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Bar none my favourite question in economics, especially as it pertains to modern political dialogue. People claim central planning has been "proven wrong" while
by RodericDay 10y ago
Bar none my favourite question in economics, especially as it pertains to modern political dialogue. People claim central planning has been "proven wrong" while ignoring ie: Apple being very much centrally planned internally, which eliminates a ton of interesting discussion.
> As D. H. Robertson points out, we find “islands of conscious power in this ocean of unconscious co-operation like lumps of butter coagulating in a pail of buttermilk.” But in view of the fact that it is usually argued that co-ordination will be done by the price mechanism, why is such organisation necessary? Why are there these “islands of conscious power”? Outside the firm, price movements direct production, which is co-ordinated through a series of exchange transactions on the market. Within a firm, these market transactions are eliminated and in place of the complicated market structure with exchange transactions is substituted the entrepreneur-co-ordinator, who directs production. It is clear that these are alternative methods of co-ordinating production. Yet, having regard to the fact that if production is regulated by price movements, production could be carried on without any organisation at all, well might we ask, why is there any organisation?
> In view of the fact that while economists treat the price mechanism as a co-ordinating instrument, they also admit the co-ordinating function of the “entrepreneur,” it is surely important to enquire why co-ordination is the work of the price mechanism in one case and of the entrepreneur in another.
- neffy 10y agoYes, it´s a lot more complicated than that. Fundamentally, it´s an issue of scale. It can be proven that central planning is the least efficient form of organisation at scale, because the information capacity of a hierarchically organised network will always be less than that of a mesh or federal mesh system. However for small systems, those network capacity limits aren´t reached - so it doesn´t matter, and there´s also a joker in the pack for mesh networks, in that if they can´t self-regulate their traffic, the resulting broadcast storm (which socially we are now in worldwide) will drive their good-put (user traffic) to very low levels. Besides the information capacity issue though, there are also considerations of command and control, so if you have a central planner that really knows what they´re doing (and the issue of information capacity is essentially that most central planners can´t), then that topology will be advantageous. Especially in competition with other centrally planned organisations - like Microsoft say.
- unflipped 10y agoPrecisely this. Read Hayek's "The Pretense of Knowledge" for a more complete understanding of this idea: http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/1974/hayek-lecture.html http://www.nobelprize.org/nobel_prizes/economic-sciences/lau...
- Animats 10y agoWe have so much information capacity now that's no longer an issue. Gosplan, the Soviet state planning apparatus, ran on an monthly information cycle and a yearly planning cycle. WalMart runs on a daily information cycle and a weekly planning cycle. Amazon is near real time. China, interestingly, goes to the opposite extreme. China is now on the 13th 5-year plan since the Revolution.[1] It's a set of 32 general policy goals to be emphasized for the next five years. These seem general, but this overall guidance determines on what the government spends time and resources. [1] http://news.xinhuanet.com/english/photo/2015-11/04/c_134783513.htm http://news.xinhuanet.com/english/photo/2015-11/04/c_1347835...
- dilemma 10y agoThat's not the point. That information needs to be processed by a human being who then outputs decisions. If you have too much "big data", that data becomes useless because it overwhelms thereby making itself useless.
- Animats 10y agoOnly some of the information needs to be processed by a human being. How much inventory to carry of each item has been automated in retail for decades. Only unusual situations and new items need human attention.