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Relevant article about Sears: https://evonomics.com/the-ceo-of-sears-jon-haidt/ https://evonomics.com/the-ceo-of-sears-jon-haidt/ There is a popular narrative

Relevant article about Sears: https://evonomics.com/the-ceo-of-sears-jon-haidt/ https://evonomics.com/the-ceo-of-sears-jon-haidt/ There is a popular narrative being reproduced that Walmart is a bigger planned economy than the Soviet Union ever was, and that they tried an internal market and that it was a disaster. Meanwhile the narrative says Sears was run into the ground by over-zealous capitalist idealism and blind fate in the free market. Don't shoot the messenger!!

rsj_hn 5y ago
> There is a popular narrative being reproduced that Walmart is a bigger planned economy than the Soviet Union ever was, and that they tried an internal market and that it was a disaster Honestly, this misses the point entirely. Both planned economies and unplanned economies have organizations doing the producing and these organizations are obviously planned internally. But in a free market economy there is competition, so when these bureaucracies (inevitably) become sclerotic or dysfunctional, they are driven out of the market by new competitors, and so competition is what keeps things efficient. Whereas in planned economies there is no competition. If you want a car, you go to the state auto company. And when that bureaucracy becomes sclerotic, you can't defect and launch your own competitor. Nor can the state motorcycle company decide it wants to pivot into autos and drive the state auto company into the ground by offering a better product at a lower cost. There is simply no competition and thus no alternative for consumers. Therefore you see this typical pattern in planned economies where there is an initial boom and things even look really good but over a generation all these bureacracies become dysfunctional and require more and more inputs to produce a single output, at which point you start seeing chronic shortages and terrible quality problems. Arguing that the actual bureaucracy doing the production is "planned" and thus there is no difference between an economy based on competition and a planned economy with no competition is not to understand why one of these is superior than the other. It does not matter how big Amazon is, what matters is that there is competition to Amazon and that Amazon can be driven out of business once is starts to become massively inefficient.
- kqr 5y ago
  This is a simplified view of the differences, to the point of maybe being oversimplified. (But you probably know that already.) Something "free markets" provide over planned economies is free(er) flow of information. Markets/economies are often incredibly complex. Allowing individual actors to signal information through pricing and competition, and allowing risk takers to exploit differences in these opinions of people to profit and simultaneously even out the differences in the direction that best corresponds to reality builds a system where it's much more likely the right things are done by the right people for the right reasons. It's just too complex to plan for. And besides, without the free markets there to give you feedback, you won't know what it is you're planning for. A (socially fair) free market is also a proper scoring rule for forecasts. It rewards people who are good at seeing into the future, and punishes those who are bad at it, in proportion to the costs of their errors. (This goes back to de Finetti's operational definition of probability.) Note that this is rather abstractly, in some sort of perfect microcosm. In practise, all free markets are distorted by privileged rent-seeking and other inefficiencies. I fully understand anyone who would be offended when I say that a free market punishes people who are bad at seeing into the future (hell, just reading that offends me!) because in reality, it also punishes all sorts of people, and often people who are great forecasters are precluded from exploiting their abilities in the free market, and so on and so forth. Please read my message not as social commentary or political bias, but the mathematical/cybernetic principles underlying this stuff, if executed well. And obviously, this doesn't even begin to explain the Sears/Walmart story, so I suspect there are other factors underlying that, too.
- meheleventyone 5y ago
  Right but the person you are replying to is talking about company internals. If companies are planned then what happens if a department becomes sclerotic (great word btw) or dysfunctional? Surely by free market rhetoric the most efficient way to deal with that is by having a company internal free market that cuts away the sclerotic parts through competition? If that doesn’t work well then what does that say about the wider free market approach? If it’s better to deal with internal department dysfunction in a different way why isn’t that process applicable to a wider planned economy?
TheGigaChad 5y ago
You are literally dumber than a rock.

rsj_hn 5y ago

> There is a popular narrative being reproduced that Walmart is a bigger planned economy than the Soviet Union ever was, and that they tried an internal market and that it was a disaster Honestly, this misses the point entirely. Both planned economies and unplanned economies have organizations doing the producing and these organizations are obviously planned internally. But in a free market economy there is competition, so when these bureaucracies (inevitably) become sclerotic or dysfunctional, they are driven out of the market by new competitors, and so competition is what keeps things efficient. Whereas in planned economies there is no competition. If you want a car, you go to the state auto company. And when that bureaucracy becomes sclerotic, you can't defect and launch your own competitor. Nor can the state motorcycle company decide it wants to pivot into autos and drive the state auto company into the ground by offering a better product at a lower cost. There is simply no competition and thus no alternative for consumers. Therefore you see this typical pattern in planned economies where there is an initial boom and things even look really good but over a generation all these bureacracies become dysfunctional and require more and more inputs to produce a single output, at which point you start seeing chronic shortages and terrible quality problems. Arguing that the actual bureaucracy doing the production is "planned" and thus there is no difference between an economy based on competition and a planned economy with no competition is not to understand why one of these is superior than the other. It does not matter how big Amazon is, what matters is that there is competition to Amazon and that Amazon can be driven out of business once is starts to become massively inefficient.

kqr 5y ago
This is a simplified view of the differences, to the point of maybe being oversimplified. (But you probably know that already.) Something "free markets" provide over planned economies is free(er) flow of information. Markets/economies are often incredibly complex. Allowing individual actors to signal information through pricing and competition, and allowing risk takers to exploit differences in these opinions of people to profit and simultaneously even out the differences in the direction that best corresponds to reality builds a system where it's much more likely the right things are done by the right people for the right reasons. It's just too complex to plan for. And besides, without the free markets there to give you feedback, you won't know what it is you're planning for. A (socially fair) free market is also a proper scoring rule for forecasts. It rewards people who are good at seeing into the future, and punishes those who are bad at it, in proportion to the costs of their errors. (This goes back to de Finetti's operational definition of probability.) Note that this is rather abstractly, in some sort of perfect microcosm. In practise, all free markets are distorted by privileged rent-seeking and other inefficiencies. I fully understand anyone who would be offended when I say that a free market punishes people who are bad at seeing into the future (hell, just reading that offends me!) because in reality, it also punishes all sorts of people, and often people who are great forecasters are precluded from exploiting their abilities in the free market, and so on and so forth. Please read my message not as social commentary or political bias, but the mathematical/cybernetic principles underlying this stuff, if executed well. And obviously, this doesn't even begin to explain the Sears/Walmart story, so I suspect there are other factors underlying that, too.
meheleventyone 5y ago
Right but the person you are replying to is talking about company internals. If companies are planned then what happens if a department becomes sclerotic (great word btw) or dysfunctional? Surely by free market rhetoric the most efficient way to deal with that is by having a company internal free market that cuts away the sclerotic parts through competition? If that doesn’t work well then what does that say about the wider free market approach? If it’s better to deal with internal department dysfunction in a different way why isn’t that process applicable to a wider planned economy?

TheGigaChad 5y ago

You are literally dumber than a rock.