19 ms·

The core difference, of course, being that there's an in-built mechanism for meritocratic selection and failure. Big companies that "centrally plan" first of al

by bhupy 5y ago

The core difference, of course, being that there's an in-built mechanism for meritocratic selection and failure. Big companies that "centrally plan" first of all only get there by establishing merit via product/market fit (unlike dictatorships), and if they fail, they usually go out of business or fade into obscurity (unlike dictatorships). If Sears was anointed the supply chain central planner on account of its one-time dominance, there's no guarantee that they'd "thrive" forever. One might then decide, okay, it's really dictatorships that are bad, let's add democracy on top of the central planning. Except...there's no empirical evidence that democracies organically elect central planners that yield the same kinds of outcomes as the "big companies". In practice, democratically elected planners have been selected more on the basis of their political clout, rather than on the basis of their merit. An example: Tesla is arguably the foremost "central planner" in electric cars today[1]. And yet, the White House recently snubbed Tesla in a summit on the future of electric vehicles[2]. California's state government not only drove Tesla out, they've decided to allocate EV resources towards laggards like Hyundai[3]. The political calculus is obvious: Elon Musk is politically unpopular among the base of voters that anointed the aforementioned democratically elected governments. Nevertheless, it's quite the indictment of democratic planning. Another observation: if the United States decided to centrally plan supply chains in 1997, there's no way they would have selected Jeff Bezos to be the politically appointed commissar[4], despite him (and his company) probably fitting your description of a "big company in effect that's a large centrally planned economy that's thriving". The opposite is happening, where factions of the currently elected government are determined to relieve Amazon of its role as a "central planner", despite (to your admission) its effectiveness. At least with dictatorial planning you might (if you’re lucky) have a competent dictator/bureaucracy that might have some unified plan / vision with the leeway to install politically unpopular but highly competent planners (and therefore no accountability), and you can actually get some stuff done. You see this with China and Singapore, which are both more authoritarian than liberal democracies (especially China), but generally have fast moving development — though even they rely predominately on the private sector / markets for their growth/development. With democratic planning/resource allocation, nothing ever gets done because at best it’s basically design by committee, and at worst it's a popularity contest where the most competent "planners" lose if they're simply unlikable. Also, there's really no big company on the planet that's centrally planning every single price signal in an economy — not even Amazon. They're dominant, yes, but by no means are they the sole producer/distributor/allocator of all goods and services. The largest corporations account for single digit percentage of GDP (if even). This is not true of state-driven central planning, at least historically speaking. The nuanced reality is that, yes, at some layer, we're all central planners. The family unit is usually centrally planned, and so too are corporations. The empirical lesson we've learned (historically) is that once you get to a certain size, there are diminishing returns to effectiveness of central planning, and at worst after a certain point it becomes actively detrimental to the well-being of the economy. [1] https://www.nytimes.com/2020/07/22/business/tesla-electric-car-audi-polestar.html https://www.nytimes.com/2020/07/22/business/tesla-electric-c... [2] https://www.theverge.com/2021/9/28/22699339/elon-musk-joe-biden-criticize-tesla-insult https://www.theverge.com/2021/9/28/22699339/elon-musk-joe-bi... [3] https://twitter.com/DavidSacks/status/1393342790931664899 https://twitter.com/DavidSacks/status/1393342790931664899 [4] https://twitter.com/JimPethokoukis/status/1231245913764638720 https://twitter.com/JimPethokoukis/status/123124591376463872...

