Oskar Lange
Encyclopedia
Oskar Ryszard Lange 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
.
as son of Arthur Julius Lange and Sophie Albertine Rosner. He studied law
and economics
at University of Krakow, where he received a B.A. (1926) and a Masters of Law (Ll.D, 1928). From 1926 to 1927 Lange worked at the Ministry of Labor in Warsaw
. This was followed by a research assistantship at the University of Krakow (1927–1931). He married Irene Oderfeld in 1932. 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. Joseph Stalin
was so impressed with Lange's work that he not only prevailed on President Franklin D. Roosevelt
to obtain a passport
for Lange to visit the Soviet Union
to speak with him personally, but also proposed offering him a position in the future Polish cabinet. Towards the end of World War II
, Lange broke with the Polish government-in-exile in London
and transferred his support to the Lublin Committee
sponsored by the Soviet Union
. As a result of this trip, the Polish American Congress
condemned Lange and defended the Polish government-in-exile. 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.
, stressed how reasonable Joseph Stalin
was prepared to be, and asked the State Department
to put pressure on the exiled Poles. Subsequently, Lange served as a go-between for Franklin Delano Roosevelt and Joseph Stalin
during the discussion on post-war Poland.
After the War ended in 1945, Lange renounced his American citizenship and returned to Poland. Lange returned to the United States in the same year 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 deputy chairman of the Polish Council of State
1961–1965 and as such one of four acting Chairmen of the Council of State (head of state
) from August 7, to August 12, 1964.
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 capitalist or private 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
.
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
.
The International Institute of Social Studies (ISS) awarded an Honorary Fellowship to Oskar Lange in 1962
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
and diplomat
Diplomat
A diplomat is a person appointed by a state to conduct diplomacy with another state or international organization. The main functions of diplomats revolve around the representation and protection of the interests and nationals of the sending state, as well as the promotion of information and...
. He was most known for advocating the use of market pricing tools in socialist systems
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
and providing the earliest model of market socialism
Market socialism
Market socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms system would be used to directly remunerate employees or would be the source of public...
.
Personal life
Lange was born in Tomaszów MazowieckiTomaszów Mazowiecki
Tomaszów Mazowiecki is a town in central Poland with 67,159 inhabitants . Situated in the Łódź Voivodeship , it was previously part of Piotrków Trybunalski Voivodeship...
as son of Arthur Julius Lange and Sophie Albertine Rosner. He studied law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
and economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
at University of Krakow, where he received a B.A. (1926) and a Masters of Law (Ll.D, 1928). From 1926 to 1927 Lange worked at the Ministry of Labor in Warsaw
Warsaw
Warsaw is the capital and largest city of Poland. It is located on the Vistula River, roughly from the Baltic Sea and from the Carpathian Mountains. Its population in 2010 was estimated at 1,716,855 residents with a greater metropolitan area of 2,631,902 residents, making Warsaw the 10th most...
. This was followed by a research assistantship at the University of Krakow (1927–1931). He married Irene Oderfeld in 1932. In 1934, a Rockefeller
Rockefeller Foundation
The Rockefeller Foundation is a prominent philanthropic organization and private foundation based at 420 Fifth Avenue, New York City. The preeminent institution established by the six-generation Rockefeller family, it was founded by John D. Rockefeller , along with his son John D. Rockefeller, Jr...
fellowship brought him to England
England
England is a country that is part of the United Kingdom. It shares land borders with Scotland to the north and Wales to the west; the Irish Sea is to the north west, the Celtic Sea to the south west, with the North Sea to the east and the English Channel to the south separating it from continental...
, from where he emigrated to the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
in 1937. He then became a professor at the University of Chicago
University of Chicago
The University of Chicago is a private research university in Chicago, Illinois, USA. It was founded by the American Baptist Education Society with a donation from oil magnate and philanthropist John D. Rockefeller and incorporated in 1890...
in 1938, and was naturalized
Naturalization
Naturalization is the acquisition of citizenship and nationality by somebody who was not a citizen of that country at the time of birth....
