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Yes. However, using modern computing and communication technology, it would be possible to run a complex economy with calculations "in-kind". That is, most calc

Yes. However, using modern computing and communication technology, it would be possible to run a complex economy with calculations "in-kind". That is, most calculation could be done using the inputs and outputs of millions of processes. Such an economy could avoid the instability of our current economy with its cyclical booms and busts.

pdonis 5y ago
> using modern computing and communication technology, it would be possible to run a complex economy with calculations "in-kind". No, it wouldn't. It's not a matter of the speed of the computing; it's a matter of the number of information channels available. The amount of information that would need to be processed to run a complex economy goes up exponentially with the size of the economy, but the number of information channels available only goes up linearly with the size of the economy. I think it was Hayek who first pointed this out more than a century ago. The proper tool to "run" a complex economy is decentralized computing, otherwise known as a free market. > Such an economy could avoid the instability of our current economy with its cyclical booms and busts. The way to avoid cyclical booms and busts is for the government to stop messing with markets. The government should not be subsidizing some products and services and penalizing others. It should let the market work out what products and services are produced and consumed.
- jwmhjwmh 5y ago
  I'm not sure what you mean by "information channels". Wouldn't a factory mainly just need to communicate its inputs and outputs the computer or computer cluster doing the calculation? Similarly for distribution centers. In particular, would much more information need to be transmitted in a planned economy than in a market economy? Remember that, while there are millions of products in the economy, any given center of production or distribution is unlikely to use more than a few thousand. I don't think the computation cost scales exponentially. If it did, the decentralized free market computer would not be able to accurately compute the economy. Paul Cockshott claims to have found a planning algorithm with O(n log n) complexity, which is very manageable. The main problem with free markets is that they lead to extreme inequality and subsequent conflict. A planned economy could distribute the surplus much better. I disagree that the government should withdraw from the market economy. The government can help alleviate the failures of the market. For one thing, the market is generally short-sighted, while governments can think more long-term. For example, it is my understanding that the Chinese government has invested a lot in solar panel technology and implementation. You would probably agree this is a good thing, given the severity of the climate crisis. By the way, the following are some of what have informed my opinion here: - https://www.haerdin.se/blog/2021/06/29/a-critique-of-economic-calculation-in-the-socialist-commonwealth/ https://www.haerdin.se/blog/2021/06/29/a-critique-of-economi... - http://users.wfu.edu/cottrell/socialism_book/new_socialism.pdf http://users.wfu.edu/cottrell/socialism_book/new_socialism.p...
  - pdonis 5y ago
    > I'm not sure what you mean by "information channels". I mean information channels to and from the central computer. > Wouldn't a factory mainly just need to communicate its inputs and outputs the computer or computer cluster doing the calculation? If that's all it's doing, a free market does that fine. There is no need for any additional computation. Similarly for any other economic actor. If the central computation is going to improve anything over what the individual economic actors would do on their own, it can only be by computing what the inputs and outputs should be for all economic actors, better than those actors can do themselves, and then dictating those inputs and outputs to the actors. Otherwise there's no point to it. And that is what it can't do based on the information argument I gave. > I don't think the computation cost scales exponentially. If it did, the decentralized free market computer would not be able to accurately compute the economy. Wrong. The decentralized free market computer's capacity scales exponentially, since each individual economic actor is computing their own actions. The centralized computer, however, has to compute everyone's actions. That's why it faces an insurmountable information problem that the individual actors doing their decentralized computing do not face. > The government can help alleviate the failures of the market. No, it can't. That is the lesson of history. Every time governments have done this, they have made things worse, not better. That is not to say that market failures do not exist, only that the failures of government are worse. > the market is generally short-sighted, while governments can think more long-term. You have this backwards. Government time horizons are the next election. Individual market actors can have time horizons going out decades--for example, individuals saving for retirement. Governments can't even keep their social security trust funds safe from being raided by the legislature when it wants to fund some white elephant. > it is my understanding that the Chinese government has invested a lot in solar panel technology and implementation. Quite possibly it has. That in no way means China might not be even better off if it were not centrally controlled by the government. > You would probably agree this is a good thing, given the severity of the climate crisis. No, I wouldn't, because I don't think climate change is a crisis. And as far as I can tell, neither do the Chinese. They are investing in those technologies not because they believe they need them themselves, but because they believe they can sell them at a substantial profit to Western countries who are much more worried about climate change than the Chinese themselves are.
- register 5y ago
  You mean you should let decide to monopolies and oligopolies what products and services we need right? There is no such thing as an ideal free market. Free market is an human model and therefore just an abstraction. The gap between theory and reality makes all the difference in the world.
  - pdonis 5y ago
    > There is no such thing as an ideal free market. Sure there is. A free market is a market in which all transactions are voluntary. That's the natural state of a market. We see many markets that are not free only because governments either prevent people from engaging in transactions they would otherwise choose to make, or force people to engage in transactions they would otherwise not choose to make (the obvious example of this is coercive taxation).
AussieWog93 5y ago
>Such an economy could avoid the instability of our current economy with its cyclical booms and busts. From what I understand (not an economist, but quoting what I've heard from them), much of the boom-bust cycle can be dampened by limiting debt.
- jwmhjwmh 5y ago
  I'm not an economist either. It just seems the business cycle has been a persistent feature of capitalist economies.
  - AussieWog93 5y ago
    Perhaps look into Australia. We have much tighter regulations than the US or UK when it comes to lending, and we've largely avoided recessions, including in 2008. COVID got us, but that did have a physical reason behind it.

