8 ms·

It seems to me, contrary to what is often claimed, the problem of central planned economies (not just state-wide ones, but also company-wide ones) is too much o

by js8 8y ago

It seems to me, contrary to what is often claimed, the problem of central planned economies (not just state-wide ones, but also company-wide ones) is too much optimization at the expense of robustness. In top-down planned systems, there is always somebody who says something like "we only need this one thing for everybody". For example, in communist Czechoslovakia, there was only one factory designated to produce certain electronic chips. But then everybody becomes dependent on that one factory, and if that one factory slips in schedule, everything that depends on it will slip. There is a fundamental trade-off to be made. You can have an efficient system but it's robustness (ability to withstand a failure or adapt to change) will be very low. But the planners are often willing to take risk of being less robust for the sake of efficiency, because it usually gives you a free promotion in human status hierarchies. (If you ever worked in a large company, I am sure you can recognize the above effect, somebody hyper-optimizing through a mandate, and it has 2nd order effects in decrease of efficiency.) Compare that with market economy, which actually has huge overabundance of production capacity, and multiple producers of almost everything. This is less efficient but works really well in practice. (However, it has the other kind of problem; there is no way the free market can recognize that there is too much companies, without the agony of "malthusian" overcrowding and associated nasty effects such as more stress for everybody. Things like bullshit jobs are probably an end result.)

