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When I was younger I heard that a planned economy can never be as potentially as efficient over time as a free (not capatilist) market due to the “lack of perfect information”. Meaning, not one authority can fully and effectively makimulsy optimize each supply/demand connection across all types of markets (pencils, food, trucks, medicine, tutors, etc…). The benefit of allowing markets to form organically (again, not monopolies, not regulatory capture, but person to person markets) is that each market will self-optimize for their own local maxima of efficiency.
This local optimization represents the implicit information that each market maker (buyer vs seller) brings to the table: effectively making every small market a mini-planned market. Now, many local maxima does not equal one true global maxima, but with many such algorithms local maxima produce very efficient and high quality results.
Hence, the challenge with a planned economy is not the control, but the lack of total information necessary to meet a higher efficiency target for all markets than would be possible if each market self-planned.
Like most things, scaling does introduce complexities that require more and more knowledge and the ability do be effective with it while making local adjustments. Some things don’t benefit from scale as much as others too, so there needs to be smart decisions.
That is why the worldwide food distribution network does lead to less expensive food due to large scale efficiencies overall, but some foods only work locally because they don’t hold up to transportation or the transportation costs are significantly higher than other foods.
What is being planned and the scale of what is being planned are extremely important, plus the decision makers need to not be malicious egomaniacs…
anarchosyndicalism ftw
The big corporations already command a wide variety of industries. And different kinds of industries coordinate with each other, even if they are different corporation. Think just-in-time delivery of raw materials to manufacture a final product.
We also do have access to virtually unlimited amounts of data. Sure, some of it is not exactly useful, but much of it is. And we also have the technology to harness it.
A planned economy also wouldn’t have to be more efficient in the same way. The point wouldn’t be to achieve infinite growth, but to reach societal goals. Build X amount of housing. Make sure that enough food is available everywhere. Coordinate relevant industries in the fight against cancer. For most things, you wouldn’t need to coordinate the entirety of the economy, at least not directly. Just the relevant parts in the relevant region. And if conditions change, you adapt the plan. A good plan is flexible.
A free market is not really different from a plan, in that sense. The two problems I see with free markets are that the aim is always, to some degree, growth and profit, and the competition. Having a choice, at least for consumer goods, is great. Not everyone likes the same apples or clothes. And the USSR had some bad experience with entirely removing branding, and therewith accountability, from things like bread. But with the need to outcompete each other, the alternatives waste so many resources on branding and marketing rather than making their products better. Those resources could be employed much more productively.
Cool how that works in a simulated gaming environment where you don’t have to worry about shit like humans who actually have free will and stuff.
We unfortunately already have observable microcosms of centralized planning: boardrooms. They fucking suck.
I prefer the even further left position where the workers producing the goods democratically make the managerial decisions…
What I’d really love to see though is attempting a hypothetical as yet untried option where the population democratically influences production decisions of firms, something that only became possible with electronic communications technologies.
Yeah, I agree. All the power to the workers. My idea of a planned economy is probably not too far off from what you describe in that last paragraph. But I’m no economist, so please don’t ask me to put forward a coherent policy proposal. xD
Ok that’s a great deal more based of you than how centrally planned economies are discussed and explained in formal economic education! Actually kind of a relief to hear XD
Historically, centrally planned economies refer to a system where a (usually arbitrarily appointed / unelected / unaccountable) committee makes all the decisions about what is produced, how, and for whom. Typically, this tended to result in the members of a centralized planning committee becoming corrupted by greed and making economic decisions that personally benefited themselves.
Replacing the committee with the consensus of the population would likely be better described as decentralized / distributed / democratized rather than centralized planning.
That is a big leap from slide 2 to slide 3. As Broton33 says, one central authority will never have perfect information across the entire market and thus will not “maximally optimize each supply/demand connection”.
Centralized planning has been tried many, many times in the past 100+ years and it has failed miserably every time. Computers and the Internet won’t make it work any better, if tried again in the 21st century, either.
Computers and the Internet won’t make it work any better, if tried again in the 21st century, either.
Why not? The internet seems like the ideal technology for more efficient production and distribution. It doesn’t even seem like a difficult problem absent the obstructions of capitalism. Not to mention the current system is literally destroying the planet…
Venezuela has access to the internet for their 21st century experiment with socialism and it hasn’t turned out very well.
Emails and Web Browsing work almost instantly around the world, but solid economic data that a central planning agency needs to use to make decisions takes time to gather. This it the core of what Broton33 talks about when he mentions the “lack of perfect information”. As an example, US businesses make extensive use of the internet, yet despite this, the US Government routinely has to revise the economic data it gathers, months and sometime years after the original surveys. Gathering accurate and timely data is hard. Gathering all the information you need is impossible. If you want to learn more, then do a Google search using the terms “Economics Perfect Information”.
As to destroying the planet, yes things are getting warmer, but the free market and the profit motive is also producing technologies that will help cool the planet.
I don’t trust the state to do that without using it to exert power. If we had a co-op based decision-making structure, that’d retain power in the hands of the workers and give us the benefits of a planned economy.
Panel 2 only happens when the people doing the planning are competent.
I have a host of managers above me whose only jobs seem to be slowing down things.
I think even capitalists know that panned economy is always better. I mean, surely they don’t buy 7 milk boxes for one day just because they may have high milk demand
Capitalism is completely planned and controlled. Ask anyone who’s been colonized. People who believe in “free markets” are brainwashed ideologues.
Planned manufacturing by one business isn’t a planned economy of all businesses. Walmart plans the supply chain to optimize pickle delivery to their store. Steam determines how many programmer hours should go to improving Linux gaming.
A planned economy means someone is telling Walmart how many many hours should go into pickle delivery and how many hours should go into Linux. Obviously food is more important than gaming so the developers at Steam will be moved to factory software automation to improve pickle delivery.
