7 ms·

One theory here is that it is easy to predict basic needs for a population, and thus let the government control the production of those - food, shelter, medicin

One theory here is that it is easy to predict basic needs for a population, and thus let the government control the production of those - food, shelter, medicine, etc. For an extremely simplified example, you have 1 billion people in China, so you need to build 1 billion housing units. That is going to keep a lot of people very busy for 20+ years. Once the general population's needs move beyond basic necessities, it becomes much harder for a central authority to predict what will be needed by it's citizens. Services, entertainment, and consumer goods are all highly dependent on many more variables than shelter and food are.

sandworm101 11y ago
>> Services, entertainment, and consumer goods are all highly dependent on many more variables than shelter and food are. I'd agree with that for the most developed economies. The US government is in no place to predict consumer wants 5/10/15 years out. But china is far behind. They can look to the more liberal/advanced economies for guidance. They seem to be doing this in their allowance of some international culture (hollywood) and communication (internet). And I think the population is following the pattern. They haven't demanded anything radically different than more advanced economies have.
- drzaiusapelord 11y ago
  > The US government is in no place to predict consumer wants 5/10/15 years out. It doesn't have to. It just need to provide the framework for US businesses to be successful and allow the entrepreur class to handle future demand. China, Russia, etc have so much state owned industry that the government itself needs to predict this stuff, which is the problem.
nickff 11y ago
You vastly overestimate the abilities of any central planner. Coordination through market prices is the only way to provide the goods you describe. If houses were a simple cube of bricks built in the same location every time, what you descibe might be feasible (though it would still be a challenge to design the bricks, select materials, and an assembly technique). Market pricing allows for relative valuation of different options, such as making waterfront homes in Manhattan more expensive than homes in Boise tend to be, or deciding how many strawberries should be grown off season in greenhouses, and how many factories should be dedicated to producing insulin (as well as which techniques should be used, as modern insulin techniques were created by a startup you may have heard of). You make the production of basic necessities sound simple, while ignoring the great amount of evidence to the contrary, i.e. Kruschev's famous tour of the grocery store.
- leereeves 11y ago
  Coordination through the market is far from perfect. The market has myopia and rarely makes huge long-term investments, and sometimes it leads people off a cliff like a band of lemmings. For example, it's given the United States a plethora of entertainment but decaying infrastructure, and the housing and dot-com bubbles. The best system seems to be a mix of both central planning and private markets.
  - icebraining 11y ago
    There was (and is) a tremendous involvement of central planning in the housing market, so much that calculating its influence the bubble is impossible. Using it as evidence that we need more central planning is essentially using No True Scotsman - "no, I mean the good kind of central planning". https://en.wikipedia.org/wiki/Causes_of_the_United_States_housing_bubble#Government_policies https://en.wikipedia.org/wiki/Causes_of_the_United_States_ho...
    - leereeves 11y ago
      Would you agree that the worst abuses (like NINJA loans and selling assets known to be toxic) weren't centrally planned?
      - icebraining 11y ago
        Sure. My disagreement, or actually, my skepticism is on whether having "more" centrally planning would have made things better. That idea seems to rely on some utopic visions of the political process, in which the responsible people are not only extremely honest, but also have uncanny foresight.
        leereeves 11y ago
        I'll grant that - obviously the government failed to prevent the housing bubble - but I think the bubble and the crash were fundamentally driven by market forces. And central planning was essential to the clean up afterwards. I think that supports the idea that a mix of the two is best.
tdaltonc 11y ago
That perspective was Hayek's primary contribution to economics. Markets are not just short-term allocation systems. In the medium and long term, their primary function is to collect, compute, and communicate granular information about what is wanted where. Bureaucrats can compile reports on the broad strokes in static systems, and by doing it without wastes like marketing, or redundant infrastructure they could maybe even do those parts more efficiently than markets. But nothing beats a market for realtime servicing of rapidly moving demand (unless you ask the techno-utopian communists).
