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Central planning might appear as a "good idea", until your linear programming model has to deal with factors of production that are counted in small quantities

Central planning might appear as a "good idea", until your linear programming model has to deal with factors of production that are counted in small quantities (eg. highly specialized machinery), at which point the so called "tragedy of the integers" degenerates any model you throw at the problem. As it turns out, the "economy" is a distributed intelligence, in which only individual actors know what's best for themselves, who react according to all sorts of information, and the overall effect of their interactions is codified in the prices of products and services. Trying to replace that with a "central brain" inevitably leads to severe misallocation of resources.

CinchWrench 6y ago
I've worked extensively with MIP and never heard the phrase "tragedy of the integers." Can you tell me where I can go to learn more about this outlook on issues associated with (i suppose) linear relaxations of integer problems?
baybal2 6y ago
> Central planning might appear as a "good idea", until your linear programming model has to deal with factors of production that are counted in small quantities (eg. highly specialized machinery), at which point the so called "tragedy of the integers" degenerates any model you throw at the problem. Central planning might appear as a "good idea", until your linear programming model runs into a typical union bureaucrat. Attributing the failure of union's system to "bad math" is like saying a man dying from old age dying from a heart disease. The biggest reason, eclipsing all others, for the economic ruin of the union was the extreme, omnipresent corruption of everything economics.
- triangleman 6y ago
  And now we have two good arguments against central planning, just off the cuff. Academically and rhetorically, Hayek demolished the idea some 75 years ago.
segfaultbuserr 6y ago
> Trying to replace that with a "central brain" inevitably leads to severe misallocation of resources. Now the question is: If a conglomerate has a dominate position in a marketplace, doesn't its administration face many of the same problems and challenges just like a central planner? In this situation, from a technical perspective, which are the similarities and differences here? Of course, one can answer, "this is why we have anti-trust laws", or "the free market still largely works, nobody can fully control an economic sector, even a conglomerate is bounded by the market". But it doesn't respond to the real question. For example, if Amazon or Google is trying to use an algorithm to optimize something globally, intuitively, it seems that they are effectively solving the same type of economic calculation problem, albeit at a much smaller scale. I made this comment because I recently saw an essay that also uses the book Red Plenty as an example to argue that many attempts on "AI", "machine learning" or "big data" by large corporations can potentially fall into the old central planning pitfalls. What is your opinion?
- chordalkeyboard 6y ago
  > If a conglomerate has a dominate position in a marketplace, doesn't its administration face many of the same problems and challenges just like a central planner? In this situation, from a technical perspective, which are the similarities and differences here? Yes they do. the differences are that they are still dependent on goods that their own firm doesn't produce, so the prices of those goods discipline their budget/plans to some degree, the firm is unable to use violence to compel the behavior they need to survive, and that as they call victim to the same central planning problems as governments, their marginal profit decreases so that the owner sees less profit and the price of a share of ownership decreases because of that.
  - cmrdporcupine 6y ago
    But they can use violence. By capturing control of the state and shifting state policy to coerce in its favour. Or failing that, employing violence directly themselves as many large monopolies did in the 20s and 30s. As an aside, I see this as the fundamental point of departure in language between a Marxian socialist and a libertarian-capitalist, they mean two different things by the "state": libertarians believe the state is a parasite on the market and a corrupter and destroyer of the free market. Marxists believe that the state is created _by_ the market for itself ("The executive of the modern state is nothing but a committee for managing the common affairs of the whole bourgeoisie.") Both see the other as hopelessly naive.
andrepd 6y ago
Well? So does a "distributed" economy. Goods are manufactured, shipped across the planet, to be dumped in a landfill. A significant portion of food goes to waste, all the while some other people starve (incidentally, being forced to plant cash crops e.g. cocoa rather than grow food for themselves). We have given trillions to help pay for the losses of the bankers, who are the people who truly rule us. We are currently in the process of giving trillions in subsidies to industries which have either already doomed us to extinction or soon will. The list goes on.
- chordalkeyboard 6y ago
  The trillion dollar bailouts are central planning. The fact that consumer goods are manufactured in countries by people who can't afford to buy them and sold to people in other countries who throw them away is a symptom of the vast disparity in cost of doing business in the respective countries. Subsidies are always and everywhere the product of a central planner. In order to criticize a distributed system properly it is necessary to identify those things that are the product of the distributed system, rather than those things that are the product of centralized planning.
  - rualca 6y ago
    > The trillion dollar bailouts are central planning. There's a difference between an measurement that's imposed by a dominant economic actor and having a centrally planned economy. Bailouts were arguably applied centrally by a central bank, but they are distributed throughout all economic actors that apply for bailouts and meet requirements.
    - chordalkeyboard 6y ago
      I agree there is a difference. Also “meet requirements” is intended to portray the process as somewhat objective but its not. They write those requirements with an eye towards who they want to get the bailout.
  - quietbritishjim 6y ago
magicsmoke 6y ago
There are hierarchical levels to the "economy" and central planning may work well at some levels. Companies at the lower levels of the hiearchy are centrally planned entities with managers assigning tasks to employees instead of using a free market to distribute them within the organization. At the middle layer, the free market links these centrally planned companies and force them to compete. It's an open question whether having a centrally planned top layer to handle national economic strategy and steer market forces is better than letting the free market handle that as well.
- rualca 6y ago
  > Companies at the lower levels of the hiearchy are centrally planned entities with managers assigning tasks to employees instead of using a free market to distribute them within the organization. Not really. I mean, there's a FAANG which is notorious for fostering a competitive environment between development teams even down to it's lower level employees, which includes flexible team configurations where individuals cooperate on separate projects.
pietrovismara 6y ago
As it turns out, means it's your opinion or are you stating it as a fact? By the way, if you insist that capitalist economies are distributed, how would you explain the extreme concentration of capital in a few hands? The global markets are ultimately controlled by a handful of people. Isn't that global centralization of market power?
- moralsupply 6y ago
  > By the way, if you insist that capitalist economies are distributed, how would you explain the extreme concentration of capital in a few hands? The global markets are ultimately controlled by a handful of people. You can't equate current-day "capitalism" with "free market capitalism". We live under state-regulated, corporatist economy, which is designed to concentrate power in the hands of big corporations that are associated with the state. That said, even in a "free market capitalist" system you'd expect concentration of wealth, for the reason that any competitive system presents an exponential distribution of performance in the outcomes. What you wouldn't expect, however, is that the concentration of wealth would be so skewed as we have in a corporatist economy. On the top of that, inequality on itself is not a problem. I'd argue it's a necessity if you want to be able to create wealth, as it's a side-effect of the incentives associated with competition (as stated above). In other words, inequality is not so much of an issue if the whole of the economy is producing more wealth, which in one way or another becomes distributed as it increases productivity. In the end, the real matter is poverty -- but from all solutions we can think on how to solve that problem, centralization and bureaucracy (here meaning: a state) seem to be the worst of all. In my personal opinion, localism (meaning: acting in the smaller community scale, as opposed to central control) and voluntaryism (meaning: the ethics of voluntary associations, as opposed to coercion) are the keys to set us up to help each other and eradicate poverty.

