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Good arguments but limited interpretation in this article - namely the fact that growth in Soviet bureaucracy correlated strongly with a decline in overall (rea

by egiva 15y ago

Good arguments but limited interpretation in this article - namely the fact that growth in Soviet bureaucracy correlated strongly with a decline in overall (real) productivity, while growth in US bureaucracy comes during a time in continued GROWTH in productivity, not decline. Then the author mixes in this observation/fact that the US experiences a quickly growing income gap between rich and poor, and it's hard for most readers to realize that that fact doesn't necessary support the idea that central planning is taking place. Central planning is top-down (the central leaders have most say over what industry does) and I'd argue that it's the opposite in the United States - namely business has more political sway than our elected officials when it comes to making policy and changing laws.

abstractbill 15y ago
...and I'd argue that it's the opposite in the United States - namely business has more political sway than our elected officials when it comes to making policy and changing laws. I think you missed the main point of the article. This isn't about business vs. government having more power, it's about few vs. many.
- _delirium 15y ago
  Yeah, it's actually a fairly old (but still interesting) observation that very large corporations are a form of top-down central planning. In fact many old-school communists first got inspired by late-19th-century capitalism's trend towards managed technocracy. There was a large movement in business that argued that production could be scientifically optimized using statistics, data collection, scientific management, etc. The communists just took it to its logical conclusion and asked, why not organize all of society in the optimal manner, using principles of technocratic scientific management? Even that argument was more or less originated by capitalists; some of the large industrial trusts argued that there was no problem with monopolies, because they were simply the most efficient, scientifically managed form of industrial production, unlike the messy, inefficient web of competing small businesses they had replaced. So really the only thing they disagreed on was how the profits of the centrally managed monopoly should be distributed. There's an odd amount of borrowing in the other direction, too. Many large businesses do realize that they internally are basically inefficient, bureaucratic command economies, mirroring some of the problems with the Soviet system. So they introduce some of the same attempted solutions that the Soviets tried: intra-corporation pseudo-markets, competition and awards, recently the trend of "gamifying" workplaces, etc. (At the risk of self-promotion, I recently wrote a bit on the latter similarity: http://www.kmjn.org/notes/soviet_gamification.html http://www.kmjn.org/notes/soviet_gamification.html)
  - salem 15y ago
    Well, there are also companies that use full on market based systems internally. For example Alcoa has an 'internal market structure' for sourcing materials, and shuttering inefficient subsidaries if they cannot compete on price internally.
- egiva 15y ago
  Well, nobody is talking about "business versus government", so please don't just cherry-pick or take parts of these comments out of context. We're talking about key concepts in Political Economy (PE) and I'm clearing saying that I disagree that Central Planning takes place in the way the author implies. The author tells us that the widening income gap is leading to ... central planning. And I say that's totally not true, it's a false causality. A terrible income gap exists, but Central Planning = Government decides and industry follows, like in China. Our system is the opposite, with industry deciding and government getting out of the way. That's Corporatism, not Central Planning. I'm saying that Corporatism creates the income gap, so Central Planning, if it exists, has nothing to do with it. Here's another way to say it: a circular block will fit into a much larger square hole, but that doesn't make it a square ;)
  - abstractbill 15y ago
    I'm not trying to quote you out of context, sorry if it came across that way. Central Planning = Government decides and industry follows, like in China. If you want to take this as a definition, then fine, we have nothing to argue about. But if you just give the phrase its literal meaning, I believe the article is arguing that: One form of central planning is what you described. Another is a very small number of entities controlling a very large amount of money.
    - egiva 15y ago
      Well, if it's a definition it's a crappy 2-second one so I apologize for that. I hear what you're saying here and I agree. In any effect, we can probably all agree that the end result of all this is overwhelmingly negative for the long-run productivity growth of the US economy, and that means more stagnating real wages, more structural unemployment, and more hardship for a lot of families. Some would argue that we need MORE central planning to lead the economy out of this hole, and there was a good op-ed in the NYTimes about why this probably isn't possible with our current government. See Link: http://www.nytimes.com/2011/08/07/opinion/sunday/what-happened-to-obamas-passion.html?pagewanted=1&_r=1&ref=general&src=me http://www.nytimes.com/2011/08/07/opinion/sunday/what-happen...
gwern 15y ago
> while growth in US bureaucracy comes during a time in continued GROWTH in productivity, not decline. A growth which has massively slowed. That it hasn't actually been outright negative is cold comfort. Look at total factor productivity in the US: http://macromarketmusings.blogspot.com/2011/02/great-stagnation-and-total-factor.html http://macromarketmusings.blogspot.com/2011/02/great-stagnat... (Notice all the supporting citations to other productivity measures in the comments.)
- egiva 15y ago
  Yes, greatly slowed and that's troubling considering all the cash that American corporations are sitting on right now. That said, the indicators are still vastly different from what we saw in the last 20-30 years even of the Soviet economy, so the main point was that soviet bureaucracy worked hard to make up for a structural decline in productivity, while American bureaucracy seems to just grow with time despite productivity growth.
- yummyfajitas 15y ago
  The slower rate of TFP growth occurred before the concentration of wealth, not after. So it's hard to argue that it is related at all to the phenomenon under discussion.
  - gwern 15y ago
    Why can't it be related? I see plenty of ways for the TFP to be related to the concentration. For example, here's one model which nicely matches the TFP lack of growth and subsequent wealth concentration: 'the wealthy 1% demands a fixed additional sum per year (due to some sort of hedonic treadmill or cultural imperative - relative status seeking perhaps); while TFP growth exceeds this fixed sum, we will see the additional wealth distributed to the other 99% through wages etc. Once TFP falls below this sum, all TFP gains now go to the 1% and everyone else stagnates.'

by egiva 15y ago

abstractbill 15y ago

...and I'd argue that it's the opposite in the United States - namely business has more political sway than our elected officials when it comes to making policy and changing laws. I think you missed the main point of the article. This isn't about business vs. government having more power, it's about few vs. many.

