6 ms·

Einstein talks of a planned economy towards the end. It's easy to see how someone in 1949 might think it's a good idea, but in 2023 the idea seems antiquated.

by hx8 3y ago

Einstein talks of a planned economy towards the end. It's easy to see how someone in 1949 might think it's a good idea, but in 2023 the idea seems antiquated. All of the major economies are largely not planned. Now I wonder if the idea of a planned economy was just tried too early. Was it missing the quantized world we live in now, with increases in information processing and communication? Is there an AI advancement in our near future that can outperform the free economy?

legitster 3y ago
It's a good reminder that at this time, the purpose of planned economies and Communism specifically was to make everyone collectively richer. Everyone kind of assumed that competition was destructive and a bad thing. Marx wrote about it, progressives believed it (which is why Americans begrudgingly put up with trusts and monopolies for long periods), and you can see it here in Einstein's writing. Only in hindsight looking at the failure of Communism do we frame it as "choice vs equality". There's a good semi-fictionalized book about how this framing changed called "Red Plenty".
- mik1998 3y ago
  That's plain false. The entire point of Marx is that capital is what creates massive productive forces.
sdfghswe 3y ago
> Was it missing the quantized world we live in now, with increases in information processing and communication? Is there an AI advancement in our near future that can outperform the free economy? Einstein would tell you that we should be quantizing less, not more! :-) No, it's not just a matter of quantifying more. The hard part of planning an economy is less "if I gather all the data in the world then planning an economy just becomes an optimization problem" and more "the biggest components in planning an economy is that A) how much individuals "need" of something depends on how painful it is for them to get it, and B) the individuals themselves wouldn't be able to tell you what this relationship is". The best known way for you to get feedback on how much someone wants something is putting it out there and see how much they'll pay for it.
- sudosysgen 3y ago
  You can do that in planned economies, and historically that's what's been done. You let people try products with the surplus, basically acting as a VC fund, and if people buy that product at a price beyond that of production you make more, otherwise you make less. A market for labor and for consumer goods has been a part of every planned economy. It really is the optimization and the logistics that was the difficult problem historically.
notacoward 3y ago
In theory it might be possible, but it's just as possible that it would go in the exact opposite direction - increasing inequality, exploitation, etc. Given who is best able to influence the development and deployment of AI, which way do you think that will work out?
UtopiaPunk 3y ago
There was a big discourse called the "socialist calculation debate" that basically revolved around whether a planned economy could ever "beat" a market economy. To summarize a big complicated thing in a nutshell, a market system is pretty neat because market forces are determine the price (a reflection of the value) of goods and services in an unplanned manner. It's a system that takes in information, and the various actors in the system respond accordingly. It's never 100% accurate, but given enough time and stability, it's usually pretty close. https://en.wikipedia.org/wiki/Socialist_calculation_debate https://en.wikipedia.org/wiki/Socialist_calculation_debate However, a pure free-market systems is always a reaction to information, so there's a lag in whether the price accurately reflects the value of a good or service. At the worst of times, prices can suddenly skyrocket and/or plunge, and if this ripples out, this creates the familiar boom and bust cycles in capitalism. In the socialist calculation debate, proponents of a planned economy say it should be possible to determine the accurate prices of things faster than the market can. Opponents say that the economy is simply too complicated to ever take in enough information to calculate such things. This discourse was all occurring well before computers and the Internet were common. The most recent serious attempt at a socialist planned economy was in Chile under Allende, who saw the potential of using technology to gather and organize such information. Chile in the 70s effectively built a proto-Internet to send information from manufacturers to a centralized location, where macro-economic decisions could be made based on the information (google "Project Cybersyn"). It would have been a really interesting test of the idea, but unfortunately the United States could not allow a democratically elected socialist leader to stand, and the CIA backed a coup to overthrow Allende. The US then installed Pinochet in his a place, a brutal dictator :( https://en.wikipedia.org/wiki/Project_Cybersyn https://en.wikipedia.org/wiki/Project_Cybersyn I'm of the opinion that with widespread computer and Internet adoption, such calculations are not only possible but happening all the time. However, such "planned economies" exist to serve capitalist corporations such as Wal-Mart and Amazon rather than the economy at-large. A book called "The People's Republic of Wal-Mart" is a good discussion on that topic: https://en.wikipedia.org/wiki/The_People%27s_Republic_of_Walmart https://en.wikipedia.org/wiki/The_People%27s_Republic_of_Wal...