eesmith 8y ago
"too much optimization at the expense of robustness" That is not unique to central planned economies. Consider how the 2011 Thailand floods lead to a global shortage of hard disk drives, or the saline solution shortage in the US when the plants in Puerto Rico were damaged by Hurricane Maria. I think the author expressed it clearly that the planning algorithms depend on linear programming, and that non-linear effects - and I believe 'robustness' counts as such - are beyond what can even hope to achieve. The author also points out: > If it’s any consolation, allowing non-convexity messes up the markets-are-always-optimal theorems of neo-classical/bourgeois economics, too. (This illustrates Stiglitz’s contention that if the neo-classicals were right about how capitalism works, Kantorovich-style socialism would have been perfectly viable.) Hence why capitalist systems may also have robustness problems. "You can have an efficient system but it's robustness (ability to withstand a failure or adapt to change) will be very low." I think that's an observation in how centralized systems are implemented. I don't see why robustness can't, at least in theory, be included as part of the optimization process. Beyond the factors highlighted in the essay, of course, like the inability to decide how to weight those factors, and the non-convexity.
- js8 8y ago
  "That is not unique to central planned economies." Yes, however, when it happens in market economies, it is not caused by planning for greater efficiency (saving money). Nobody really decided there to be only one factory that produces hard drives; it is a consequence of hard drives being particularly difficult to produce. "I think the author expressed it clearly that the planning algorithms depend on linear programming, and that non-linear effects" I disagree with that. I think planning itself (algorithms) is not the issue here, I think the objective is. "I don't see why robustness can't, at least in theory, be included as part of the optimization process." In theory, perhaps. But in practice, it's difficult to prove to the people in charge (whoever that is) that you made the system more robust, compared to proving that you made the system more efficient. So there will always be an inherent organizational bias towards efficiency. Airlines are an interesting example of industry which strives for efficiency, yet has strong robustness guarantees through regulation enforced by central agency. (Although in this case, it is not economic robustness.) Maybe the robustness of the economy as a whole is given by how much choice you have in being conservative or take an experiment. So there really cannot be "robustness" as an objective, since it depends on continual experimentation with different models of operation, where most of them fail.
  - coldtea 8y ago
    >Nobody really decided there to be only one factory that produces hard drives; it is a consequence of hard drives being particularly difficult to produce. Are they? To the point that some factories in Thailand had all/most the knowledge and equipment to do so? I'd say it's exactly they were located in Thailand for exactly the same reason a planned economy would focus on: "greater efficiency (saving money)": it was convenient and cheaper to get them made there (except when it suddenly weren't).
    - js8 8y ago
      What I am trying to say is that it was a convergent decision to buy from a single manufacturer (although perhaps cost-driven), rather than a decision to, in order to reduce costs, have only one manufacturer. Making HDDs is quite difficult and there is only a handful companies that can do it. If the barrier to entry was lower, there would be more different manufacturers and probability of relying on single manufacturer would be reduced. Like in most other industries.
petre 8y ago
If you lived in communist Czechoslovakia you probably saw the amount of bullshit jobs in a (small) centrally planned economy. We had communist party activists in all institutions, secret police listening all day to people's conversations and the list could probably go on and on.
- js8 8y ago
  These might be considered useless but are not necessarily bullshit according to Graeber's definition. The definition of bullshit job is the person doing it knows that it is bullshit, yet they have to do it because there is no better job available for them. And to be honest, I am not really sure there is less bureaucrats (which are only sometimes bullshit jobs) in the market system. I actually suspect the opposite, because there are much more hierarchies, and there is less people needed in agriculture and industry.
  - misterman0 8y ago
    Speaking of bullshit jobs and hierarchies, here's a tangent. Isn't it a little bit strange that we, the people of the world, who are striving for or already live in a market economy and a ndemocracy, are OK with living most of our lives in a hierarchy that in some ways resemble feudalism? Half the day I live according to this hierarchy: An Owner (who decide things) | CEO (decide/implement things) | CFO/CTO (decide/implement things) | Chief Product Owner (decide/implement things) | Chief Office Officer (mostly decides things) | Product Owner (decide/implement things) | Tech Lead/Systems Architect (decide/implement things) | Developer (implement things) I'm a developer. I've chosen not to participate in "climbing the ladder" because that would make me less of a developer and more something else. I'm happy being a developer but I find I don't at all enjoy being at the bottom. (edit: formatting)
    - js8 8y ago
      I am in a similar position and I find it strange, too. That's why I am pro (direct) democracy and minimum basic income, and more or less against power hierarchies. But I know many people that don't want that, or don't care.
vbezhenar 8y ago
The inefficiency of market economy is terrible. Also it leads to production of bad products where repairability, quality is sacrificed to reduce costs and increase sells (who would make a good light bulb, which will last years if you can make a bad light bulb which will last months and sell dozens of them). I'm living in post-USSR country and a lot of old consumer goods which were "made in USSR" are an etalon of quality compared to modern goods. I still think that central planned economy is superior to market economy. USSR failed because of human factor and probably because computers were not good enough to produce proper plan on a USSR-scale, but even with those factors it was able to compete with the rest of the world in science, space, military. It's quite fascinating.
- vkou 8y ago
  There's some survivorship bias at play here. The crappy, poor quality goods made in the USSR went to the scrap heap decades ago. The stuff you're seeing today lasted the test of time, but a lot of other stuff didn't. Some Soviet categories of goods, and brands were pretty decent. My grandparents' fridge has lasted a good 40 years, without any issues. Their television was broken more then it was working.
  - craigkilgo 8y ago
    A percentage of this effect is due to "restrictions" on manufacturing. i.e. you had to make things with a certain thickness of steel, etc. You see this effect with American goods too. You have avocado green fridges still running for 50 years or washing machines from the 1970's that are still running. Things don't last today because we have paper thin metal and various other cheap parts and there is no incentive to make a washing machine that lasts for 40 years.
    - 3rdAccount 8y ago
      I received an old washing machine when i got married and a new dryer. That washing machine is super heavy, but still working. The dryer is a POS and the plastic knobs have all started failing, so I have to use pliers to turn the knob. I'd pay 2x the price of a standard appliance to get a quality one without question.
marmaduke 8y ago
> only need this one thing for everybody Not too diminish the aspect which is particular to communist Czechoslovakia, but it is a hard earned tenet of highly available systems best practices to have redundancies throughout a given stack. For example, a storage system that has disks in RAID, dual RAID controllers, dual NAS servers, dual connectivity to switches, etc is more expensive but worth it in the long run if you depend on it. Maybe that lesson hasn’t been absorbed more widely. Market economy perhaps gets redundancy for “free” (or cost subsidized by losers)
- 7sidedmarble 8y ago
  >Market economy perhaps gets redundancy for “free” (or cost subsidized by losers) That's a platitude, not a fact. We just are moved to believe that the market is naturally redundant by propaganda, our governments in the west urge us not to look at the instances where it's not, like economic collapses caused by banks or other government investing groups that are "too big to fail."
  - marmaduke 8y ago
    Indeed that was intended as a provocation to further thought
  - deleted 8y ago
    [deleted]