_delirium 15y ago
Yeah, it's actually a fairly old (but still interesting) observation that very large corporations are a form of top-down central planning. In fact many old-school communists first got inspired by late-19th-century capitalism's trend towards managed technocracy. There was a large movement in business that argued that production could be scientifically optimized using statistics, data collection, scientific management, etc. The communists just took it to its logical conclusion and asked, why not organize all of society in the optimal manner, using principles of technocratic scientific management? Even that argument was more or less originated by capitalists; some of the large industrial trusts argued that there was no problem with monopolies, because they were simply the most efficient, scientifically managed form of industrial production, unlike the messy, inefficient web of competing small businesses they had replaced. So really the only thing they disagreed on was how the profits of the centrally managed monopoly should be distributed. There's an odd amount of borrowing in the other direction, too. Many large businesses do realize that they internally are basically inefficient, bureaucratic command economies, mirroring some of the problems with the Soviet system. So they introduce some of the same attempted solutions that the Soviets tried: intra-corporation pseudo-markets, competition and awards, recently the trend of "gamifying" workplaces, etc. (At the risk of self-promotion, I recently wrote a bit on the latter similarity: http://www.kmjn.org/notes/soviet_gamification.html http://www.kmjn.org/notes/soviet_gamification.html)
- salem 15y ago
  Well, there are also companies that use full on market based systems internally. For example Alcoa has an 'internal market structure' for sourcing materials, and shuttering inefficient subsidaries if they cannot compete on price internally.
egiva 15y ago
Well, nobody is talking about "business versus government", so please don't just cherry-pick or take parts of these comments out of context. We're talking about key concepts in Political Economy (PE) and I'm clearing saying that I disagree that Central Planning takes place in the way the author implies. The author tells us that the widening income gap is leading to ... central planning. And I say that's totally not true, it's a false causality. A terrible income gap exists, but Central Planning = Government decides and industry follows, like in China. Our system is the opposite, with industry deciding and government getting out of the way. That's Corporatism, not Central Planning. I'm saying that Corporatism creates the income gap, so Central Planning, if it exists, has nothing to do with it. Here's another way to say it: a circular block will fit into a much larger square hole, but that doesn't make it a square ;)
- abstractbill 15y ago
  I'm not trying to quote you out of context, sorry if it came across that way. Central Planning = Government decides and industry follows, like in China. If you want to take this as a definition, then fine, we have nothing to argue about. But if you just give the phrase its literal meaning, I believe the article is arguing that: One form of central planning is what you described. Another is a very small number of entities controlling a very large amount of money.
  - egiva 15y ago
    Well, if it's a definition it's a crappy 2-second one so I apologize for that. I hear what you're saying here and I agree. In any effect, we can probably all agree that the end result of all this is overwhelmingly negative for the long-run productivity growth of the US economy, and that means more stagnating real wages, more structural unemployment, and more hardship for a lot of families. Some would argue that we need MORE central planning to lead the economy out of this hole, and there was a good op-ed in the NYTimes about why this probably isn't possible with our current government. See Link: http://www.nytimes.com/2011/08/07/opinion/sunday/what-happened-to-obamas-passion.html?pagewanted=1&_r=1&ref=general&src=me http://www.nytimes.com/2011/08/07/opinion/sunday/what-happen...

gwern 15y ago

> while growth in US bureaucracy comes during a time in continued GROWTH in productivity, not decline. A growth which has massively slowed. That it hasn't actually been outright negative is cold comfort. Look at total factor productivity in the US: http://macromarketmusings.blogspot.com/2011/02/great-stagnation-and-total-factor.html http://macromarketmusings.blogspot.com/2011/02/great-stagnat... (Notice all the supporting citations to other productivity measures in the comments.)

egiva 15y ago
Yes, greatly slowed and that's troubling considering all the cash that American corporations are sitting on right now. That said, the indicators are still vastly different from what we saw in the last 20-30 years even of the Soviet economy, so the main point was that soviet bureaucracy worked hard to make up for a structural decline in productivity, while American bureaucracy seems to just grow with time despite productivity growth.
yummyfajitas 15y ago
The slower rate of TFP growth occurred before the concentration of wealth, not after. So it's hard to argue that it is related at all to the phenomenon under discussion.
- gwern 15y ago
  Why can't it be related? I see plenty of ways for the TFP to be related to the concentration. For example, here's one model which nicely matches the TFP lack of growth and subsequent wealth concentration: 'the wealthy 1% demands a fixed additional sum per year (due to some sort of hedonic treadmill or cultural imperative - relative status seeking perhaps); while TFP growth exceeds this fixed sum, we will see the additional wealth distributed to the other 99% through wages etc. Once TFP falls below this sum, all TFP gains now go to the 1% and everyone else stagnates.'