Why can't planned economy work?
>inb4 state can't allocate resources as good as market can
Why?
>>1291066
You just answered it.
>>1291070
You're not explaining me why can't state allocate resources effectively though.
>>1291066
I think once we've maxed out our technology far enough it can be possible. The problem with the USSR, the most famous example of a planned economy, was that a lot of the consumer goods we take for granted today after decades of research (which, admittedly, was driven by firms doing research but also with hefty american govt funding as well iirc). The other problem is that the soviet union got wrekt by Germany in wwii economically and demographically and then had to continue directing investment into heavy industry, a legacy of Stalinist development, to compete with the US during the Cold War, which always assured that the government, even if it wanted to, had little money to channel into producing solid consumer goods that might have increased the perceived quality of soviet life and halted the sense of stagnation in the final years of the USSR.
>>1291092
But basically if USSR focused on consumer goods instead of heavy industry, it would be better?
I mean, in military industry for example they weren't far behind America, and in some areas they were ahead.
>>1291066
I noticed it works fine in some of the newer MMO's that have strict fixed economies.
It wouldn't work in reality, as the invisible hand of the unfree market makes violating it impossible in such games. In such worlds, it's physically impossible to trade items save in the fixed price range the system decides upon.
In reality, there is no such market god, so eventually, some group or groups will want more than they have, and gather resources and power to continue that pursuit in snowball like fashion, until they take over the mechanisms that control the market and twist it to their own ends.
Which is, more or less, how we got to where we are.
>>1291098
>I mean, in military industry for example they weren't far behind America, and in some areas they were ahead.
I think it would have certainly lasted longer than it did. You have to realize that the USSR was never the bigger economy vis a vis the US, especially after it got it's shit pushed in during wwii. Since revenues were smaller as a result, the soviets had to spend a far larger proportion of their budget on defense/military industrial complex. There's no question that they were able to keep parity and even surpass the US at times, but the sheer expense of doing this was one of the reasons Gorbachev wanted to end Cold War tensions once and for all, so that the USSR (see the issue around the Star Wars program for example, though I'm hesitant to argue that Reagan "ended the Cold War"
>>1291115
woops forgot to finish last sentence:
so that he could trim military spending and revitalize the Soviet economy/government
>>1291066
it can work, but you have to remove a vital factor;
the human
>>1291066
Economic calculation problem
Planned economies are dead as fuck. Only internet memesters could support one. They would get laughed out of any economics department.
>>1291066
>Why can't planned economy work?
https://www.youtube.com/watch?v=gPJWwiKnYGs
This is why
>>1291115
Correct me if I wrong, but from what (little) I read, problems were actually purely political, not really directly derived from planned economy.
Namely, political establishment focused on heavy industry and military spending because these ministries were politically powerful, and when it came to consumer goods input from consumers was crippled because of political repression and thus unwillingness of people to criticize and offer input.
So maybe if USSR was a bit more ''liberalized'' after Stalin, things would work far better?
>>1291122
Meme answer. I'm asking for explanation, not meme answers and quips.
>>1291128
>Economic calculation problem
Sorry if I'm a bit skeptical.
>>1291066
Agency cost.
>>1291148
>>Economic calculation problem
The objection raised to central planning still makes perfect sense.
A price system guided by a free market can utilize the knowledge of a vast number of individuals to respond quickly and accurately to supply and demand. To ask the same of a bureaucracy is insane - it is impossible for a bureaucracy to accomplish the same thing a market can.
>Correct me if I wrong, but from what (little) I read, problems were actually purely political, not really directly derived from planned economy.
>Namely, political establishment focused on heavy industry and military spending because these ministries were politically powerful, and when it came to consumer goods input from consumers was crippled because of political repression and thus unwillingness of people to criticize and offer input.
>So maybe if USSR was a bit more ''liberalized'' after Stalin, things would work far better?
There was a book critiquing the planned economy and calling for reform within the Soviet Union by Nikolai Shmelev and Vladimir Popov. I know in that book there are highlights of how hilariously bad the Moscow bureaucrats were at managing the economy.
>>1291148
Namely, political establishment focused on heavy industry and military spending because these ministries were politically powerful, and when it came to consumer goods input from consumers was crippled because of political repression and thus unwillingness of people to criticize and offer input.
You may be right, but my knowledge on the USSR is not comprehensive at all. However, I'd conjecture that the reason that heavy industry and military spending were so politically powerful was because two things (which I'm basically repeating from the last post). First, is that Stalin's Five Year Plans built up a huge heavy industry/military industry which created a class of appartchiks who had an interest in perpetuating their industry to their profit. This complex continued after the Second World War. In a word, it was a military industrial complex. The second reason is that the Cold War always made soviets focus on strategic and military concerns, so any politician who could gain access to the levers of the military and industry had not only power, but also the ability mold policy and so gain stature/prestige what have you.