imtringued 5y ago
>they've decided to allocate EV resources towards laggards like Hyundai[3]. Nevertheless, it's quite the indictment of democratic planning. Democratic planning is trying to get competition into that market. How is that bad? competition is inherently inefficient, that's why monopolies form and companies grow endlessly in the first place.
- bhupy 5y ago
  Except there is already quite a lot of competition in the market. Tesla is by no means a monopoly, and the automobile market has traditionally never had a monopoly problem. It's just that Tesla happens to have the strongest product today. That will inevitably change in the future as other manufacturers catch up, but traditionally the capital allocation to potentially worthy competitors has been driven by market signals so as to ensure that we not only have competition for the sake of competition, but actual competition among effective "planners". The aforementioned California actions are not being made on that basis. E.g. why Hyundai? Why not up-starts like Lucid Motors or Polestar? Why not Volkswagen or Toyota or GM? Most institutional investors that operate on market forces make their allocation decisions based on actual financial models and tend to prefer startups over large incumbents due to the asymmetric upside. That said, we actually agree that competition is a good thing — despite its near term inefficiency — and hence we then agree that central planning is sub-optimal. The question then becomes, between "democratic central planning" and "decentralized market planning" which system of resource allocation is better at fostering competition and actually high quality goods and services? From where I sit, there's been no real evidence that democratic planning is necessarily better at fostering competition than market forces, and in fact there's plenty of evidence to the contrary. While you're correct that there's a necessary role for the state to prevent monopolies from forming, this isn't the same as actually creating and establishing the competing planners from the get-go. Another example highlighting the mis-incentives in play when democratically planning: NASA's planned SLS moon mission is over budget and behind schedule. Because the boosters aren't reusable, each launch is expected to cost $1B (with a B) dollars — EACH launch! Meanwhile SpaceX's target cost-per-launch is $50M. We can probably agree that NASA's approach is grossly inefficient, but you might charitably make the case that NASA is just fostering competition by propping up Boeing as a worthy competitor to SpaceX. Except...Boeing's track record has shown that it's a rather weak competitor, and worse, it's become increasingly difficult for new entrants to participate in the aerospace industry owing to Boeing's state sanctioned entrenchment. SLS is also pretty classic NASA; basically every US swing state has to have a plant manufacturing something for it so the Congresspeople approve it — again not a decision made out of a need for efficiency, competition, nor to provide the better product, but on the basis of political expediency. Again, the nuanced reality is that democratic planning can probably work at some layers (though even at the local level, there have been some notable disasters[1][2][3]). It could also be that once you get to a certain size, there are diminishing returns to effectiveness of "democratic planning", and at worst after a certain point it becomes actively detrimental, just based on outcomes we see at the Federal level. [1] https://twitter.com/michelletandler/status/1448483841350451203 https://twitter.com/michelletandler/status/14484838413504512... [2] https://twitter.com/wesyang/status/1448460530289676289 https://twitter.com/wesyang/status/1448460530289676289 [3] https://twitter.com/Noahpinion/status/1448464328848396290 https://twitter.com/Noahpinion/status/1448464328848396290

by bhupy 5y ago

imtringued 5y ago

>they've decided to allocate EV resources towards laggards like Hyundai[3]. Nevertheless, it's quite the indictment of democratic planning. Democratic planning is trying to get competition into that market. How is that bad? competition is inherently inefficient, that's why monopolies form and companies grow endlessly in the first place.

bhupy 5y ago
Except there is already quite a lot of competition in the market. Tesla is by no means a monopoly, and the automobile market has traditionally never had a monopoly problem. It's just that Tesla happens to have the strongest product today. That will inevitably change in the future as other manufacturers catch up, but traditionally the capital allocation to potentially worthy competitors has been driven by market signals so as to ensure that we not only have competition for the sake of competition, but actual competition among effective "planners". The aforementioned California actions are not being made on that basis. E.g. why Hyundai? Why not up-starts like Lucid Motors or Polestar? Why not Volkswagen or Toyota or GM? Most institutional investors that operate on market forces make their allocation decisions based on actual financial models and tend to prefer startups over large incumbents due to the asymmetric upside. That said, we actually agree that competition is a good thing — despite its near term inefficiency — and hence we then agree that central planning is sub-optimal. The question then becomes, between "democratic central planning" and "decentralized market planning" which system of resource allocation is better at fostering competition and actually high quality goods and services? From where I sit, there's been no real evidence that democratic planning is necessarily better at fostering competition than market forces, and in fact there's plenty of evidence to the contrary. While you're correct that there's a necessary role for the state to prevent monopolies from forming, this isn't the same as actually creating and establishing the competing planners from the get-go. Another example highlighting the mis-incentives in play when democratically planning: NASA's planned SLS moon mission is over budget and behind schedule. Because the boosters aren't reusable, each launch is expected to cost $1B (with a B) dollars — EACH launch! Meanwhile SpaceX's target cost-per-launch is $50M. We can probably agree that NASA's approach is grossly inefficient, but you might charitably make the case that NASA is just fostering competition by propping up Boeing as a worthy competitor to SpaceX. Except...Boeing's track record has shown that it's a rather weak competitor, and worse, it's become increasingly difficult for new entrants to participate in the aerospace industry owing to Boeing's state sanctioned entrenchment. SLS is also pretty classic NASA; basically every US swing state has to have a plant manufacturing something for it so the Congresspeople approve it — again not a decision made out of a need for efficiency, competition, nor to provide the better product, but on the basis of political expediency. Again, the nuanced reality is that democratic planning can probably work at some layers (though even at the local level, there have been some notable disasters[1][2][3]). It could also be that once you get to a certain size, there are diminishing returns to effectiveness of "democratic planning", and at worst after a certain point it becomes actively detrimental, just based on outcomes we see at the Federal level. [1] https://twitter.com/michelletandler/status/1448483841350451203 https://twitter.com/michelletandler/status/14484838413504512... [2] https://twitter.com/wesyang/status/1448460530289676289 https://twitter.com/wesyang/status/1448460530289676289 [3] https://twitter.com/Noahpinion/status/1448464328848396290 https://twitter.com/Noahpinion/status/1448464328848396290