U.S. citizen in 1943. Joseph Stalin
Joseph Stalin
Joseph Vissarionovich Stalin was the Premier of the Soviet Union from 6 May 1941 to 5 March 1953. He was among the Bolshevik revolutionaries who brought about the October Revolution and had held the position of first General Secretary of the Communist Party of the Soviet Union's Central Committee...
was so impressed with Lange's work that he not only prevailed on President Franklin D. Roosevelt
Franklin D. Roosevelt
Franklin Delano Roosevelt , also known by his initials, FDR, was the 32nd President of the United States and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic crisis and world war...
to obtain a passport
Passport
A passport is a document, issued by a national government, which certifies, for the purpose of international travel, the identity and nationality of its holder. The elements of identity are name, date of birth, sex, and place of birth....
for Lange to visit the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
to speak with him personally, but also proposed offering him a position in the future Polish cabinet. Towards the end of World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, Lange broke with the Polish government-in-exile in London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
and transferred his support to the Lublin Committee
Polish Committee of National Liberation
The Polish Committee of National Liberation , also known as the Lublin Committee, was a provisional government of Poland, officially proclaimed 21 July 1944 in Chełm under the direction of State National Council in opposition to the Polish government in exile...
sponsored by the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
. As a result of this trip, the Polish American Congress
Polish American Congress
The Polish American Congress is a U.S. umbrella organization of Polish-Americans and Polish-American organizations.Its membership is composed of fraternal, educational, veterans, religious, cultural, social, business, and political organizations, as well as individuals.As of January 2009, it lists...
condemned Lange and defended the Polish government-in-exile. Lange returned to the United States at the end of May, met with Free Polish London Exile
Polish government in Exile
The Polish government-in-exile, formally known as the Government of the Republic of Poland in Exile , was the government in exile of Poland formed in the aftermath of the Invasion of Poland of September 1939, and the subsequent occupation of Poland by Nazi Germany and the Soviet Union, which...
Prime Minister Stanisław Mikołajczyk, who happened then to be in Washington, D.C.
Washington, D.C.
Washington, D.C., formally the District of Columbia and commonly referred to as Washington, "the District", or simply D.C., is the capital of the United States. On July 16, 1790, the United States Congress approved the creation of a permanent national capital as permitted by the U.S. Constitution....
, stressed how reasonable Joseph Stalin
Joseph Stalin
Joseph Vissarionovich Stalin was the Premier of the Soviet Union from 6 May 1941 to 5 March 1953. He was among the Bolshevik revolutionaries who brought about the October Revolution and had held the position of first General Secretary of the Communist Party of the Soviet Union's Central Committee...
was prepared to be, and asked the State Department
United States Department of State
The United States Department of State , is the United States federal executive department responsible for international relations of the United States, equivalent to the foreign ministries of other countries...
to put pressure on the exiled Poles. Subsequently, Lange served as a go-between for Franklin Delano Roosevelt and Joseph Stalin
Joseph Stalin
Joseph Vissarionovich Stalin was the Premier of the Soviet Union from 6 May 1941 to 5 March 1953. He was among the Bolshevik revolutionaries who brought about the October Revolution and had held the position of first General Secretary of the Communist Party of the Soviet Union's Central Committee...
during the discussion on post-war Poland.
After the War ended in 1945, Lange renounced his American citizenship and returned to Poland. Lange returned to the United States in the same year as the new Polish Communist régime's
People's Republic of Poland
The People's Republic of Poland was the official name of Poland from 1952 to 1990. Although the Soviet Union took control of the country immediately after the liberation from Nazi Germany in 1944, the name of the state was not changed until eight years later...
first Ambassador
Ambassador
An ambassador is the highest ranking diplomat who represents a nation and is usually accredited to a foreign sovereign or government, or to an international organization....
to the United States. In 1946, Lange served as the Polish delegate to the United Nations Security Council
United Nations Security Council
The United Nations Security Council is one of the principal organs of the United Nations and is charged with the maintenance of international peace and security. Its powers, outlined in the United Nations Charter, include the establishment of peacekeeping operations, the establishment of...
. 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
University of Warsaw
The University of Warsaw is the largest university in Poland and one of the most prestigious, ranked as best Polish university in 2010 and 2011...
and the Main School of Planning and Statistics
Warsaw School of Economics
Warsaw School of Economics is the oldest economic university in Poland.The Warsaw School of Economics was founded in 1906 as a private school under the name August Zieliński Private Trade Courses for Men. On 30 July 1919 it became a separate legal entity and was granted the status of an...
. Lange was deputy chairman of the Polish Council of State
Polish Council of State
The Council of State of the Republic of Poland was introduced by the 1947 Small Constitution. It consisted of the President of the Republic of Poland, the Marshal and Vicemarshals of Constituent Sejm, President of the Supreme Chamber of Control and could consist of other members...