>Namely, political establishment focused on heavy industry and military spending because these ministries were politically powerful, and when it came to consumer goods input from consumers was crippled because of political repression and thus unwillingness of people to criticize and offer input.
That's interesting, never thought of it that way. But wouldn't you think that consumer goods are somewhat apolitical? Even if any opposition in Soviet Russia could be construed as treason, I think that the ability to improve the citizen's standard of living through "bread and circuses," so to speak, would ultimately benefit the regime and make the population docile and apathetic. China does this today
>>1291066
Your distinction between state and market economies is irrelevant. Economic planning does not imply state ownership and market economies do not imply non-state ownership.
>>1291148
The USSR was liberalised after Stalin, and everything went to hell. By the end of the 60's socialist property relations were eviscerated and replaced with a centrally-coordinated market that destroyed the entire country. This was able to happen from the political degeneration caused by anti-communist elements within the party led by the likes of Beria, Khrushchev, Kosygin, and Brezhnev.
>>1291197
>Correct me if I wrong, but from what (little) I read, problems were actually purely political, not really directly derived from planned economy.
It's still being debated today. The collapse of the Soviet Union is complex but I agree with you that politics was a big factor, even though I'm not sure which were the most important factors.
>>1291191
>can utilize the knowledge of a vast number of individuals
But why can't you simply ask individuals themselves, in centrally planned economy?
Again, ignore the political aspects. This was flawed in USSR because state itself was repressive. But if that wasn't the case, consumers could provide input. And economic planners could react.
>it is impossible for a bureaucracy to accomplish the same thing a market can
But why?
I'd actually argue that planned economy is more effective under certain conditions.
I mean, just look how quickly did USSR industrialize. It went from country that was devastated by civil war, and country that was devastated in WW2 (and lost 20+ million people), to second world economy by 60's.
Obviously there were problems, but I'd still argue these problems were mostly political and not some inherent problems of planned economy.
>>1291197
>built up a huge heavy industry/military industry which created a class of appartchiks who had an interest in perpetuating their industry to their profit
Precisely.
>and make the population docile and apathetic
Wouldn't you say that's occurring in modern Western societies, which embrace free market and free trade?
>>1291204
>Economic planning does not imply state ownership and market economies do not imply non-state ownership.
You're right.
>and everything went to hell
It still had quite respectable economic growth.
I don't think Stalinism was sustainable in any case.
>>1291207
"Politics" are endemic to any planned economy. The interests of the planners will never align with the varied interests of individual economic actors.
>>1291250
>"Politics" are endemic to any planned economy.
Are you arguing politics don't occur in other systems/societies?
I'd say politics are inevitable.
Now question is, how to provide a sort of ''checks&balances'' that could mitigate that.
>>1291248
>But why can't you simply ask individuals themselves, in centrally planned economy?
Again, ignore the political aspects. This was flawed in USSR because state itself was repressive. But if that wasn't the case, consumers could provide input. And economic planners could react.
Because people can't sit around all day filling out survey forms about how many and what kind of paper-towels they want.
If there are prices in the system, they will all be arbitrary. The planners have to pretty much pull prices out of their ass, and to adjust them in real time like a market is just silly.
>it is impossible for a bureaucracy to accomplish the same thing a market can
A bureaucracy could never be as efficient as a market which responds automatically and accurately to supply and demand. Of course if the economy is controlled by the government it can be pushed towards particular goals, but not efficiently.
>>1291288
>people can't sit around all day filling out survey forms
Do they have to?
I believe you're exaggerating, in fact consumption is mostly constant and there's no need for such an input. Of course, it shouldn't be discouraged either.
>and to adjust them in real time like a market is just silly
Why?
I mean, even if the process is somewhat ineffective compared to free market process, can't I argue that benefits could potentially outweigh the negative sides?
>which responds automatically and accurately
I admit again I'm far from expert, but wouldn't economic crisis dispute that?
Resource allocation under free market isn't really perfect as you make it out to be.
>but not efficiently
Again, I'd argue that it can be extremely efficient under certain conditions. As I said, USSR turned from illiterate devastated land to second world economy in the span of 30 years, and considering they had to fight a brutal war which led to death of 14% of population and massive devastation in Western areas which were actually economically most important, I'd say that was very very impressive. Again, disregard political oppression, and picture looks rather good.
>>1291323
I wish I had time to argue with you all day (we're not all NEETs) but I think you aren't really grasping what kind of Herculean task it would be for a central planning agency to manage a large modern economy. I'd recommend Sowell's Basic Economics, because a good part of the book is explaining how planned economies can't work as well as markets, and it's written for non-experts. To understand how a planned economy can't work you have to understand how an unplanned economy does work.