- vlehto 11y ago
  I've been wondering if stuff like this was the reason for initial growth spur of soviet union. It was easy for Lenin to see in 1923 that the country needed steel, food, housing and railroads. If you just churn out that stuff, you can't go wrong too much. But once those markets we're saturated in the 70's, you had no data provided by the markets about what to do. So the soviet union was pretty much doomed to that level of GDP. Now I imagine it would be still relatively easy to take a country like Peru, turn communist and simply churn out steel, food, housing, install internet cables and improve roads. But you would hit a wall in decade or two.
  - tdaltonc 11y ago
    Today that's called "The State Development Capitalism Model" as opposed to the market-led capitalism model in "The Washington Consensus" and I think it has a lot to recommend it. But the hand-off to a first world economy and governance style is really really tricky (see the "middle income trap").
    - vlehto 11y ago
      Ah the good old "national socialism". It worked good for Nazis for a short while. But I don't think we have no long term data? Francoist Spain suffered from trade restrictions and Baathist countries used to benefit "unfairly" from oil. I suspect the problem is the same. Your indicators get skewed if you accept them as goals. Bit like if you go to school, not for learning, but for getting good grades. It's going to kick you sooner or later, but at latest in academia.
ajross 11y ago
> you need to build 1 billion housing units. That is going to keep a lot of people very busy for 20+ years. By all accounts, though, housing is already vastly overbuilt in China. They spent all those labor-hours already fueling the boom, and those "very busy" hands are now idle.
- leereeves 11y ago
  Reportedly, China wants to move tens or hundreds of millions of people to the "ghost cities" by 2020. http://europe.chinadaily.com.cn/epaper/2015-07/03/content_21169332.htm http://europe.chinadaily.com.cn/epaper/2015-07/03/content_21... http://www.nytimes.com/2014/03/18/world/asia/china-releases-plan-to-integrate-farmers-in-cities.html?_r=0 http://www.nytimes.com/2014/03/18/world/asia/china-releases-... http://www.techinsider.io/heres-chinas-big-plan-to-move-a-population-the-size-of-the-phillippines-from-farms-to-cities-2015-7 http://www.techinsider.io/heres-chinas-big-plan-to-move-a-po... It's seems like a strange plan: build empty cities then move people to them en masse. I guess it makes more sense for a centrally planned economy.
  - beachstartup 11y ago
    china is operating on a longer timescale than commercial real estate developers. on the flip side, there's a housing shortage (symptom: insanely high prices) in many US cities. i don't think that's any more or less strange, it's just an artifact of the system that's in place. in vancouver there's a housing shortage (insanely high prices), combined with a housing glut (in the form of empty units). that's weird too.
    - leereeves 11y ago
      Yes, strange was not the right word. What China is doing is like building a whole housing development before selling any, but on a much larger scale. It's the scale that I find striking.
icebraining 11y ago
For an extremely simplified example, you have 1 billion people in China, so you need to build 1 billion housing units. Well, only if you want to have empty units, as there's (almost?) always more than one person per housing unit. How many? Well, that depends on the wealth of the household, on how many children they plan to have, on how many generation will be living with them. And where should those houses be located? That depends on the (future!) employment opportunities, on the surrounding environment, on personal preferences, etc. And what kind of zoning should there be applicable? US-style sprawling suburbs? High-density skyscrapers? Smaller towns? How dependent is that on other factors? What building materials should be used? Is it better to build something cheap for now, betting on improving economic conditions for later rebuilding? Or is a medium-term solution better? If a layman like me can think of a few dozen variables in 10 minutes, how many are actually there? How can one make a plan that accounts for the particulars of each of the billion?
- bsbechtel 11y ago
  My example was extremely simplified, and my point was not that China's central planning is correct, working well, or a good idea. It was that it is easier to get away/justify central planning on basic necessities (especially when 500 million people don't even have access to these things) than more complicated luxuries that are more subject to individual tastes.
  - jdihwjbbr 11y ago
    Your thought experiment was lazy and clearly illusionary. At most your comment has some explanatory power as to how the central governments and central banks of the world trick themselves into believing they can make intelligible decisions for billions. Sheer hubris which costs millions of lives and needless poverty.

