5 ms·

3 of these stories are on HN regularly, but the soviet one was new to me. Now I wonder: what should the central planners give as metrics? Is there anything th

3 of these stories are on HN regularly, but the soviet one was new to me. Now I wonder: what should the central planners give as metrics? Is there anything that works?

hoseja 7y ago
Obviously, number or weight of standard-compliant nails.
- dagw 7y ago
  But then you need someone to test the nails for standard-compliance, and what metrics should you give them to make sure they do a good job...
  - subroutine 7y ago
    You can revert to a count-based performance target, and test for compliance based on parcel weight (e.g. a 2-inch finishing nail weighs 0.79 g; if a factory reports 1 mil units, take a random .8 kg sample, check if there's ~1k nails).
    - dagw 7y ago
      Then the factory will just prioritize making sure all their nails weigh the same over any other consideration.
      - subroutine 7y ago
        They should be prioritizing count (I mentioned that was the performance metric). They actually wouldn't need to "make sure all their nails weigh the same", only that on average they weigh as much as the template. If you can't save time by using less material, and you can't save time by generating fewer units, might as well make the foundry mold match the template, no?
  - peteradio 7y ago
    These things actually do exist. I couldn't quote them for you but nails are designed to meet a specific function and are stated to meet that function under some penalty. For instance penny nails used for framing a house are made to be somewhat malleable so they don't shear when the house settles. This is certainly regularly tested.
- PeterisP 7y ago
  Well, but the standards do include both very tiny and very large nails, as they are actually needed by various purposes; and prioritizing by number or weight will still incentivize the facturies to overproduce either small upholstery nails or huge railroad spikes (both of which would be standard-compliant), and disincentivize them from producing medium sized carpentry nails.
SiempreViernes 7y ago
The story seems to be based on a satire cartoon: https://skeptics.stackexchange.com/questions/22375/did-a-soviet-nail-factory-produce-useless-nails-to-improve-metrics https://skeptics.stackexchange.com/questions/22375/did-a-sov... Certainly the practical issue of what to use as performance indicator is a deep one, at least if one wishes to have a system that efficiently satisfies the needs of the population rather than their stated wants. Today we could probably build some decent abstract indicator out of a myriad of detailed statistics, but the soviets didn't have much IT infrastructure in place and had to make do with simpler indicators. The linked memoir has the following summary of how the planned economy worked in practice: > The Soviet manager’s success indicator was a measure of gross output, such as weight, quantity, square feet, or surface area. [...] The Soviets experimented by adding other indicators, but in the end a gross output indicator always determined the manager’s success or failure. > Soviet managers were as autonomous as their market counterparts. They set their own plan targets by disguising their productive capacity and overstating their resource needs. Soviet planners served primarily as supply agents for enterprises, endeavouring to supply the enterprises with sufficient inputs to fulfill their gross output targets. The system of material supply could seldom perform this task, and Soviet factory managers made barter arrangements with one another and produced their own inputs. This activity led me to the conclusion that the Soviet economy, like a market, was organized polycentrically and not hierarchically as a planning system. The “central plan” was little more than the summation of the factory manager's individual plans. I would caution that this account seems like it overstates the actual independence of the managers, no doubt there were many political restrictions on their freedom of action in practice, but the general account that the plan essentially comes from the low level managers seems sound.
- Ididntdothis 7y ago
  They funny thing is that we haven't had a planned economy where everybody was honest. In the communist states everybody was lying and everybody knew that everybody else was lying. And the planners were ignoring this. This makes me wonder how things would have worked out with more honesty.
  - celeritascelery 7y ago
deleted 7y ago
[deleted]
pjc50 7y ago
For a much more detailed fictional but based on true events take, there is Francis Spufford's novel Red Plenty. It details how certain factions in the Soviet Union had considered the optimisation problem (including Kantorovich, the inventor of "linear programming"), and were effectively proposing pseudo-market systems. So long as these could be made politically acceptable by not having anything labelled "price".
gnode 7y ago
> what should the central planners give as metrics? Is there anything that works? According to Goodhart's Law, no. As he originally explained it: "Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes." Metrics of GDP, inflation, and employment are commonly used in macroeconomics to approximate quality of life, but they're subject to the same problem. For instance, you may be able to increase GDP and employment by increasing violent criminality, expanding the markets for private security, insurance, weapons and prisons, but harming general quality of life.
phkahler 7y ago
Have quality control that verifies the nails meet specifications, and only reward production of good nails. It's better but still lacks normal market feedback.
yellowstuff 7y ago
The system as described actually worked fairly well in an economic sense for a few decades, pulling Russia up from a poor agrarian country to a much wealthier industrialized country. In the 1950s there was a legitimate case to be made that Communism was winning and would soon beat capitalism at its own game. Essentially, if the recipient of the nails had their own large-scale industrial project to complete they could pull strings with the Central Committee to make sure they got the raw materials they needed to get their own bonuses. There wasn't much representation of end consumers, so they tended to get low quality stuff that they didn't want, but the system was actually quite good at producing increasing amounts of steel and cement. However increasing disillusionment and corruption, combined with the complexities of a computer-age economy lead to the gradual erosion of the system. There was a bona fide attempt to build a computer model to gather all the relevant inputs and do the central planning, but it didn't get very far in practice. The book Red Plenty gives an informative and compelling lightly fictionalized account: https://slatestarcodex.com/2014/09/24/book-review-red-plenty/ https://slatestarcodex.com/2014/09/24/book-review-red-plenty...
marcosdumay 7y ago
> Is there anything that works? Markets mostly work.
rwallace 7y ago
> Now I wonder: what should the central planners give as metrics? Is there anything that works? No. You can't set a metric and let the metric do your governing for you. There needs to be a human in the loop. In other words, the system has to be run by people who are making a good-faith effort to achieve the real objectives. Markets partly solve the problem. You can have a market economy that optimizes the production of nails and other widgets according to the metric of profit, but if that's all you have, you will end up with corporations that produce lots of widgets at a huge profit, but in the process burn out workers, pollute the environment, and fill news channels with scandals about how Acme knew for the last thirty years that its products were poisoning consumers, but kept the truth hidden. So you need regulations to mitigate these problems. But this in turn requires that the regulators are acting in good faith instead of trying to game a metric. There always needs to be someone in the loop.