- dietmtnview 3y ago
  > To summarize a big complicated thing in a nutshell, a market system is pretty neat because market forces are determine the price (a reflection of the value) of goods and services in an unplanned manner. It's a system that takes in information, and the various actors in the system respond accordingly. It's never 100% accurate, but given enough time and stability, it's usually pretty close. No. A massive majority of the prices of things in the US are distorted by the government or the Federal Reserve. Agriculture is propped up by the government, the prices of healthcare are distorted by capitalist interests, landlords have benefited from lax government oversight, the railway workers strike was made illegal by Biden. The list goes on and the prices are a reflection of these distortions. To say prices reflect reality is to be delusional to the political situation.
marcusverus 3y ago
On the one hand, I think we’re probably already at the point where a workable planned economy is possible—-one in which everyone has an apartment and gets 3 square meals a day. But it’s hard to imagine a planned economy which wouldn’t underperform a free economy in the long term. You cannot expect to reduce the incentives for innovation without reducing innovation.
- J_Shelby_J 3y ago
  We have an example of how a planned market works in practice: the housing market. The housing market is one of the most regulated “planned” markets. We’ve made it impossible to build in some cites and impossible to build density in almost all suburbs. And so we have a massive housing shortage that’s doubled the fair market price of housing. If we let the market build enough homes to meet the demand, an apartment would be incredibly affordable. Someone working as a fry cook could afford a two bedroom. That being said, one could argue this planned market is working as intended… renters and first time home buyers are taking 30-50% of their incomes and giving it to property owners… who voted for this system.
  - polygotdomain 3y ago
    While I agree that the housing market is significantly "planned", it's also not centrally planned. Zoning is determined by local citizens, which tend to have the opposite incentives to responsible growth, housing prices, and infrastructure costs. Also, the thing that make many housing decisions work is infrastructure, which is handled through entirely different mechanisms. >If we let the market build enough homes to meet the demand, an apartment would be incredibly affordable. I'm not entirely convinced that just letting builders "build more" is going to solve the issue. The reality is that companies are only going to build what they can sell and/or lease at a level that makes it profitable for them to build it. The three factors are then land value, materials, and labor costs. Materials and labor are a separate thing, so you're effectively saying that changes in zoning would decrease the land value. At this point, I'm not really sure that you'd see that impact. In many of the cities and areas where you'd want more density, the land values are already quite high, and it's unlikely that bringing in that density would decrease the land value. What you're banking on is more housing increasing competition and bringing prices down, which would be unlikely to happen, mainly because of how long it would take to go from an empty lot to "ready-to-move-in" apartments. At best it would slow down double digit rent increases, which would obviously be a benefit, but it wouldn't suddenly make housing affordable. From my perspective, we need to incentivize the building of affordable housing, rather than investor driven product. An investor driven product is going to try and have higher end finishes, novel floor plans, and other amenities to distinguish it from the market to maximize rents and valuations. Affordable housing can be built with normal finishes, reproducible floor plans, and comparable amenities. That's what will keep the cost down for the other two factors, material and labor, so that the end result is something that's affordable. The biggest problem is that no one in commercial real estate really likes building this kind of product, unless it's in an area without much direct competition.
sabarn01 3y ago
Due to the war a lot of economies were planned circa 1945. With the war and the depression in peoples recent memory the idea of free capital allocation seemed insane.
avgcorrection 3y ago
> Einstein talks of a planned economy towards the end. It's easy to see how someone in 1949 might think it's a good idea, but in 2023 the idea seems antiquated. All of the major economies are largely not planned. AAPL? MSFT? AMZN? A large corporation is internally a planned economy. Why do they keep outcompeting small businesses?
- shrimp_emoji 3y ago
  Market capture and high barrier to entry to producing the same caliber of service/product, particularly given network effects. These are not good examples.
  - avgcorrection 3y ago
    Bad examples of what? It doesn't matter why big corporations keep outcompeting small businesses. They simply do. Thus “planned economies” are still a thing, not something “antiquated”. It doesn't matter if you think that these are caused by impurities in the system.