sandworm101 11y ago

>> Services, entertainment, and consumer goods are all highly dependent on many more variables than shelter and food are. I'd agree with that for the most developed economies. The US government is in no place to predict consumer wants 5/10/15 years out. But china is far behind. They can look to the more liberal/advanced economies for guidance. They seem to be doing this in their allowance of some international culture (hollywood) and communication (internet). And I think the population is following the pattern. They haven't demanded anything radically different than more advanced economies have.

drzaiusapelord 11y ago
> The US government is in no place to predict consumer wants 5/10/15 years out. It doesn't have to. It just need to provide the framework for US businesses to be successful and allow the entrepreur class to handle future demand. China, Russia, etc have so much state owned industry that the government itself needs to predict this stuff, which is the problem.

nickff 11y ago

You vastly overestimate the abilities of any central planner. Coordination through market prices is the only way to provide the goods you describe. If houses were a simple cube of bricks built in the same location every time, what you descibe might be feasible (though it would still be a challenge to design the bricks, select materials, and an assembly technique). Market pricing allows for relative valuation of different options, such as making waterfront homes in Manhattan more expensive than homes in Boise tend to be, or deciding how many strawberries should be grown off season in greenhouses, and how many factories should be dedicated to producing insulin (as well as which techniques should be used, as modern insulin techniques were created by a startup you may have heard of). You make the production of basic necessities sound simple, while ignoring the great amount of evidence to the contrary, i.e. Kruschev's famous tour of the grocery store.

leereeves 11y ago
Coordination through the market is far from perfect. The market has myopia and rarely makes huge long-term investments, and sometimes it leads people off a cliff like a band of lemmings. For example, it's given the United States a plethora of entertainment but decaying infrastructure, and the housing and dot-com bubbles. The best system seems to be a mix of both central planning and private markets.
- icebraining 11y ago
  There was (and is) a tremendous involvement of central planning in the housing market, so much that calculating its influence the bubble is impossible. Using it as evidence that we need more central planning is essentially using No True Scotsman - "no, I mean the good kind of central planning". https://en.wikipedia.org/wiki/Causes_of_the_United_States_housing_bubble#Government_policies https://en.wikipedia.org/wiki/Causes_of_the_United_States_ho...
  - leereeves 11y ago
    Would you agree that the worst abuses (like NINJA loans and selling assets known to be toxic) weren't centrally planned?
    - icebraining 11y ago
      Sure. My disagreement, or actually, my skepticism is on whether having "more" centrally planning would have made things better. That idea seems to rely on some utopic visions of the political process, in which the responsible people are not only extremely honest, but also have uncanny foresight.
      - leereeves 11y ago
        I'll grant that - obviously the government failed to prevent the housing bubble - but I think the bubble and the crash were fundamentally driven by market forces. And central planning was essential to the clean up afterwards. I think that supports the idea that a mix of the two is best.

tdaltonc 11y ago

That perspective was Hayek's primary contribution to economics. Markets are not just short-term allocation systems. In the medium and long term, their primary function is to collect, compute, and communicate granular information about what is wanted where. Bureaucrats can compile reports on the broad strokes in static systems, and by doing it without wastes like marketing, or redundant infrastructure they could maybe even do those parts more efficiently than markets. But nothing beats a market for realtime servicing of rapidly moving demand (unless you ask the techno-utopian communists).