3 of these stories are on HN regularly, but the soviet one was new to me. Now I wonder: what should the central planners give as metrics? Is there anything that works?

hoseja 7y ago

Obviously, number or weight of standard-compliant nails.

dagw 7y ago
But then you need someone to test the nails for standard-compliance, and what metrics should you give them to make sure they do a good job...
- subroutine 7y ago
  You can revert to a count-based performance target, and test for compliance based on parcel weight (e.g. a 2-inch finishing nail weighs 0.79 g; if a factory reports 1 mil units, take a random .8 kg sample, check if there's ~1k nails).
  - dagw 7y ago
    Then the factory will just prioritize making sure all their nails weigh the same over any other consideration.
    - subroutine 7y ago
      They should be prioritizing count (I mentioned that was the performance metric). They actually wouldn't need to "make sure all their nails weigh the same", only that on average they weigh as much as the template. If you can't save time by using less material, and you can't save time by generating fewer units, might as well make the foundry mold match the template, no?
- peteradio 7y ago
  These things actually do exist. I couldn't quote them for you but nails are designed to meet a specific function and are stated to meet that function under some penalty. For instance penny nails used for framing a house are made to be somewhat malleable so they don't shear when the house settles. This is certainly regularly tested.
PeterisP 7y ago
Well, but the standards do include both very tiny and very large nails, as they are actually needed by various purposes; and prioritizing by number or weight will still incentivize the facturies to overproduce either small upholstery nails or huge railroad spikes (both of which would be standard-compliant), and disincentivize them from producing medium sized carpentry nails.

