Oskar R. Lange

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

Contents 1 Personal life 2 Academic contributions 3 See also 4 Notes 5 Bibliography 6 References 7 External links

[edit] Personal life

Lange was the son of a textile merchant. He studied law and economics at Poznań and Kraków, where he graduated in 1928. In 1934, a Rockefeller fellowship brought him to England, from where he emigrated to the United States in 1937. He then became a professor at the University of Chicago in 1938, and was naturalized U.S. citizen in 1943. Towards the end of World War II, in a highly controversial move, Lange broke with the Polish government-in-exile in London and transferred his support to the Lublin Committee sponsored by the Soviet Union. Lange served as a go-between Franklin Delano Roosevelt and Joseph Stalin during the post-war discussion on Poland. Lange returned to the United States at the end of May, met with Free Polish London Exile Prime Minister Stanisław Mikołajczyk, who happened then to be in Washington, D.C., and stressed how reasonable Joseph Stalin was prepared to be, and asked the State Department to put pressure on the exiled Poles. Lange's covername with the KGB was FRIEND. He was alleged to have been recruited into the NKVD by Boleslaw Gebert^[1]

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

In 1974, the Wrocław University of Economics was named after Lange (the official Polish name is Akademia Ekonomiczna we Wrocławiu im. Oskara Langego).

[edit] Academic contributions

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

In this book, Lange advocated the use of market tools (especially the neoclassical pricing theory) in economic planning of socialism and Marxism. He proposed that central planning boards set prices through "trial and error," making adjustments as shortages and surpluses occurred rather than relying on a free price mechanism. If there were shortages, prices would be raised; if there were surpluses, prices would be lowered. Raising the prices would encourage businesses to increase production, driven by their desire to increase their profits, and in doing so eliminate the shortage. Lowering the prices would encourage businesses to curtail production in order to prevent losses, which would eliminate the surplus. Therefore, it would be a simulation of the market mechanism, which Lange thought would be capable of effectively managing supply and demand. Proponents of this idea argue that it combines the advantages of a market economy with those of socialist economics.

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

His works provided the earliest model of market socialism.^[2]

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

[edit] See also

• Lange Model

[edit] Notes

[edit] Bibliography

• "The Determinateness of the Utility Function", 1934, RES.
• "Marxian Economics and Modern Economic Theory", 1935.
• "The Place of Interest in the Theory of Production", 1936, RES
• "On the Economic Theory of Socialism, 1936, RES.
• "On the Economic Theory of Socialism, I & II", 1936, 1937.
• On the Economic Theory of Socialism, 1938.
• "The Rate of Interest and the Optimum Propensity to Consume", 1938, Economica
• "Saving and Investment: Saving in process analysis", 1939, QJE
• "Is the American Economy Contracting?", 1939, AER
• "Complementarity and Interrelations of Shifts in Demand", 1940, RES
• "Theoretical Derivation of the Elasticities of Demand and Supply: the direct method", 1942, Econometrica
• "The Foundations of Welfare Economics", 1942, Econometrica
• "The Stability of Economic Equilibrium", 1942, Econometrica.
• "Say's Law: A restatement and criticism", 1942, in Lange et al., editors, Studies in Mathematical Economics.
• "A Note on Innovations", 1943, REStat
• "The Theory of the Multiplier", 1943, Econometrica
• "Strengthening the Economic Foundations of Democracy", with Abba Lerner, 1944, American Way of Business.
• Price Flexibility and Employment, 1944.
• "The Stability of Economic Equilibrium" (Appendix of Lange, 1944)
• "The Rate of Interest and the Optimal Propensity to Consume" 1944, in Haberler, editor, Readings in Business Cycle Theory.
• "The Scope and Method of Economics", 1945, RES.
• "Marxian Economic in the Soviet Union", 1945, AER
• "The Practice of Economic Planning and the Optimum Allocation of Resources", 1949, Econometrica
• "The Economic Laws of Socialist Society in Light of Joseph Stalin's Last Work", 1953, Nauka Paulska (repr. IER, 1954).
• The Political Economy of Socialism, 1958.
• Introduction to Econometrics, 1958.
• Political Economy, 1959.
• "The Output-Investment Ratio and Input-Output Analysis", 1960, Econometrica
• Theories of Reproduction and Accumulation, 1961
• Economic and Social Essays, 1930-1960, 1961.
• Economic Development, Planning and Economic Cooperation, 1963.
• Essays on Economic Planning, 1963.
• Optimal Decisions: principles of programming. 1964.
• Wholes and Parts: A general theory of system behavior. 1965
• "The Computer and the Market", 1967, in Feinstein, editor, Socialism, Capitalism and Economic Growth.
• Introduction to Economic Cybernetics, 1965.

[edit] References

• Milton Friedman (1946). "Lange on Price Flexibility and Employment: A Methodological Criticism," American Economic Review, 36, no. 4, p. 613-631. Reprinted in Essays in Positive Economics, pp. 277-300.
• Thadeusz Kowalik (1987). "Lange, Oskar R.," The New Palgrave: A Dictionary of Economics, 3, pp. 123-29.
• Charles Sadler, "Pro-Soviet Polish-Americans: Oskar Lange and Russia's Friends in the Polonia, 1941–1945," Polish Review, 22, no. 4 (1977), 25–39.
• Venona 956-957 KGB New York to Moscow 6 July 1944 states that KGB agent Bolesław Gebert had reported on 30 June 1944, "the other day Lange presented to the State Department and to Roosevelt’s Secretariat a report on the journey to the USSR and the conversation with Comrade Stalin. Gebert read this report." [1] [2][3]

[edit] External links

• The History of Economic Thought: Oskar Lange