by js8 8y ago

eesmith 8y ago

"too much optimization at the expense of robustness" That is not unique to central planned economies. Consider how the 2011 Thailand floods lead to a global shortage of hard disk drives, or the saline solution shortage in the US when the plants in Puerto Rico were damaged by Hurricane Maria. I think the author expressed it clearly that the planning algorithms depend on linear programming, and that non-linear effects - and I believe 'robustness' counts as such - are beyond what can even hope to achieve. The author also points out: > If it’s any consolation, allowing non-convexity messes up the markets-are-always-optimal theorems of neo-classical/bourgeois economics, too. (This illustrates Stiglitz’s contention that if the neo-classicals were right about how capitalism works, Kantorovich-style socialism would have been perfectly viable.) Hence why capitalist systems may also have robustness problems. "You can have an efficient system but it's robustness (ability to withstand a failure or adapt to change) will be very low." I think that's an observation in how centralized systems are implemented. I don't see why robustness can't, at least in theory, be included as part of the optimization process. Beyond the factors highlighted in the essay, of course, like the inability to decide how to weight those factors, and the non-convexity.

js8 8y ago
"That is not unique to central planned economies." Yes, however, when it happens in market economies, it is not caused by planning for greater efficiency (saving money). Nobody really decided there to be only one factory that produces hard drives; it is a consequence of hard drives being particularly difficult to produce. "I think the author expressed it clearly that the planning algorithms depend on linear programming, and that non-linear effects" I disagree with that. I think planning itself (algorithms) is not the issue here, I think the objective is. "I don't see why robustness can't, at least in theory, be included as part of the optimization process." In theory, perhaps. But in practice, it's difficult to prove to the people in charge (whoever that is) that you made the system more robust, compared to proving that you made the system more efficient. So there will always be an inherent organizational bias towards efficiency. Airlines are an interesting example of industry which strives for efficiency, yet has strong robustness guarantees through regulation enforced by central agency. (Although in this case, it is not economic robustness.) Maybe the robustness of the economy as a whole is given by how much choice you have in being conservative or take an experiment. So there really cannot be "robustness" as an objective, since it depends on continual experimentation with different models of operation, where most of them fail.
- coldtea 8y ago
  >Nobody really decided there to be only one factory that produces hard drives; it is a consequence of hard drives being particularly difficult to produce. Are they? To the point that some factories in Thailand had all/most the knowledge and equipment to do so? I'd say it's exactly they were located in Thailand for exactly the same reason a planned economy would focus on: "greater efficiency (saving money)": it was convenient and cheaper to get them made there (except when it suddenly weren't).
  - js8 8y ago
    What I am trying to say is that it was a convergent decision to buy from a single manufacturer (although perhaps cost-driven), rather than a decision to, in order to reduce costs, have only one manufacturer. Making HDDs is quite difficult and there is only a handful companies that can do it. If the barrier to entry was lower, there would be more different manufacturers and probability of relying on single manufacturer would be reduced. Like in most other industries.

petre 8y ago

If you lived in communist Czechoslovakia you probably saw the amount of bullshit jobs in a (small) centrally planned economy. We had communist party activists in all institutions, secret police listening all day to people's conversations and the list could probably go on and on.