    - stkdump 3y ago
      Interestingly though, the extent to which big corporations outcompete small business is different in different economies. For example in Europe a much larger part of the economy is driven by small/medium business than in America.
codeulike 3y ago
Yes I've wondered about this - the market-vs-planned economy question got decided in an era with completely different networking and information processing technologies. There's this famous story: Sometime before 1989, a Soviet official asked economist Paul Seabright who was in charge of London’s bread supply. Seabright gave him an answer that is comical but also true: ‘nobody’. The bread we eat turns up on our tables thanks to an incredible team effort (bakers, machinists, electricity suppliers, distributors etc etc). And even more incredibly, there is no-one in charge of that team. It just happens. Also - please do weigh in on this, its a genuine question - we are used to the idea that markets are efficient in that way - as described above. But that efficiency of the current state, but doesn't seem to take account of the evolution that happened to get to that point. Has anyone measured the work it takes to get the market to that endpoint? Is there even a name for this concept? That is: For every business that is involved in the supply of bread to london today, there must also be lots of businesses that tried to be involved but failed. Is there an economic term for the work that goes into the failed businesses and initiatives that dont survive long enough to become players in the market? The bankruptcies, the people that had to sell their business off cheap to a competitor, the people who spent a few years trying then gave up and pivoted to something else. Is there a name for that lost effort? Because it seems that if were comparing against a planned economy thats what we should compare with - the total effort over time to produce whatever X.
- consilient 3y ago
  > But that efficiency of the current state, but doesn't seem to take account of the evolution that happened to get to that point. Has anyone measured the work it takes to get the market to that endpoint? Is there even a name for this concept? I don't know of a term for this in particular, but the keywords to search for are "entry" and "social inefficiency".
- hx8 3y ago
  I think food in general is a terrible example of the efficiency in the free market. Nearly 40% of all food in the US is wasted. The evolutionary pressure of the free market values high availability over efficient use of resources.
marcosdumay 3y ago
The economy is still highly complex and chaotic. That means that computers or not, if you don't have complete information about what everybody is doing and the ability to simulate every mind in the world, then no, you can't perfectly optimize it. You can only do some hacks here or there, estimate risks, and react. But guess what? That's exactly what our governments do.
indymike 3y ago
> Einstein talks of a planned economy towards the end. It's easy to see how someone in 1949 might think it's a good idea, but in 2023 the idea seems antiquated From the article: "A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow men in place of the glorification of power and success in our present society." This has been tried, and results in horrible oppression within just a few years of implementation. I can see the appeal, but you have to re-invent humans to make it work.
- LindeBuzoGray 3y ago
  > This has been tried, and results in horrible oppression within just a few years of implementation. I can see the appeal, but you have to re-invent humans to make it work. From 50,000 years ago to 10,000 years ago there were no capitalists, no kings, no slave owners. production to the needs of the community, distribute the work to be done among all those able to work and guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow men in place of the glorification of power and success in our present society. It is not a system of horrible oppression, it is how the few remaining hunter gatherer bands live in the Amazon right now.
  - satvikpendem 3y ago
    > From 50,000 years ago to 10,000 years ago there were no capitalists, no kings, no slave owners. Citation needed. Humans have been anatomically modern since 100k BC, including the brain. There is no reason to think there haven't been kings or slaves in that time, just that there is no history about them.
    - LindeBuzoGray 3y ago
      Migratory hunter gatherer bands still exist, and no observation of them through history has found kings or slave owners among them. Nor is there historical evidence. I'm not sure how a migratory hunter gatherer band which has few possessions and moves from place to place would have some slave owners who not work and the others as slaves. In fact much of the world was like this only a few centuries ago.
jamiepenney 3y ago
I've seen it convincingly argued that large corporations like Walmart operate like a planned economy internally, even if they are acting in an externally unplanned economy. JT from Second Thought talks about it here: https://www.youtube.com/watch?v=xuBrGaVhjcI https://www.youtube.com/watch?v=xuBrGaVhjcI as well as early socialist attempts at doing the same thing with computers (Cybersyn in Chile).