SiempreViernes 7y ago

The story seems to be based on a satire cartoon: https://skeptics.stackexchange.com/questions/22375/did-a-soviet-nail-factory-produce-useless-nails-to-improve-metrics https://skeptics.stackexchange.com/questions/22375/did-a-sov... Certainly the practical issue of what to use as performance indicator is a deep one, at least if one wishes to have a system that efficiently satisfies the needs of the population rather than their stated wants. Today we could probably build some decent abstract indicator out of a myriad of detailed statistics, but the soviets didn't have much IT infrastructure in place and had to make do with simpler indicators. The linked memoir has the following summary of how the planned economy worked in practice: > The Soviet manager’s success indicator was a measure of gross output, such as weight, quantity, square feet, or surface area. [...] The Soviets experimented by adding other indicators, but in the end a gross output indicator always determined the manager’s success or failure. > Soviet managers were as autonomous as their market counterparts. They set their own plan targets by disguising their productive capacity and overstating their resource needs. Soviet planners served primarily as supply agents for enterprises, endeavouring to supply the enterprises with sufficient inputs to fulfill their gross output targets. The system of material supply could seldom perform this task, and Soviet factory managers made barter arrangements with one another and produced their own inputs. This activity led me to the conclusion that the Soviet economy, like a market, was organized polycentrically and not hierarchically as a planning system. The “central plan” was little more than the summation of the factory manager's individual plans. I would caution that this account seems like it overstates the actual independence of the managers, no doubt there were many political restrictions on their freedom of action in practice, but the general account that the plan essentially comes from the low level managers seems sound.

Ididntdothis 7y ago
They funny thing is that we haven't had a planned economy where everybody was honest. In the communist states everybody was lying and everybody knew that everybody else was lying. And the planners were ignoring this. This makes me wonder how things would have worked out with more honesty.
- celeritascelery 7y ago

deleted 7y ago

[deleted]

pjc50 7y ago

For a much more detailed fictional but based on true events take, there is Francis Spufford's novel Red Plenty. It details how certain factions in the Soviet Union had considered the optimisation problem (including Kantorovich, the inventor of "linear programming"), and were effectively proposing pseudo-market systems. So long as these could be made politically acceptable by not having anything labelled "price".

gnode 7y ago

> what should the central planners give as metrics? Is there anything that works? According to Goodhart's Law, no. As he originally explained it: "Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes." Metrics of GDP, inflation, and employment are commonly used in macroeconomics to approximate quality of life, but they're subject to the same problem. For instance, you may be able to increase GDP and employment by increasing violent criminality, expanding the markets for private security, insurance, weapons and prisons, but harming general quality of life.

phkahler 7y ago

Have quality control that verifies the nails meet specifications, and only reward production of good nails. It's better but still lacks normal market feedback.

yellowstuff 7y ago

The system as described actually worked fairly well in an economic sense for a few decades, pulling Russia up from a poor agrarian country to a much wealthier industrialized country. In the 1950s there was a legitimate case to be made that Communism was winning and would soon beat capitalism at its own game. Essentially, if the recipient of the nails had their own large-scale industrial project to complete they could pull strings with the Central Committee to make sure they got the raw materials they needed to get their own bonuses. There wasn't much representation of end consumers, so they tended to get low quality stuff that they didn't want, but the system was actually quite good at producing increasing amounts of steel and cement. However increasing disillusionment and corruption, combined with the complexities of a computer-age economy lead to the gradual erosion of the system. There was a bona fide attempt to build a computer model to gather all the relevant inputs and do the central planning, but it didn't get very far in practice. The book Red Plenty gives an informative and compelling lightly fictionalized account: https://slatestarcodex.com/2014/09/24/book-review-red-plenty/ https://slatestarcodex.com/2014/09/24/book-review-red-plenty...

marcosdumay 7y ago

> Is there anything that works? Markets mostly work.

rwallace 7y ago

> Now I wonder: what should the central planners give as metrics? Is there anything that works? No. You can't set a metric and let the metric do your governing for you. There needs to be a human in the loop. In other words, the system has to be run by people who are making a good-faith effort to achieve the real objectives. Markets partly solve the problem. You can have a market economy that optimizes the production of nails and other widgets according to the metric of profit, but if that's all you have, you will end up with corporations that produce lots of widgets at a huge profit, but in the process burn out workers, pollute the environment, and fill news channels with scandals about how Acme knew for the last thirty years that its products were poisoning consumers, but kept the truth hidden. So you need regulations to mitigate these problems. But this in turn requires that the regulators are acting in good faith instead of trying to game a metric. There always needs to be someone in the loop.