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There has never been a successful centrally planned economy. Perhaps with the assistance of massive computation and information spread via the Internet it could

There has never been a successful centrally planned economy. Perhaps with the assistance of massive computation and information spread via the Internet it could be conceivable. But without that it seems like every toy model a central planner uses is going to fail miserably.

nopatternhere 9y ago
That's a WHAT, not a why. You aren't wrong, just answered the wrong way around. The why is because it is just too hard for any centralised group to know enough to plan a large economy adequately, for two main reasons (to keep an already long post short): 1. It is too much information for any group to consider and get any significant chunk of it correct. 2. Innovation is the opposite of planning. "Lets try this unproductive waste of time to connect college students and see what happens. Oh, we are worth billions" is not the way anyone would plan an economy, let alone the problem to assign smart people to. Innovation, unfortunately, can't really be planned. Central planning fails for the same reason scaling in tech is so difficult. When you have one server, a monolith (planned, organised) is great. All the code is in one place, one database, super easy to reason with and manage, no need for cludgey hacks, perfect code etc etc. But when you beyond that single server, another layer of complexity arises. How do we set up our infrastructure? How do we optimise long running tasks? How do we make sure everyone knows what everyone else is doing? Should we split code into smaller, harder to understand chunks? Planned economies fail because what the planners are optimising for - as a reductio ad absurdum - is protecting their own skin, and that means avoiding failure much more than encouraging success, especially in innovation, where > 90% of new ideas ultimately fail. Markets work because failure is a part of the puzzle, and markets optimise for success, not avoiding failure. As VC firms show, a lot of failure can be overcome with a tiny percentage of great successes, and these great success spur on growth. Markets also succeed because the conditions on a micro-level - i.e. a street - vary wildly. King Street in Newtown Australia - https://www.google.com.au/maps?q=king+street&um=1&ie=UTF-8&sa=X&ved=0ahUKEwjt2vLB-rTWAhUEurwKHWS9AFUQ_AUICigB https://www.google.com.au/maps?q=king+street&um=1&ie=UTF-8&s... - is a long, winding, inefficient mess of op-shops, restaurants and weirdness. No one would plan a street like that, but it works. However, the elements that make up King Street - what the actual shops sell - is different to what makes say the Haight-Ashbury in San Francisco sells, or what is available in San Telmo in Argentina, despite all three being similar in what they represent in each city (an area for alternative types). The flipside to these three places is Brasília - the capital of Brazil and a planned disaster. TL;DR markets optimise for success while accepting failure happens, whereas planned economies optimise to avoid failure above risky practices that may lead to success, and markets allow micro-optimisations, whereas planned economies end up one size-fits-all.
flukus 9y ago
How about ancient egypt (http://www.reshafim.org.il/ad/egypt/economy/ http://www.reshafim.org.il/ad/egypt/economy/)? A planned economy that lasted far longer than capitalism has existed.
- padobson 9y ago
  Oh man, awesome reference! I read biographies on Cleopatra and Julius Caesar a couple years back and was amazed how much planning went into Egypt's economy. The similarities to Venezuela can be pretty interesting! In the ancient world when economies were highly reliant on wealth created by agriculture, the Nile delta was the most fertile land in thousands of miles in any direction. Each year the Nile flooded predictably. When irrigation was plentiful, all of Egypt prospered. When the Nile went through a dryer year, all the peasants working the land starved. Excellent reference!
- vixen99 9y ago
  You mean a planned autocracy that persisted - oh bravo! Maybe Kim will do that.
Iv 9y ago
To be more precise, there were successes of centrally planned economies, but all in the same circumstances: under-developed countries trying to modernize themselves. It is hard for a central planner to be an innovator, but it is easy to be a follower. USSR industrialized itself very quickly. China had some success and did not shut down its central planning but hybridized it. South-Korea's steel production is an example of success in state-planning that contradicts market logic. Depending on your metric for success, you can also cite Cuba's life expectancy as it planned to become a medical nation. Central planning fails when you have to invent new things. New services, new products can't be planned. Very few anticipated internet, almost no one expected cell phone and then smartphones to be that prevalent. But do not throw away central planning as a systematically failed decision process. It works for : - big scale infrastructure projects that require little innovation. - wars - big research programs: Apollo, Operation Manhattan Actually, I think that with a public funded, government-supported centrally planned program, we could have deployed a self-driving cars network as early as the 90s.
- padobson 9y ago
  I don't know where the dividing line is between "regulated markets" and "central planning", but I think you raise the need for some distinctions. The space program is a great example. Could the US have beaten the USSR to the moon without private suppliers like IBM? IBM couldn't exist in a centrally planned economy, and the Apollo missions wouldn't have been successful without private suppliers like IBM. Apollo, Manhattan, WWII and South Korea via the Korean War and post-war American influence are all great examples of successful government programs, but I don't know that any of them would have happened without US markets providing funding and infrastructure. Ford was building a Sherman tank every 90 minutes during WWII. There's probably a tipping point where large programs like these extract so much value from the markets that fund them that those markets cease to function, which is probably why wars are often funded with debt instead of direct taxation.
  - Iv 9y ago
    Yes, it is less about "central planification" than "total planification". The former can and did work in many instances, the latter never succeeded or at least never out-performed free markets (still I would have loved to see how Cuba would have fared without the embargo) Intelligence is scarce, honesty too and information is often only partial. Some decisions are better done at a local scale. I believe that NASA would have designed computers even without IBM. Possibly even faster but it would have been a tailored computer that would have been very expensive and of little civilian application. We see it now with SpaceX: NASA sucked at cutting costs. But it excelled at skipping steps and it put a man on the moon in 1969, a goal that vastly outpaced the private space industry, that did not even exist at the time. The whole space industry was quickstarted by this centrally planned effort. My personal opinion is that the red line that a state should not cross lest it has a complete information and huge stash of intelligence to process it, is price setting. It can have, for many things, a target and try to enforce it (in the case of oil, through some sales quota for instance) but it should use failure to achieve these targets as an indication that it misses some information about the economy or that its incentives are insufficient.