by hx8 3y ago

legitster 3y ago

It's a good reminder that at this time, the purpose of planned economies and Communism specifically was to make everyone collectively richer. Everyone kind of assumed that competition was destructive and a bad thing. Marx wrote about it, progressives believed it (which is why Americans begrudgingly put up with trusts and monopolies for long periods), and you can see it here in Einstein's writing. Only in hindsight looking at the failure of Communism do we frame it as "choice vs equality". There's a good semi-fictionalized book about how this framing changed called "Red Plenty".

mik1998 3y ago
That's plain false. The entire point of Marx is that capital is what creates massive productive forces.

sdfghswe 3y ago

> Was it missing the quantized world we live in now, with increases in information processing and communication? Is there an AI advancement in our near future that can outperform the free economy? Einstein would tell you that we should be quantizing less, not more! :-) No, it's not just a matter of quantifying more. The hard part of planning an economy is less "if I gather all the data in the world then planning an economy just becomes an optimization problem" and more "the biggest components in planning an economy is that A) how much individuals "need" of something depends on how painful it is for them to get it, and B) the individuals themselves wouldn't be able to tell you what this relationship is". The best known way for you to get feedback on how much someone wants something is putting it out there and see how much they'll pay for it.

sudosysgen 3y ago
You can do that in planned economies, and historically that's what's been done. You let people try products with the surplus, basically acting as a VC fund, and if people buy that product at a price beyond that of production you make more, otherwise you make less. A market for labor and for consumer goods has been a part of every planned economy. It really is the optimization and the logistics that was the difficult problem historically.

notacoward 3y ago

In theory it might be possible, but it's just as possible that it would go in the exact opposite direction - increasing inequality, exploitation, etc. Given who is best able to influence the development and deployment of AI, which way do you think that will work out?

UtopiaPunk 3y ago

There was a big discourse called the "socialist calculation debate" that basically revolved around whether a planned economy could ever "beat" a market economy. To summarize a big complicated thing in a nutshell, a market system is pretty neat because market forces are determine the price (a reflection of the value) of goods and services in an unplanned manner. It's a system that takes in information, and the various actors in the system respond accordingly. It's never 100% accurate, but given enough time and stability, it's usually pretty close. https://en.wikipedia.org/wiki/Socialist_calculation_debate https://en.wikipedia.org/wiki/Socialist_calculation_debate However, a pure free-market systems is always a reaction to information, so there's a lag in whether the price accurately reflects the value of a good or service. At the worst of times, prices can suddenly skyrocket and/or plunge, and if this ripples out, this creates the familiar boom and bust cycles in capitalism. In the socialist calculation debate, proponents of a planned economy say it should be possible to determine the accurate prices of things faster than the market can. Opponents say that the economy is simply too complicated to ever take in enough information to calculate such things. This discourse was all occurring well before computers and the Internet were common. The most recent serious attempt at a socialist planned economy was in Chile under Allende, who saw the potential of using technology to gather and organize such information. Chile in the 70s effectively built a proto-Internet to send information from manufacturers to a centralized location, where macro-economic decisions could be made based on the information (google "Project Cybersyn"). It would have been a really interesting test of the idea, but unfortunately the United States could not allow a democratically elected socialist leader to stand, and the CIA backed a coup to overthrow Allende. The US then installed Pinochet in his a place, a brutal dictator :( https://en.wikipedia.org/wiki/Project_Cybersyn https://en.wikipedia.org/wiki/Project_Cybersyn I'm of the opinion that with widespread computer and Internet adoption, such calculations are not only possible but happening all the time. However, such "planned economies" exist to serve capitalist corporations such as Wal-Mart and Amazon rather than the economy at-large. A book called "The People's Republic of Wal-Mart" is a good discussion on that topic: https://en.wikipedia.org/wiki/The_People%27s_Republic_of_Walmart https://en.wikipedia.org/wiki/The_People%27s_Republic_of_Wal...