pdonis 5y ago

> using modern computing and communication technology, it would be possible to run a complex economy with calculations "in-kind". No, it wouldn't. It's not a matter of the speed of the computing; it's a matter of the number of information channels available. The amount of information that would need to be processed to run a complex economy goes up exponentially with the size of the economy, but the number of information channels available only goes up linearly with the size of the economy. I think it was Hayek who first pointed this out more than a century ago. The proper tool to "run" a complex economy is decentralized computing, otherwise known as a free market. > Such an economy could avoid the instability of our current economy with its cyclical booms and busts. The way to avoid cyclical booms and busts is for the government to stop messing with markets. The government should not be subsidizing some products and services and penalizing others. It should let the market work out what products and services are produced and consumed.

jwmhjwmh 5y ago
I'm not sure what you mean by "information channels". Wouldn't a factory mainly just need to communicate its inputs and outputs the computer or computer cluster doing the calculation? Similarly for distribution centers. In particular, would much more information need to be transmitted in a planned economy than in a market economy? Remember that, while there are millions of products in the economy, any given center of production or distribution is unlikely to use more than a few thousand. I don't think the computation cost scales exponentially. If it did, the decentralized free market computer would not be able to accurately compute the economy. Paul Cockshott claims to have found a planning algorithm with O(n log n) complexity, which is very manageable. The main problem with free markets is that they lead to extreme inequality and subsequent conflict. A planned economy could distribute the surplus much better. I disagree that the government should withdraw from the market economy. The government can help alleviate the failures of the market. For one thing, the market is generally short-sighted, while governments can think more long-term. For example, it is my understanding that the Chinese government has invested a lot in solar panel technology and implementation. You would probably agree this is a good thing, given the severity of the climate crisis. By the way, the following are some of what have informed my opinion here: - https://www.haerdin.se/blog/2021/06/29/a-critique-of-economic-calculation-in-the-socialist-commonwealth/ https://www.haerdin.se/blog/2021/06/29/a-critique-of-economi... - http://users.wfu.edu/cottrell/socialism_book/new_socialism.pdf http://users.wfu.edu/cottrell/socialism_book/new_socialism.p...
- pdonis 5y ago
  > I'm not sure what you mean by "information channels". I mean information channels to and from the central computer. > Wouldn't a factory mainly just need to communicate its inputs and outputs the computer or computer cluster doing the calculation? If that's all it's doing, a free market does that fine. There is no need for any additional computation. Similarly for any other economic actor. If the central computation is going to improve anything over what the individual economic actors would do on their own, it can only be by computing what the inputs and outputs should be for all economic actors, better than those actors can do themselves, and then dictating those inputs and outputs to the actors. Otherwise there's no point to it. And that is what it can't do based on the information argument I gave. > I don't think the computation cost scales exponentially. If it did, the decentralized free market computer would not be able to accurately compute the economy. Wrong. The decentralized free market computer's capacity scales exponentially, since each individual economic actor is computing their own actions. The centralized computer, however, has to compute everyone's actions. That's why it faces an insurmountable information problem that the individual actors doing their decentralized computing do not face. > The government can help alleviate the failures of the market. No, it can't. That is the lesson of history. Every time governments have done this, they have made things worse, not better. That is not to say that market failures do not exist, only that the failures of government are worse. > the market is generally short-sighted, while governments can think more long-term. You have this backwards. Government time horizons are the next election. Individual market actors can have time horizons going out decades--for example, individuals saving for retirement. Governments can't even keep their social security trust funds safe from being raided by the legislature when it wants to fund some white elephant. > it is my understanding that the Chinese government has invested a lot in solar panel technology and implementation. Quite possibly it has. That in no way means China might not be even better off if it were not centrally controlled by the government. > You would probably agree this is a good thing, given the severity of the climate crisis. No, I wouldn't, because I don't think climate change is a crisis. And as far as I can tell, neither do the Chinese. They are investing in those technologies not because they believe they need them themselves, but because they believe they can sell them at a substantial profit to Western countries who are much more worried about climate change than the Chinese themselves are.
register 5y ago
You mean you should let decide to monopolies and oligopolies what products and services we need right? There is no such thing as an ideal free market. Free market is an human model and therefore just an abstraction. The gap between theory and reality makes all the difference in the world.
- pdonis 5y ago
  > There is no such thing as an ideal free market. Sure there is. A free market is a market in which all transactions are voluntary. That's the natural state of a market. We see many markets that are not free only because governments either prevent people from engaging in transactions they would otherwise choose to make, or force people to engage in transactions they would otherwise not choose to make (the obvious example of this is coercive taxation).

AussieWog93 5y ago

>Such an economy could avoid the instability of our current economy with its cyclical booms and busts. From what I understand (not an economist, but quoting what I've heard from them), much of the boom-bust cycle can be dampened by limiting debt.

jwmhjwmh 5y ago
I'm not an economist either. It just seems the business cycle has been a persistent feature of capitalist economies.
- AussieWog93 5y ago
  Perhaps look into Australia. We have much tighter regulations than the US or UK when it comes to lending, and we've largely avoided recessions, including in 2008. COVID got us, but that did have a physical reason behind it.