CinchWrench 6y ago

I've worked extensively with MIP and never heard the phrase "tragedy of the integers." Can you tell me where I can go to learn more about this outlook on issues associated with (i suppose) linear relaxations of integer problems?

baybal2 6y ago

> Central planning might appear as a "good idea", until your linear programming model has to deal with factors of production that are counted in small quantities (eg. highly specialized machinery), at which point the so called "tragedy of the integers" degenerates any model you throw at the problem. Central planning might appear as a "good idea", until your linear programming model runs into a typical union bureaucrat. Attributing the failure of union's system to "bad math" is like saying a man dying from old age dying from a heart disease. The biggest reason, eclipsing all others, for the economic ruin of the union was the extreme, omnipresent corruption of everything economics.

triangleman 6y ago
And now we have two good arguments against central planning, just off the cuff. Academically and rhetorically, Hayek demolished the idea some 75 years ago.

segfaultbuserr 6y ago

> Trying to replace that with a "central brain" inevitably leads to severe misallocation of resources. Now the question is: If a conglomerate has a dominate position in a marketplace, doesn't its administration face many of the same problems and challenges just like a central planner? In this situation, from a technical perspective, which are the similarities and differences here? Of course, one can answer, "this is why we have anti-trust laws", or "the free market still largely works, nobody can fully control an economic sector, even a conglomerate is bounded by the market". But it doesn't respond to the real question. For example, if Amazon or Google is trying to use an algorithm to optimize something globally, intuitively, it seems that they are effectively solving the same type of economic calculation problem, albeit at a much smaller scale. I made this comment because I recently saw an essay that also uses the book Red Plenty as an example to argue that many attempts on "AI", "machine learning" or "big data" by large corporations can potentially fall into the old central planning pitfalls. What is your opinion?