nopatternhere 9y ago

That's a WHAT, not a why. You aren't wrong, just answered the wrong way around. The why is because it is just too hard for any centralised group to know enough to plan a large economy adequately, for two main reasons (to keep an already long post short): 1. It is too much information for any group to consider and get any significant chunk of it correct. 2. Innovation is the opposite of planning. "Lets try this unproductive waste of time to connect college students and see what happens. Oh, we are worth billions" is not the way anyone would plan an economy, let alone the problem to assign smart people to. Innovation, unfortunately, can't really be planned. Central planning fails for the same reason scaling in tech is so difficult. When you have one server, a monolith (planned, organised) is great. All the code is in one place, one database, super easy to reason with and manage, no need for cludgey hacks, perfect code etc etc. But when you beyond that single server, another layer of complexity arises. How do we set up our infrastructure? How do we optimise long running tasks? How do we make sure everyone knows what everyone else is doing? Should we split code into smaller, harder to understand chunks? Planned economies fail because what the planners are optimising for - as a reductio ad absurdum - is protecting their own skin, and that means avoiding failure much more than encouraging success, especially in innovation, where > 90% of new ideas ultimately fail. Markets work because failure is a part of the puzzle, and markets optimise for success, not avoiding failure. As VC firms show, a lot of failure can be overcome with a tiny percentage of great successes, and these great success spur on growth. Markets also succeed because the conditions on a micro-level - i.e. a street - vary wildly. King Street in Newtown Australia - https://www.google.com.au/maps?q=king+street&um=1&ie=UTF-8&sa=X&ved=0ahUKEwjt2vLB-rTWAhUEurwKHWS9AFUQ_AUICigB https://www.google.com.au/maps?q=king+street&um=1&ie=UTF-8&s... - is a long, winding, inefficient mess of op-shops, restaurants and weirdness. No one would plan a street like that, but it works. However, the elements that make up King Street - what the actual shops sell - is different to what makes say the Haight-Ashbury in San Francisco sells, or what is available in San Telmo in Argentina, despite all three being similar in what they represent in each city (an area for alternative types). The flipside to these three places is Brasília - the capital of Brazil and a planned disaster. TL;DR markets optimise for success while accepting failure happens, whereas planned economies optimise to avoid failure above risky practices that may lead to success, and markets allow micro-optimisations, whereas planned economies end up one size-fits-all.

