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How do you think is planned economy unable to direct this effect? Maybe random faults even out arbitrary bias that would be introduced by regulation. How is a g

by conceit 11y ago

How do you think is planned economy unable to direct this effect? Maybe random faults even out arbitrary bias that would be introduced by regulation. How is a government spending tons on military not partially a planned economy?

zardo 11y ago
Would you offer up the military industrial complex as an example of a planned economy NOT wasting money on dead projects?
- deleted 11y ago
  [deleted]
PeterisP 11y ago
Planned economy might direct this effect, but they don't - if the system gives leaders an option to prolong the agony, then they invariably use it, and the system suffers from it. For examples in planned economies, USSR had a lot of examples, and this article is another. For examples in otherwise-freemarket-but-not-in-this-case economies, see "too big to fail" situation with bank bailouts, and your own example on USA military industrial complex - where failed projects get propped up instead of allowing them to die as they should, thus in the end harming the long-run perspective in the whole sector.
- tim333 11y ago
  I kind of lived through this effect with the decline of the British coal industry which was nationalised at the time. It became uncompetitive mostly because British coal was hard to get at compared to say open pit mining in Australia, so money was lost on each ton dug up. But the argument against closing it was the miners needed jobs, it was hard for them to switch to other work, sacking them would kill the economy in mining towns and so on. It was easier for the government to pay the losses from taxes on the general population who didn't complain very much, than to fire a bunch of miners who would complain very loudly. And who did of course when Thatcher eventually fired them. With hindsight it would have been better for the industry to decline gradually than laying off everyone at once.
gerbal 11y ago
Planned economies are not inherently unable to direct said effect. They just have a harder time reallocating resources from failing enterprises because of the political nature of resource allocation. Look at a large corporation like IBM some floundering business units persist for decades because of the internal political cost of ending them when economically it is the prudent thing to do.

by conceit 11y ago

zardo 11y ago

Would you offer up the military industrial complex as an example of a planned economy NOT wasting money on dead projects?

deleted 11y ago
[deleted]

PeterisP 11y ago

Planned economy might direct this effect, but they don't - if the system gives leaders an option to prolong the agony, then they invariably use it, and the system suffers from it. For examples in planned economies, USSR had a lot of examples, and this article is another. For examples in otherwise-freemarket-but-not-in-this-case economies, see "too big to fail" situation with bank bailouts, and your own example on USA military industrial complex - where failed projects get propped up instead of allowing them to die as they should, thus in the end harming the long-run perspective in the whole sector.

tim333 11y ago
I kind of lived through this effect with the decline of the British coal industry which was nationalised at the time. It became uncompetitive mostly because British coal was hard to get at compared to say open pit mining in Australia, so money was lost on each ton dug up. But the argument against closing it was the miners needed jobs, it was hard for them to switch to other work, sacking them would kill the economy in mining towns and so on. It was easier for the government to pay the losses from taxes on the general population who didn't complain very much, than to fire a bunch of miners who would complain very loudly. And who did of course when Thatcher eventually fired them. With hindsight it would have been better for the industry to decline gradually than laying off everyone at once.

gerbal 11y ago

Planned economies are not inherently unable to direct said effect. They just have a harder time reallocating resources from failing enterprises because of the political nature of resource allocation. Look at a large corporation like IBM some floundering business units persist for decades because of the internal political cost of ending them when economically it is the prudent thing to do.