chordalkeyboard 6y ago
> If a conglomerate has a dominate position in a marketplace, doesn't its administration face many of the same problems and challenges just like a central planner? In this situation, from a technical perspective, which are the similarities and differences here? Yes they do. the differences are that they are still dependent on goods that their own firm doesn't produce, so the prices of those goods discipline their budget/plans to some degree, the firm is unable to use violence to compel the behavior they need to survive, and that as they call victim to the same central planning problems as governments, their marginal profit decreases so that the owner sees less profit and the price of a share of ownership decreases because of that.
- cmrdporcupine 6y ago
  But they can use violence. By capturing control of the state and shifting state policy to coerce in its favour. Or failing that, employing violence directly themselves as many large monopolies did in the 20s and 30s. As an aside, I see this as the fundamental point of departure in language between a Marxian socialist and a libertarian-capitalist, they mean two different things by the "state": libertarians believe the state is a parasite on the market and a corrupter and destroyer of the free market. Marxists believe that the state is created _by_ the market for itself ("The executive of the modern state is nothing but a committee for managing the common affairs of the whole bourgeoisie.") Both see the other as hopelessly naive.

andrepd 6y ago

Well? So does a "distributed" economy. Goods are manufactured, shipped across the planet, to be dumped in a landfill. A significant portion of food goes to waste, all the while some other people starve (incidentally, being forced to plant cash crops e.g. cocoa rather than grow food for themselves). We have given trillions to help pay for the losses of the bankers, who are the people who truly rule us. We are currently in the process of giving trillions in subsidies to industries which have either already doomed us to extinction or soon will. The list goes on.

chordalkeyboard 6y ago
The trillion dollar bailouts are central planning. The fact that consumer goods are manufactured in countries by people who can't afford to buy them and sold to people in other countries who throw them away is a symptom of the vast disparity in cost of doing business in the respective countries. Subsidies are always and everywhere the product of a central planner. In order to criticize a distributed system properly it is necessary to identify those things that are the product of the distributed system, rather than those things that are the product of centralized planning.
- rualca 6y ago
  > The trillion dollar bailouts are central planning. There's a difference between an measurement that's imposed by a dominant economic actor and having a centrally planned economy. Bailouts were arguably applied centrally by a central bank, but they are distributed throughout all economic actors that apply for bailouts and meet requirements.
  - chordalkeyboard 6y ago
    I agree there is a difference. Also “meet requirements” is intended to portray the process as somewhat objective but its not. They write those requirements with an eye towards who they want to get the bailout.
- quietbritishjim 6y ago

magicsmoke 6y ago

There are hierarchical levels to the "economy" and central planning may work well at some levels. Companies at the lower levels of the hiearchy are centrally planned entities with managers assigning tasks to employees instead of using a free market to distribute them within the organization. At the middle layer, the free market links these centrally planned companies and force them to compete. It's an open question whether having a centrally planned top layer to handle national economic strategy and steer market forces is better than letting the free market handle that as well.

rualca 6y ago
> Companies at the lower levels of the hiearchy are centrally planned entities with managers assigning tasks to employees instead of using a free market to distribute them within the organization. Not really. I mean, there's a FAANG which is notorious for fostering a competitive environment between development teams even down to it's lower level employees, which includes flexible team configurations where individuals cooperate on separate projects.

pietrovismara 6y ago

As it turns out, means it's your opinion or are you stating it as a fact? By the way, if you insist that capitalist economies are distributed, how would you explain the extreme concentration of capital in a few hands? The global markets are ultimately controlled by a handful of people. Isn't that global centralization of market power?

moralsupply 6y ago
> By the way, if you insist that capitalist economies are distributed, how would you explain the extreme concentration of capital in a few hands? The global markets are ultimately controlled by a handful of people. You can't equate current-day "capitalism" with "free market capitalism". We live under state-regulated, corporatist economy, which is designed to concentrate power in the hands of big corporations that are associated with the state. That said, even in a "free market capitalist" system you'd expect concentration of wealth, for the reason that any competitive system presents an exponential distribution of performance in the outcomes. What you wouldn't expect, however, is that the concentration of wealth would be so skewed as we have in a corporatist economy. On the top of that, inequality on itself is not a problem. I'd argue it's a necessity if you want to be able to create wealth, as it's a side-effect of the incentives associated with competition (as stated above). In other words, inequality is not so much of an issue if the whole of the economy is producing more wealth, which in one way or another becomes distributed as it increases productivity. In the end, the real matter is poverty -- but from all solutions we can think on how to solve that problem, centralization and bureaucracy (here meaning: a state) seem to be the worst of all. In my personal opinion, localism (meaning: acting in the smaller community scale, as opposed to central control) and voluntaryism (meaning: the ethics of voluntary associations, as opposed to coercion) are the keys to set us up to help each other and eradicate poverty.