flukus 9y ago

How about ancient egypt (http://www.reshafim.org.il/ad/egypt/economy/ http://www.reshafim.org.il/ad/egypt/economy/)? A planned economy that lasted far longer than capitalism has existed.

padobson 9y ago
Oh man, awesome reference! I read biographies on Cleopatra and Julius Caesar a couple years back and was amazed how much planning went into Egypt's economy. The similarities to Venezuela can be pretty interesting! In the ancient world when economies were highly reliant on wealth created by agriculture, the Nile delta was the most fertile land in thousands of miles in any direction. Each year the Nile flooded predictably. When irrigation was plentiful, all of Egypt prospered. When the Nile went through a dryer year, all the peasants working the land starved. Excellent reference!
vixen99 9y ago
You mean a planned autocracy that persisted - oh bravo! Maybe Kim will do that.

Iv 9y ago

To be more precise, there were successes of centrally planned economies, but all in the same circumstances: under-developed countries trying to modernize themselves. It is hard for a central planner to be an innovator, but it is easy to be a follower. USSR industrialized itself very quickly. China had some success and did not shut down its central planning but hybridized it. South-Korea's steel production is an example of success in state-planning that contradicts market logic. Depending on your metric for success, you can also cite Cuba's life expectancy as it planned to become a medical nation. Central planning fails when you have to invent new things. New services, new products can't be planned. Very few anticipated internet, almost no one expected cell phone and then smartphones to be that prevalent. But do not throw away central planning as a systematically failed decision process. It works for : - big scale infrastructure projects that require little innovation. - wars - big research programs: Apollo, Operation Manhattan Actually, I think that with a public funded, government-supported centrally planned program, we could have deployed a self-driving cars network as early as the 90s.

padobson 9y ago
I don't know where the dividing line is between "regulated markets" and "central planning", but I think you raise the need for some distinctions. The space program is a great example. Could the US have beaten the USSR to the moon without private suppliers like IBM? IBM couldn't exist in a centrally planned economy, and the Apollo missions wouldn't have been successful without private suppliers like IBM. Apollo, Manhattan, WWII and South Korea via the Korean War and post-war American influence are all great examples of successful government programs, but I don't know that any of them would have happened without US markets providing funding and infrastructure. Ford was building a Sherman tank every 90 minutes during WWII. There's probably a tipping point where large programs like these extract so much value from the markets that fund them that those markets cease to function, which is probably why wars are often funded with debt instead of direct taxation.
- Iv 9y ago
  Yes, it is less about "central planification" than "total planification". The former can and did work in many instances, the latter never succeeded or at least never out-performed free markets (still I would have loved to see how Cuba would have fared without the embargo) Intelligence is scarce, honesty too and information is often only partial. Some decisions are better done at a local scale. I believe that NASA would have designed computers even without IBM. Possibly even faster but it would have been a tailored computer that would have been very expensive and of little civilian application. We see it now with SpaceX: NASA sucked at cutting costs. But it excelled at skipping steps and it put a man on the moon in 1969, a goal that vastly outpaced the private space industry, that did not even exist at the time. The whole space industry was quickstarted by this centrally planned effort. My personal opinion is that the red line that a state should not cross lest it has a complete information and huge stash of intelligence to process it, is price setting. It can have, for many things, a target and try to enforce it (in the case of oil, through some sales quota for instance) but it should use failure to achieve these targets as an indication that it misses some information about the economy or that its incentives are insufficient.