js8 8y ago
These might be considered useless but are not necessarily bullshit according to Graeber's definition. The definition of bullshit job is the person doing it knows that it is bullshit, yet they have to do it because there is no better job available for them. And to be honest, I am not really sure there is less bureaucrats (which are only sometimes bullshit jobs) in the market system. I actually suspect the opposite, because there are much more hierarchies, and there is less people needed in agriculture and industry.
- misterman0 8y ago
  Speaking of bullshit jobs and hierarchies, here's a tangent. Isn't it a little bit strange that we, the people of the world, who are striving for or already live in a market economy and a ndemocracy, are OK with living most of our lives in a hierarchy that in some ways resemble feudalism? Half the day I live according to this hierarchy: An Owner (who decide things) | CEO (decide/implement things) | CFO/CTO (decide/implement things) | Chief Product Owner (decide/implement things) | Chief Office Officer (mostly decides things) | Product Owner (decide/implement things) | Tech Lead/Systems Architect (decide/implement things) | Developer (implement things) I'm a developer. I've chosen not to participate in "climbing the ladder" because that would make me less of a developer and more something else. I'm happy being a developer but I find I don't at all enjoy being at the bottom. (edit: formatting)
  - js8 8y ago
    I am in a similar position and I find it strange, too. That's why I am pro (direct) democracy and minimum basic income, and more or less against power hierarchies. But I know many people that don't want that, or don't care.

vbezhenar 8y ago

The inefficiency of market economy is terrible. Also it leads to production of bad products where repairability, quality is sacrificed to reduce costs and increase sells (who would make a good light bulb, which will last years if you can make a bad light bulb which will last months and sell dozens of them). I'm living in post-USSR country and a lot of old consumer goods which were "made in USSR" are an etalon of quality compared to modern goods. I still think that central planned economy is superior to market economy. USSR failed because of human factor and probably because computers were not good enough to produce proper plan on a USSR-scale, but even with those factors it was able to compete with the rest of the world in science, space, military. It's quite fascinating.

vkou 8y ago
There's some survivorship bias at play here. The crappy, poor quality goods made in the USSR went to the scrap heap decades ago. The stuff you're seeing today lasted the test of time, but a lot of other stuff didn't. Some Soviet categories of goods, and brands were pretty decent. My grandparents' fridge has lasted a good 40 years, without any issues. Their television was broken more then it was working.
- craigkilgo 8y ago
  A percentage of this effect is due to "restrictions" on manufacturing. i.e. you had to make things with a certain thickness of steel, etc. You see this effect with American goods too. You have avocado green fridges still running for 50 years or washing machines from the 1970's that are still running. Things don't last today because we have paper thin metal and various other cheap parts and there is no incentive to make a washing machine that lasts for 40 years.
  - 3rdAccount 8y ago
    I received an old washing machine when i got married and a new dryer. That washing machine is super heavy, but still working. The dryer is a POS and the plastic knobs have all started failing, so I have to use pliers to turn the knob. I'd pay 2x the price of a standard appliance to get a quality one without question.

marmaduke 8y ago

> only need this one thing for everybody Not too diminish the aspect which is particular to communist Czechoslovakia, but it is a hard earned tenet of highly available systems best practices to have redundancies throughout a given stack. For example, a storage system that has disks in RAID, dual RAID controllers, dual NAS servers, dual connectivity to switches, etc is more expensive but worth it in the long run if you depend on it. Maybe that lesson hasn’t been absorbed more widely. Market economy perhaps gets redundancy for “free” (or cost subsidized by losers)

7sidedmarble 8y ago
>Market economy perhaps gets redundancy for “free” (or cost subsidized by losers) That's a platitude, not a fact. We just are moved to believe that the market is naturally redundant by propaganda, our governments in the west urge us not to look at the instances where it's not, like economic collapses caused by banks or other government investing groups that are "too big to fail."
- marmaduke 8y ago
  Indeed that was intended as a provocation to further thought
- deleted 8y ago
  [deleted]