>>1291339
>to manage a large Herculean economy
But Soviets somehow managed it, and had respectable economic growth, despite the fact it was heavily plagued by political corruption.
I mean, I can read books all day (and I did read BE by Sowell), but theory is theory and practice is practice.
>>1291066
Because you cant plan against chaos.
>>1291266
With a market system politics enters in determining the rules of the road, but not the contents therein. There are agency costs and other efficiency losses involved in determining the rules of the road, but they are nowhere near as large as the costs involved in matching the tastes of every individual in the market to jobs and consumer goods. The planners can never perform as well as a market.
>>1291082
Because it's super complicated and it changes very quickly? And while you can use computers to make it easier, people are fallible and corruption is always going to be a part of it.
Also I can't see the advantage of doing this over existing social democratic systems of capitalism.
>>1291082
Basic economics, the free market ensures competition and an incentive for companies to produce goods the market really demands, and the competition also drives innovation and prices, eventually leading to completely new technologies we wouldn't have had otherwise.
>>1291288
>market which responds automatically and accurately to supply and demand
This never happens
>>1291446
>competition also drives innovation and prices, eventually leading to completely new technologies we wouldn't have had otherwise.
Funny enough, in the modern economies of the leading Western nations, we are seeing the reverse.
>>1291112
We need an mmo that doubles as an economist experiment.
Like designed as one from the start but really engaging gameplay and combat
>>1291465
Eve online already exists
>>1291066
It can work, to a certain extent. It even surpasses Free Markets in some respects.
Good example is WW2, when total war with Germany broke out the arch Liberals (economically anyway) in the UK government didn't lean back and say "it's okay lads, the free market will fix this". No that would have been stupid. There was heavy state involvement in every sector of the economy, freedom tramping top down control, farmers who didn't follow the latest mandates to boost yields had their lands confiscated for instance. It works when you have competent administration and your needs are simple, 600,00 guns one million tonnes of wheat, that sort of shit.
What it can't do is provide the myriad consumer goods that we all love and associate with better lives, as planning cannot be that nimble.
>>1291482
It works when there is one goal for everyone. You don't have that outside of wartime.
>>1291468
Yeah but you know one that is actually fun.
>>1291498
I would argue such a goal could exist outside of war.
>We are building this together
etc
>>1291416
>matching the tastes of every individual
That doesn't occur in free market either. Let's be realistic for a second.
>The planners can never perform as well as a market.
Again with this mantra.
And I have to repeat it again, USSR overcame incredible odds and became a worlds second economy in the span of 30 years.
And we're talking about a very repressive country, where political infighting and oppression of population arguably sapped the potential for economic improvement, a lot more than they aided it.
Practice>theory.
I see people here quote Austrian School, but tell me, which country improved significantly by adopting those ideas?
Even often mentioned Chile actually started really growing after they dropped it, that is after Pinochet.
>>1291430
>I can't see advantage of doing this
For start, you make economy more robust since it won't depend so much on external factors.
Influence of foreign capital and thus foreigners is highly limited.
Among many other things.
Advantages are primarily political and social.
>>1291446
>ensures competition and incentive
Okay, but it's not like USSR didn't innovate at all.
Innovation was in fact mostly curtailed by above mentioned political issues.
None of those things are inherently tied with central planing/command economy.
>>1291066
>too many middle men between service/product and customer
>state will eventually devolve into unreasonable, leading to almost nothing getting approved
>concerning profits and what would be beneficial to the business, the government doesn't have a dog in their fight, so they will not have the same drive as the businesses
>>1291148
>I'm not looking for pragmatically reasons why my idealistic system won't work
well then why ask, you won't find anything you are purposely avoiding
>>1291634
How am I avoiding anything?
I just prefer when you explain it with your own words instead of referring me to theories of Austrian School. Which is exactly ''idealistic system'' you talk of.
>>1291626
>too many middle men between service/product and customer
Explain this part.
>state will eventually devolve into unreasonable, leading to almost nothing getting approved
Everything will decay. That's just how it is. There are no eternal systems.
>so they will not have the same drive as the businesses
Pure speculation, and I could offer a counterpoint by saying government works in the interest of society as whole, while business works in the interest of pure profit.
The central planner would need perfect information about every agent in the system in order to optimally allocate resources, to say nothing of the lopsided power dynamic associated with the existence of a central planner.
The price mechanism may not be perfect but it does well in that it provides information as to who wants what and how badly relatively efficiently.
>>1291066
Because humans are imperfect
>Central planning doesn't work
What's stopping government from doing the same things corporations do and just have a chain of command with higher ups just oversseing middle management who oversees local management who oversees workers?
Why can a business do this and work but not a government?
>>1291530
Like fascism.