dietmtnview 3y ago
> To summarize a big complicated thing in a nutshell, a market system is pretty neat because market forces are determine the price (a reflection of the value) of goods and services in an unplanned manner. It's a system that takes in information, and the various actors in the system respond accordingly. It's never 100% accurate, but given enough time and stability, it's usually pretty close. No. A massive majority of the prices of things in the US are distorted by the government or the Federal Reserve. Agriculture is propped up by the government, the prices of healthcare are distorted by capitalist interests, landlords have benefited from lax government oversight, the railway workers strike was made illegal by Biden. The list goes on and the prices are a reflection of these distortions. To say prices reflect reality is to be delusional to the political situation.

marcusverus 3y ago

On the one hand, I think we’re probably already at the point where a workable planned economy is possible—-one in which everyone has an apartment and gets 3 square meals a day. But it’s hard to imagine a planned economy which wouldn’t underperform a free economy in the long term. You cannot expect to reduce the incentives for innovation without reducing innovation.

J_Shelby_J 3y ago
We have an example of how a planned market works in practice: the housing market. The housing market is one of the most regulated “planned” markets. We’ve made it impossible to build in some cites and impossible to build density in almost all suburbs. And so we have a massive housing shortage that’s doubled the fair market price of housing. If we let the market build enough homes to meet the demand, an apartment would be incredibly affordable. Someone working as a fry cook could afford a two bedroom. That being said, one could argue this planned market is working as intended… renters and first time home buyers are taking 30-50% of their incomes and giving it to property owners… who voted for this system.
- polygotdomain 3y ago
  While I agree that the housing market is significantly "planned", it's also not centrally planned. Zoning is determined by local citizens, which tend to have the opposite incentives to responsible growth, housing prices, and infrastructure costs. Also, the thing that make many housing decisions work is infrastructure, which is handled through entirely different mechanisms. >If we let the market build enough homes to meet the demand, an apartment would be incredibly affordable. I'm not entirely convinced that just letting builders "build more" is going to solve the issue. The reality is that companies are only going to build what they can sell and/or lease at a level that makes it profitable for them to build it. The three factors are then land value, materials, and labor costs. Materials and labor are a separate thing, so you're effectively saying that changes in zoning would decrease the land value. At this point, I'm not really sure that you'd see that impact. In many of the cities and areas where you'd want more density, the land values are already quite high, and it's unlikely that bringing in that density would decrease the land value. What you're banking on is more housing increasing competition and bringing prices down, which would be unlikely to happen, mainly because of how long it would take to go from an empty lot to "ready-to-move-in" apartments. At best it would slow down double digit rent increases, which would obviously be a benefit, but it wouldn't suddenly make housing affordable. From my perspective, we need to incentivize the building of affordable housing, rather than investor driven product. An investor driven product is going to try and have higher end finishes, novel floor plans, and other amenities to distinguish it from the market to maximize rents and valuations. Affordable housing can be built with normal finishes, reproducible floor plans, and comparable amenities. That's what will keep the cost down for the other two factors, material and labor, so that the end result is something that's affordable. The biggest problem is that no one in commercial real estate really likes building this kind of product, unless it's in an area without much direct competition.

sabarn01 3y ago

Due to the war a lot of economies were planned circa 1945. With the war and the depression in peoples recent memory the idea of free capital allocation seemed insane.

avgcorrection 3y ago

> Einstein talks of a planned economy towards the end. It's easy to see how someone in 1949 might think it's a good idea, but in 2023 the idea seems antiquated. All of the major economies are largely not planned. AAPL? MSFT? AMZN? A large corporation is internally a planned economy. Why do they keep outcompeting small businesses?

shrimp_emoji 3y ago
Market capture and high barrier to entry to producing the same caliber of service/product, particularly given network effects. These are not good examples.
- avgcorrection 3y ago
  Bad examples of what? It doesn't matter why big corporations keep outcompeting small businesses. They simply do. Thus “planned economies” are still a thing, not something “antiquated”. It doesn't matter if you think that these are caused by impurities in the system.
  - stkdump 3y ago
    Interestingly though, the extent to which big corporations outcompete small business is different in different economies. For example in Europe a much larger part of the economy is driven by small/medium business than in America.