1961–1965 and as such one of four acting Chairmen of the Council of State (head of state
Head of State
A head of state is the individual that serves as the chief public representative of a monarchy, republic, federation, commonwealth or other kind of state. His or her role generally includes legitimizing the state and exercising the political powers, functions, and duties granted to the head of...
) from August 7, to August 12, 1964.
Academic contributions
The bulk of Lange's contributions to economics came during his American interlude of 1933-1945. Despite being an ardentArdent
Ardent may refer to:* Ardent , a French automobile produced from 1900 to 1901*Ardent Computer, a graphics minicomputer manufacturing company*Ardent Productions, a film recording company founded by Prince Edward, Earl of Wessex...
socialist
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...
, Lange deplored the Marxian
Marxian economics
Marxian economics refers to economic theories on the functioning of capitalism based on the works of Karl Marx. Adherents of Marxian economics, particularly in academia, distinguish it from Marxism as a political ideology and sociological theory, arguing that Marx's approach to understanding the...
labor theory of value
Labor theory of value
The labor theories of value are heterodox economic theories of value which argue that the value of a commodity is related to the labor needed to produce or obtain that commodity. The concept is most often associated with Marxian economics...
, being very much a believer in the Neoclassical
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...
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
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...
together.
In this book, Lange advocated the use of market tools (especially the neoclassical pricing theory) in economic planning of socialism and Marxism
Marxism
Marxism is an economic and sociopolitical worldview and method of socioeconomic inquiry that centers upon a materialist interpretation of history, a dialectical view of social change, and an analysis and critique of the development of capitalism. Marxism was pioneered in the early to mid 19th...
. 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
Simulation
Simulation is the imitation of some real thing available, state of affairs, or process. The act of simulating something generally entails representing certain key characteristics or behaviours of a selected physical or abstract system....
of the market mechanism, which Lange thought would be capable of effectively managing supply and demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
. 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 capitalist or private 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
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...
.
His works provided the earliest model of market socialism
Market socialism
Market socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms system would be used to directly remunerate employees or would be the source of public...
.
Besides the work on market socialism
Market socialism
Market socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms system would be used to directly remunerate employees or would be the source of public...
, he also contributed in various areas. Lange was one of the leading lights of the "Paretian
Pareto efficiency
Pareto efficiency, or Pareto optimality, is a concept in economics with applications in engineering and social sciences. The term is named after Vilfredo Pareto, an Italian economist who used the concept in his studies of economic efficiency and income distribution.Given an initial allocation of...
Revival" in general equilibrium theory during the 1930s. In 1942, he provided one of the first proofs of the First and Second Welfare Theorems
Fundamental theorems of welfare economics
There are two fundamental theorems of welfare economics. The first states that any competitive equilibrium or Walrasian equilibrium leads to a Pareto efficient allocation of resources. The second states the converse, that any efficient allocation can be sustainable by a competitive equilibrium...
. He initiated the analysis of stability of general equilibrium (1942, 1944). His critique of the quantity theory of money
Quantity theory of money
In monetary economics, the quantity theory of money is the theory that money supply has a direct, proportional relationship with the price level....
(1942) prompted his student, Don Patinkin
Don Patinkin
Don Patinkin was an Israeli/American monetary economist, and the president of Hebrew University in Jerusalem.- Biography :...
, on to his remarkable "integration" of money into general equilibrium theory. Lange made several seminal contributions to the development of the Neoclassical synthesis
Neoclassical synthesis
Neoclassical synthesis is a postwar academic movement in economics that attempts to absorb the macroeconomic thought of John Maynard Keynes into the thought of neoclassical economics...
(e.g. 1938, 1943, 1944). He worked on integrating classical
Classical economics
Classical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill....
and neoclassical economics
Neoclassical economics
Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...
into a single theoretical structure (e.g. 1959). In his final years, Lange also worked on cybernetics
Cybernetics
Cybernetics is the interdisciplinary study of the structure of regulatory systems. Cybernetics is closely related to information theory, control theory and systems theory, at least in its first-order form...
and the use of computers for economic planning
Economic planning
Economic planning refers to any directing or planning of economic activity outside the mechanisisms of the market, in an attempt to achieve specific economic or social outcomes. Planning is an economic mechanism for resource allocation and decision-making in contrast with the market mechanism...
.
The International Institute of Social Studies (ISS) awarded an Honorary Fellowship to Oskar Lange in 1962