vlehto 11y ago
I've been wondering if stuff like this was the reason for initial growth spur of soviet union. It was easy for Lenin to see in 1923 that the country needed steel, food, housing and railroads. If you just churn out that stuff, you can't go wrong too much. But once those markets we're saturated in the 70's, you had no data provided by the markets about what to do. So the soviet union was pretty much doomed to that level of GDP. Now I imagine it would be still relatively easy to take a country like Peru, turn communist and simply churn out steel, food, housing, install internet cables and improve roads. But you would hit a wall in decade or two.
- tdaltonc 11y ago
  Today that's called "The State Development Capitalism Model" as opposed to the market-led capitalism model in "The Washington Consensus" and I think it has a lot to recommend it. But the hand-off to a first world economy and governance style is really really tricky (see the "middle income trap").
  - vlehto 11y ago
    Ah the good old "national socialism". It worked good for Nazis for a short while. But I don't think we have no long term data? Francoist Spain suffered from trade restrictions and Baathist countries used to benefit "unfairly" from oil. I suspect the problem is the same. Your indicators get skewed if you accept them as goals. Bit like if you go to school, not for learning, but for getting good grades. It's going to kick you sooner or later, but at latest in academia.

ajross 11y ago

> you need to build 1 billion housing units. That is going to keep a lot of people very busy for 20+ years. By all accounts, though, housing is already vastly overbuilt in China. They spent all those labor-hours already fueling the boom, and those "very busy" hands are now idle.

leereeves 11y ago
Reportedly, China wants to move tens or hundreds of millions of people to the "ghost cities" by 2020. http://europe.chinadaily.com.cn/epaper/2015-07/03/content_21169332.htm http://europe.chinadaily.com.cn/epaper/2015-07/03/content_21... http://www.nytimes.com/2014/03/18/world/asia/china-releases-plan-to-integrate-farmers-in-cities.html?_r=0 http://www.nytimes.com/2014/03/18/world/asia/china-releases-... http://www.techinsider.io/heres-chinas-big-plan-to-move-a-population-the-size-of-the-phillippines-from-farms-to-cities-2015-7 http://www.techinsider.io/heres-chinas-big-plan-to-move-a-po... It's seems like a strange plan: build empty cities then move people to them en masse. I guess it makes more sense for a centrally planned economy.
- beachstartup 11y ago
  china is operating on a longer timescale than commercial real estate developers. on the flip side, there's a housing shortage (symptom: insanely high prices) in many US cities. i don't think that's any more or less strange, it's just an artifact of the system that's in place. in vancouver there's a housing shortage (insanely high prices), combined with a housing glut (in the form of empty units). that's weird too.
  - leereeves 11y ago
    Yes, strange was not the right word. What China is doing is like building a whole housing development before selling any, but on a much larger scale. It's the scale that I find striking.

icebraining 11y ago

For an extremely simplified example, you have 1 billion people in China, so you need to build 1 billion housing units. Well, only if you want to have empty units, as there's (almost?) always more than one person per housing unit. How many? Well, that depends on the wealth of the household, on how many children they plan to have, on how many generation will be living with them. And where should those houses be located? That depends on the (future!) employment opportunities, on the surrounding environment, on personal preferences, etc. And what kind of zoning should there be applicable? US-style sprawling suburbs? High-density skyscrapers? Smaller towns? How dependent is that on other factors? What building materials should be used? Is it better to build something cheap for now, betting on improving economic conditions for later rebuilding? Or is a medium-term solution better? If a layman like me can think of a few dozen variables in 10 minutes, how many are actually there? How can one make a plan that accounts for the particulars of each of the billion?

bsbechtel 11y ago
My example was extremely simplified, and my point was not that China's central planning is correct, working well, or a good idea. It was that it is easier to get away/justify central planning on basic necessities (especially when 500 million people don't even have access to these things) than more complicated luxuries that are more subject to individual tastes.
- jdihwjbbr 11y ago
  Your thought experiment was lazy and clearly illusionary. At most your comment has some explanatory power as to how the central governments and central banks of the world trick themselves into believing they can make intelligible decisions for billions. Sheer hubris which costs millions of lives and needless poverty.