National Economic Optimum

Optimum, National Economic

 

the optimum variant for the use of resources in the public domain. The attainment of a national economic optimum is possible only under public ownership of the means of production. Finding the optimum is the basic task of economic planning and is equivalent to selecting the optimum system of economic functioning. In keeping with the highest goal of socialism, the best system of economic functioning is that which most fully satisfies the needs of society. These include such requirements as food, clothing, housing, medical service, and recreation and also production requirements, which are continuously developing.

Several variables enter into the complex task of calculating a national economic optimum under dynamic conditions. Thus, for example, planners must consider the level at which current and potential needs can be met, as well as the existence of various uncertainties associated with such problematic areas as the international situation, rate of development of science and technology, and meteorological conditions. It is also necessary to take into account the incommensurability of indices characterizing the degree to which different kinds of social needs are being satisfied.

Needs, production, and consumption are closely interrelated. Society continually expends a significant part of its resources on the requirements of production to satisfy its other needs. However, evaluation of the variants of economic functioning must be carried out according to finite indicators that characterize the satisfaction of nonproduction needs (with defined limitations on production potentials at the end of a specified time T).

Society’s resources are limited, and therefore certain needs are always unsatisfied. In the process of finding the optimal plan variant, it is necessary to arrive at the variant that is most preferable from the point of view of the interests of society, that is, to establish the most rational degree of satisfaction of particular needs. If one is to estimate the degree of satisfaction of a particular social need by the indicator Wi for i = 1,2,…, n, where n is the number of requirements, then each variant of use of resources will be characterized by an aggregate of n indicators. In different years of the specified period of time T, values of Wi may differ; thus it becomes necessary to characterize each variant by a set of aggregates of indicators Wt1, Wt2, …, Wtn, where t is the number of the particular year in the specified period (t = 1, 2, …, T). Numerical values of indicators Wti depend on conditions that may develop in the future and that in planning are to a large degree undefined. It is necessary to decide whether it is better to assure an average level of satisfaction of a particular need under any conditions or to seek total satisfaction of requirements under favorable conditions, with a risk of obtaining lower than median results if circumstances turn out to be unfavorable.

Consideration of uncertainties is an important factor in evaluating the content of the national economic optimum. Various methods of comparing alternatives under conditions of indeterminacy are studied in systems analysis and operations research.

In conjunction with the impossibility of reducing contradictory indicators characterizing the degree of satisfaction of separate social needs to a single metric scale, plan variants must be compared with respect to aggregate values for a large number of indicators. They can be compared only according to rank order and the corresponding criterion of “better-worse.” An ordinal scale (scale of preferences) for use in choosing among variant resolutions must be based on polls of experts and the preferences of managers responsible for making decisions. The results of mass sociological surveys should also be considered. Given an ordinal scale reflecting social preferences in relation to various combinations of values of indicators that characterize the degree to which particular social needs are met, different variants of economic functioning can be compared, and the best can be chosen.

The expression of social and economic goals in quantitative terms is one of the most important requirements for attaining the national economic optimum. In order to obtain this quantitative data, information is required on the expenditures proposed for the attainment of each individual goal and on the relative social utility of various combinations of goals. In the process of quantifying needs, various combinations of goals that can be achieved with present and future resources are examined, and the most desirable mix is selected.

One of the major requirements for attaining the national economic optimum is a comparison of the outcomes and costs that are expected for alternative patterns of allocating resources to meet the most pressing social and economic needs and for alternative decisions regarding the distribution of production tasks and resources among the sectors of the economy. There are a number of other views on the problem of the national economic optimum. (See A Discussion on Optimum Planning, Moscow, 1966; Source Materials, 1968.)

REFERENCES

Optimal’noe planirovanie i sovershenstvovanie upravleniia narodnym khoziaistvom (collection of articles). Moscow, 1969.
Problemy narodnokhoziaistvennogo optimuma (anthology). Novosibirsk, 1973.

IU. S. SOLNYSHKOV

Encyclopedia browser ?
Full browser ?