Economic Cybernetics

a scientific field concerned with the application of cybernetic ideas and methods to economic systems. In an expanded and not entirely accurate sense, economic cybernetics is often taken to mean the field of science that has developed at the junction of mathematics and cybernetics with economics, including mathematical programming, operations research, mathematical economic models, econometrics, and mathematical economics.

Economic cybernetics considers the economy and its structural and functional components as systems in which the processes of regulation and control are carried on by the movement and conversion of information. The methods of economic cybernetics make it possible to standardize this information and articulate it; to streamline the receipt, transmission, and processing of economic information; and to work out the structure and composition of data-processing equipment. It is this approach that gives research in economic cybernetics its internal unity and character. Such research serves specifically as the theoretical basis for building automated control systems and data-processing systems for the national economy.

Economic cybernetics is still in the formative stage. In many countries such investigations are still included under systems analysis, operations research, and management science, as in the United States and Great Britain, or under information science, as in France. The term “economic cybernetics” was first used in the early 1960’s by V. S. Nemchinov (USSR), O. Lange and H. Greniewski (Poland), and S. Beer (Great Britain). These scientists also sketched the main lines of development of the new science, devoting special attention to the connection between systems analysis of an economy on the one hand and logic, control theory, and information theory on the other. Many fundamental propositions of economic cybernetics were formulated much earlier, however. The notion of an economy as a system is contained in F. Quesnay’s Economic Table (1758). It was elaborated and scientifically substantiated in the works of K. Marx and V. I. Lenin.

Of fundamental importance for economic cybernetics are the theory and practice of national economic planning and management in the USSR and the other socialist countries, in particular, the development of a system of plan indexes and the incentives for achieving them (the analysis of information needs and content in the national economy has been done by economic statistics). In the 1950’s and 1960’s special attention was devoted to applied questions of building data-processing systems. These questions included study and streamlining of data flows, coding, and organization of data processing. Through these investigations, computers could be used more efficiently in data-processing systems; previously they had been used for one-time calculations and had not been employed on the control level. Diagrams for the regulation of economic systems, some very abstract, were constructed as illustrations of the theory of automatic control.

All these investigations, which at first were very weakly interrelated, gradually came together to make up the problem area of economic cybernetics. As the transition was made from comparatively small-scale data-processing systems at enterprises and firms to analysis and planning information systems on the sectorial and national level, the common features of the field emerged. In this case, information flows and data processing could no longer be considered apart from the processes of planning and controlling the socialist economy as a whole or the processes of control in the capitalist economy. The question of information supply for large-scale systems of mathematical economic models became especially urgent. Solution of the central problem of combining models of objects being controlled and models of control processes became the basis for planning automated control systems. With the solution of this problem, efficient and optimal plans that meet the set requirements of the controlling body could be developed and implemented to create an optimal control system.

Economic cybernetics is developing along three main lines, which are being coordinated ever more closely: the theory of economic systems and models, the theory of economic information, and the theory of controlling systems.

The theory of economic systems and models considers the methodology for doing systems analysis of an economy, modeling the economy, and reflecting the structure and functioning of the economic systems in the models; the classification and construction of sets of mathematical economic models; economic regulation and the correlation and mutual coordination of different incentives and influences in the functioning of economic systems; and the behavior of people and collectives. In its investigation of these problems economic cybernetics relies primarily on political economy and general systems theory, as well as on sociology and control theory; it summarizes the results of the development of mathematical economic methods and models.

The theory of economic information considers the economy as an information system. It studies information flows circulating in the national economy as communication among its elements and subsystems. It also investigates the characteristics of information channels and the messages transmitted along them; economic measurements and symbolic systems in the economy generally (that is, the languages of economic control, including the development of systems of economic indexes and rules for calculating these indexes; these questions are singled out in economic semiotics); and decision-making and data-processing processes in the information systems of the national economy at all levels, including questions of optimal organization of these processes. Here economic cybernetics touches closely on information theory, research to determine the usefulness and value of information, semiotics, programming theory, and information science.

The theory of controlling systems in economics brings research in other areas of economic cybernetics together and gives it concrete form. It concentrates on comprehensive study and refinement of the control system for the national economy and for separate economic units and, in the last analysis, on their optimal functioning. Special attention is devoted to planning and directing the fulfillment of plans, including study of the methodology, technology, and organization of control functions and the use of mathematical economic models and other scientific methods in control practice; developing an internally coordinated system of economic, administrative, legal, and other incentives and norms for control and constructing organizational structures for administrative bodies; studying human factors (including social and psychological factors) in the processes of economic management and the interaction of the human being and the machine in the automated control system; and designing and introducing the automated control system. Economic cybernetics considers the automated control system not as a data-processing “addition” to particular administrative bodies but rather as the economic administration system itself, a system based on comprehensive application of mathematical economic methods and models and modern computer and information technology and including the appropriate techniques and organization for its operation. Research and applied development in these areas are under way in the USSR at all levels of national economic management, from the systems of the State Planning Committee of the USSR and the sectorial automated control systems to enterprise automated control systems.

The Twenty-fourth Congress of the CPSU projected the creation of a nationwide automated system for collecting and processing information. In the ninth five-year-plan (1971–75) the introduction of automated control systems for enterprises and organizations in industry, agriculture, communications, trade, and transportation was accelerated.

The principal research centers in economic cybernetics are the Central Mathematical Economics Institute of the Academy of Sciences of the USSR, the Institute of the Economics and Organization of Industrial Production of the Siberian Division of the Academy of Sciences of the USSR, the Institute of Cybernetics of the Academy of Sciences of the Ukrainian SSR, the Scientific Research Economics Institute of the State Planning Committee of the USSR, and the Computer Center of the Academy of Sciences of the USSR.