Commentary on Jorge Buzaglo ‘Expanding Human Capabilities: Lange’s “Observations” Updated for the 21st Century’

Jorge Buzaglo’s writings in recent years on the economic development of poor and middleincome countries has been involved with shifting our perspective ‘from the growth of material production and consumption to a different type of growth, namely human growth... [I]n the language of capabilities introduced by Amartya Sen, human development is the process of increasing the domain of human capabilities/liberties’ (Buzaglo, 2016, p. 2). ‘Expanding Human Capabilities’ is an important contribution to a movement in economics away from its unthinking focus on ‘growth’, one that is taking place, albeit sluggishly, even in the mainstream (Coyle, 2015). Buzaglo has not been content to deal with these issues from a conceptual perspective, but offers a scheme to make these goals operational. The template used, a 1957 paper by Oskar Lange designed to trace the appropriate intersectoral allocation of investment for efficient output growth, is in some ways an odd choice. Lange is most remembered at present for his model of market socialism from the 1930s, a refutation of the von Mises proposition that a socialist economy (in this context, defined as one with state ownership of property) cannot rationally allocate resources. Initially, interpretations of the debate moved in Lange’s favour, with general equilibrium theorists supporting his claim that state-owned enterprises can simply be instructed to simulate the price and output behaviour presumed to emerge in a market economy under conditions of competitive equilibrium. The debate continued for decades, with the ascendency in recent years of an Austrian interpretation suggesting that Lange’s model (and, by implication, general equilibrium theory) fails to capture the essence of the superiority of capitalist enterprise, with its capacity for dynamic change and innovation. After World War II, and his return to Poland, Lange replaced market socialist schema with a commitment to computerised central planning, as exemplified in the 1957 paper: an input-output framework is adapted for a strategy in which the growth of national product is linked to the rate of (physical) investment (Buzaglo, 2016, Equation 1 and Figure 1). Lange’s emphasis on physical investment, typical of central planners of the day, has been defended by Buzaglo: