the overall mechanism for increasing production ~fficiency. Capital
investments lying outside the programs would be used mainly to carry out such
~ measures. This is guaranteed by the fact that the indicators and economic
norms of the plan for development of science and technology run through all
the other sections of the plan and are the initial basis for their composi-
tion. The norms for efficient utilization of economic resources are assigned
a special role in this mechanism.
Making the Tranaition to Normative Methods of Resource Allocatioa. The demand
for capital investments exceeds the real capabilities of capital construction.
The principal reason for this is the disagreement between sources of financing
and normative acts (used in construction and in project plans and estimates)
or~ the one hand and the capital construction plan on the other. The volumes
of financing are far greater than theix real backing, the estimated cost is
exceeded twofold or threefold, and construction times considerably exceed the
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standard allo~rances. All of this causes inconsistency bezween the physical
and value aspects of the plan. The situation can be changed easentially if
the assigned rate of efficiency of investments is set forth in the plan. In
this case the standard rate of efficiency will reflect the optimum balance be-
tween supply and demand for a generic resource like capital investments. Ati
the same time this standard makes it possible to determine the scale of inecha-
nization of laborious processes and introduction of highly productiive n~w
technological sqstems. In this sense the standard efficiency of capital in-
vestments is a kind of "vehicle" of technical progress. That is why the ori-
entation toward the level of this standard signifies an orientation toward in-
creasing the effectiveness of scientific-technical progress and toward en-
forcement of the balance with respect to resources and finances achieved in
the plan. ~~Ptrrsuing the course of raising production efficiency presu~'pose~
that allocation of the relevant resources to the particular production unit
unfailingly takes into account the greatest efficiency of their utilization
from the standpoint of the national economy. To that end capital investments
must be assigned in accordance with the standard efficiency of capital invest-
ments set forth in the plan.
The following must be correlated to the level of the standard coefficient of
investment~efficiency: the level of the rate of interest on credit, the
charge for newly added capacities, wholesale prices, rate schedules and other
economic norms which are now established independently of the plan. It ie
evident that the charge on assets comprising construction work unfinished be-
yond the assigned deadlines must be set at the same level as the standard rate
of efficiency. Proceedi~~g from there, the estimated construction cost ought
~ to be determined so as to take into account the charge on unfinished construc-
tion.
The proposed procedure for resource allocatiom would in our view ensure uni-
form requirements as to the efficiency of their utiliza~ion regardless of
sources of financing. The allocation of resources under the programs and out-
side them would be approached fxom the standpoint of the contribution which
the measures make, either under~the program or outside it, to the growth of
the benefit of scientific-technical progress. All of this will make it possi-
ble to raise substantially the level of internal consistency of plans and to
diminish the problem of the shortage of resources.
Orienting the Economic Mechanism Toward Final Results. A maximum rise of pro-
duction efficiency cannot be achieved unless we know in specific terms what
that growth expresses and what kind of indicators describe it. T'he official
- methods for evaluation of the efficiency of economic measures not uncommonly
eontain contrad3.ctory recommendations. At present for all practical purposes
there do not exist even two methods documEnts that are altogether identical in
the methods of computing the economic benefit from the standpoint of the na-
_ tional economy, in the system of norms used, in the list of indicators to be
taken into account, and so on. The efficiency of capital investments and of
new technology is evaluated in different ways, as though they were different
factors unrelated to one another. The problem is compounded by the fact that
yet another system of evaluations is used in cost accounting: such criteria
as prof:lt, production cost, profitability, etc. ~
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i
~
� All of thts acts as a serious drag on carrying out measures to raise the level
; of planning work in the national economy envisaged by the decree on improve-
j ment of the economic mechanism. The economic mechanism must function in all
' its parts on uniform methods principles reflecting the requirements of raieing
the ultimate efficiency of production froffi the standpoiut of the national
, economy. To that end a uniform methodology for calculating the benefit of
scientific-technical progress should be applied in planning, in price setting
i and in economic production incentives. This indicator should figure as a
start-to-finish iadicator extending over all levels when decisions are being
~ made on creation and application of new technology. But modification of the ~
i indicator of the benefit of scientific-technical progress is necessary to en-
suring that calculations of the beaefit to be determined at di.fferent levels
; can be compared and summarized.
! When specific measures to apply new technology are being compared, this indi-
i cator is modified to take the form of the well-known formula of the difference
, between the upper limit of the price and the annual impute-l costs of produc-
tion of the new technology. In the special case when the product remaine un-
; changed in its use characteristics and quality, the gener.�al formula of the
benefit of performing the specific measures concerning n~ew technology is modi-
- fied to become the formula of the d~fference between annual imputed costs. In
~ the more general case when there is a change not orily in the quality, but also
the assortment of the product manufactured, one must deal with a diff~rent
type of criterion--the growth of net profit to Che national econonry. At the
~ level of sectors and the national economy as a whole the indicator of the
growth of normative net output figures as the criterion that implements the
, principle of maxi~izing the benefit of scientific-technical progrese.
' A large number of problems have to be solved to implement uniform principles
~ of economic computations based on the benefit of scientific-technical prog-
~ ress. First of all a direct relation has to be eatablished between material
: incentives and the final results of economic activity. This applies both to
; the wage and also to all forms of material incentives. This approach must en-
sure a decisive eradication of all forms of leveling in remuneration and the
; awarding of bonuses. ~
_ Ths question of broader use of the standard wage deserves attention in this
connection. It would seem to be worthwhile to also discuss the question of
introducing two levels of wages--the guaranteed wage, reflecting occupational,
sectoral and social peculiarities in remuneration of labor, and one that would
not be guaranteed and would be created from the portion of the economic bene-
fit of scientific-technical progress and would figure as a supplemental wage
paid specifically for the final result of production. It is important that in
' this procedure for forming a supplemental fund for remuneration of labor that
~ its size depend directly on the economp of all types of economic reaourcea:
physical and labor reeources and capital investments.
~ It is important to resolve the question of shares in the distribution of in-
~ come. The standard charge.on economic resources employed should be collected
~ from the enterpriae, and everything it realizes beyond that (net pro~it)
; should be divided by shares between the enterprise and the budget. Formation
i
~
; 28
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of economic production incentive funds ought to be made directlq and immedi-
ately dependent upon the size of the benefit (the growth of net profit).
A number of other problema also need to be solved to introduce a uniform
methodology for calculating the benefit of scientific-technical progresa; the
following, to be specific, are indispensable: gradual reorientation in the
encouragement of quality from volume indicators (the share of output in the
superior-quality category) to the benefit of technical progress, which re- �
flects the economic gain of the consumer of the new product; expansion of the
rights of all-union industrial, production and scientific-production associa-
_ tions in determination of financial resources, in introduction of specific
forms uf remuneration of labor, in the distribution of resources among eco-
nomic incentive funds, and in conclusion of direct long-term business con-
tracts; formation of centralized economic incentive funds and compensation
reserves within entities for administration of the programs (the size of these
funds might be sub~ect to a norm stated in the percentage of the total value
of pro~ects under the program, and the deductions to them might be made from
the resources of consumers or from the state budget).
Accomplishment of these measures is bound up with overcoming a number of dif -
ficulties, and time and resources will have tc be spent. But their perfor-
mance is in our view an important condition for raising the efficiency of so-
cial production and for performing the fundamental task of organically combin-
ing the advances of the scientific-technical revolution with the advantages of
socialism.
COE'YRIGHT: Izdatel'stvo "Pravda", "Voprosy ekonomiki", 1981
7045
- CSO: 1820 END
29
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