>>1291066
Shit happens
>>1291066
State planning requires that everything be connected to a central decision making process whereas a market depends on the decisions of multitudes of market actors (MAs). Both can be inefficient, however MAs avoid most of the challenges faced by advanced economies. A bureaucracy must devote administrative resources towards oversight and the effects compound as the economy develops and a system becomes more complex. By contrast MAs can both conglomerate to gain the benefits of an economy of scale or relegate functions to other MAs (or the government) to relieve any administrative burden.
>>1291805
So are markets.
But I get your point.
>>1291934
What does this crude drawing of a triangle mean?
>want to buy industrial good
>contact manufacturer and order
>order is sent via a private courier
vs
>want to buy industrial good
>contact government bureaucrat
>government bureaucrat forwards the request to another government bureaucrat
>request is put into a waiting list
>request is then analyzed and approved by another government bureaucrat
>government bureaucrat contacts factory to order goods
>factory needs raw materials which are pending for proper allocation
>a government bureaucrat finally approves raw materials for the factory
>goods wait in a warehouse until a government bureaucrat frees up space on the ministry of transportation waiting list
>>1291482
And after the war Germany/Japan roared back into prosperity while Britain stagnated because they didn't relinquish control back to private entities
Why doesn't a planned economy work in 2016?
First, a government has to (should) serve all its citizens. Therefore it has to (should) take everyone into account in its decisions. This is linked to the competition argument of the free market. The government only has the incentive to do as much as is needed to keep people from overthrowing it. The government has little incentive to improve its work because that will lead to higher demands from the people. They'll get used to better work.
This usually leads to way too much work and information for even a well-oiled bureacracy of 1 million to handle.
Second, and this connects to the first point, imperfect information.
No person or organization is omniscient.
But generally, smaller and localized governments/organizations that are closer to the end product/consumer handle this information better.
Why? They have far fewer people ro be worried about, so they specialize to those interests.
Third, humans are corrupt. Almost without a doubt, the larger and more powerful the organization, the more chances it has to be corrupt.
China has mastered the first two problems, but its system is falling suspect to corruption that is almost impossible to get rid of without systematic changes.
This is not to say the free market is perfect, or even good in its current form in 2016.
But history has shown that as long as humans/organizations are more imperfect, more unincentivized, and more corrupt than the average market system... The market system will be dominant.
On a sidenote, the current neoliberal system of the West is better at self-propagating and defending itself, than it is at functioning to the benefit of mankind as a whole.
There is a better political/economic system. (It's not communism though.)
>>1292016
Also not fascism
>>1292003
>Britain stagnated because they didn't relinquish control back to private entities
not true. read more pls
>>1291538
You can't view a nation as a GDP machine. We could increase GDP with a 100% tax rate in which all government funds are spent on digging holes and filling them again. It doesn't mean that the production is meaningful or valuable. No one wants to spend money on having useless holes dug but the government bureaucrat.
>>1291839
A government won't go out of business if it fails to provide value.
>>1291066
>Why?
Because when it's their own money people spend it more wisely.
Public money = nobody's money
>Hey let's build a Colossus statue and give the rest for free to savage non-white so-called "refugees".
>>1291066
It CAN work it is just that a free Market Economy gets rid of inefficiencies in the process the government takes to allocate the resources.
Thus after 40 some odd years of inefficiency the disparity becomes much larger. The populous sees the prosperity of the other nations and demands they have the same.
>>1294511
>government funds are spent on digging holes and filling them again
when does this ever happen? OP is right about your relying on libertarian memes
>>1294511
Point is life improved for Soviet citizens as well. There were dumb things but they created value, no doubt about that.
>>1291969
A triangle or pyramid is commonly used to portray a hierarchy as you might have seen in descriptions of the feudal system.
http://www.bing.com/images/search?q=feudal+system
Another example might be the command structure in the military.
My drawing was just a diagram of what I am describing. Each supervisor has to manage 20 subordinates and each time they must devote time to oversight to prevent corruption and inefficiency, just to illustrate I quantified efficiency as "90%".
In real life of course it is much more complicated, but this "whisper down the lane" effect is a factor.
>>1295545
Its an exaggeration of what occurs to illustrate the point. The soviet union had a massive military industrial complex, but they did not provide the things the people want at a level comparable to a market economy.
It probably does work if you only have a few things to create, like only specific kinds of rationed food, and a myriad of weapons.
But the question is for how long it works, and how good of a life the people under it live.
Capitalism has the advantage in that everyone can be a producer of goods if they want, at least to a larger extent than what was true under mercantilism and feudalism.
We don't have the requisite computer programs for planned economies, give it a few decades.
>>1295545
Stop bad-talking the International Pot-hole Diggers and Re-fillers Union!
7/26 class war now.
>>1297504
This.
Just wait until we get an AI so advanced it replaces our government all together and micromanges each citizen individually.
>>1297536
How terrible.