codeulike 3y ago

Yes I've wondered about this - the market-vs-planned economy question got decided in an era with completely different networking and information processing technologies. There's this famous story: Sometime before 1989, a Soviet official asked economist Paul Seabright who was in charge of London’s bread supply. Seabright gave him an answer that is comical but also true: ‘nobody’. The bread we eat turns up on our tables thanks to an incredible team effort (bakers, machinists, electricity suppliers, distributors etc etc). And even more incredibly, there is no-one in charge of that team. It just happens. Also - please do weigh in on this, its a genuine question - we are used to the idea that markets are efficient in that way - as described above. But that efficiency of the current state, but doesn't seem to take account of the evolution that happened to get to that point. Has anyone measured the work it takes to get the market to that endpoint? Is there even a name for this concept? That is: For every business that is involved in the supply of bread to london today, there must also be lots of businesses that tried to be involved but failed. Is there an economic term for the work that goes into the failed businesses and initiatives that dont survive long enough to become players in the market? The bankruptcies, the people that had to sell their business off cheap to a competitor, the people who spent a few years trying then gave up and pivoted to something else. Is there a name for that lost effort? Because it seems that if were comparing against a planned economy thats what we should compare with - the total effort over time to produce whatever X.

consilient 3y ago
> But that efficiency of the current state, but doesn't seem to take account of the evolution that happened to get to that point. Has anyone measured the work it takes to get the market to that endpoint? Is there even a name for this concept? I don't know of a term for this in particular, but the keywords to search for are "entry" and "social inefficiency".
hx8 3y ago
I think food in general is a terrible example of the efficiency in the free market. Nearly 40% of all food in the US is wasted. The evolutionary pressure of the free market values high availability over efficient use of resources.

marcosdumay 3y ago

The economy is still highly complex and chaotic. That means that computers or not, if you don't have complete information about what everybody is doing and the ability to simulate every mind in the world, then no, you can't perfectly optimize it. You can only do some hacks here or there, estimate risks, and react. But guess what? That's exactly what our governments do.

indymike 3y ago

> Einstein talks of a planned economy towards the end. It's easy to see how someone in 1949 might think it's a good idea, but in 2023 the idea seems antiquated From the article: "A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow men in place of the glorification of power and success in our present society." This has been tried, and results in horrible oppression within just a few years of implementation. I can see the appeal, but you have to re-invent humans to make it work.

LindeBuzoGray 3y ago
> This has been tried, and results in horrible oppression within just a few years of implementation. I can see the appeal, but you have to re-invent humans to make it work. From 50,000 years ago to 10,000 years ago there were no capitalists, no kings, no slave owners. production to the needs of the community, distribute the work to be done among all those able to work and guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow men in place of the glorification of power and success in our present society. It is not a system of horrible oppression, it is how the few remaining hunter gatherer bands live in the Amazon right now.
- satvikpendem 3y ago
  > From 50,000 years ago to 10,000 years ago there were no capitalists, no kings, no slave owners. Citation needed. Humans have been anatomically modern since 100k BC, including the brain. There is no reason to think there haven't been kings or slaves in that time, just that there is no history about them.
  - LindeBuzoGray 3y ago
    Migratory hunter gatherer bands still exist, and no observation of them through history has found kings or slave owners among them. Nor is there historical evidence. I'm not sure how a migratory hunter gatherer band which has few possessions and moves from place to place would have some slave owners who not work and the others as slaves. In fact much of the world was like this only a few centuries ago.

jamiepenney 3y ago

I've seen it convincingly argued that large corporations like Walmart operate like a planned economy internally, even if they are acting in an externally unplanned economy. JT from Second Thought talks about it here: https://www.youtube.com/watch?v=xuBrGaVhjcI https://www.youtube.com/watch?v=xuBrGaVhjcI as well as early socialist attempts at doing the same thing with computers (Cybersyn in Chile).