Gosplan never had anywhere near enough compute power or good data to do that job.
The data problem could have been solved with bar-coding. That's how WalMart got tight control over their inventory. Master Control in Bentonville, Arkansas can see pallet 2345235 leaving warehouse 242 on truck 24343 headed for store 2514. If store 2514 doesn't report arrival of that pallet, questions will be asked and the pallet will be found or somebody will be in big trouble. When the pallet is found, broken down, and product placed on shelves, the items will eventually show up in cash register data. If shelf inventory minus sales is not very close to incoming shipments, the "shrinkage" security people are informed and start looking for theft.
Gosplan had an annual planning cycle and monthly reporting. WalMart has a weekly planning cycle and daily reporting. A year was far too much lag for the system to work well. Although it did for heavy industry, where things take months anyway.
The huge linear programming problem isn't insoluble. It's a sparse matrix; potato chips don't affect steel tubing much. There's probably some way to come close to an optimal solution.[1] Sparse matrix techniques were in their infancy when the USSR was active, though.
> The data problem could have been solved with bar-coding. That's how WalMart got tight control over their inventory. Master Control in Bentonville, Arkansas can see pallet 2345235 leaving warehouse 242 on truck 24343 headed for store 2514. If store 2514 doesn't report arrival of that pallet, questions will be asked and the pallet will be found or somebody will be in big trouble. When the pallet is found, broken down, and product placed on shelves, the items will eventually show up in cash register data. If shelf inventory minus sales is not very close to incoming shipments, the "shrinkage" security people are informed and start looking for theft.
This is really interesting -- I'd never found much on pre-SAAS/internet Wal-Mart's asset tracking system, which I assume this must be a part of. Do you have any links to articles or books I could read to learn more about this?
Interesting! Thank you. Surprising to me to see RFID tags mentioned in the context of a system-wide transition -- I'll have to look into whether that was successfully completed.
It wasn't.[1] 2003 was too early for this. Their RFID usage continues to increase, though.
Latest WalMart edict: clear bar codes must appear on all four vertical faces of each carton.[2] They're tired of having to rotate a box to find out what's inside.
"People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information." - Sam Walton
The USSR had about 12 million types of goods. If you cross them over about 1000 possible locations, that gives you 12 billion variables, which according to Cosma would correspond to an optimization problem that would take a thousand years to solve on a modern desktop computer.
Modern (commercial and open-source) solvers of linear programming (LP) tackle problems of millions of variables in minutes. Most of those 12 billion variables would be cleared out (e.g. fixed to their lower bound, zero) in a pre-processing step.
Problems with variables that are constrained to be integer can take much longer, but they are orders of magnitude more efficient today than a few years ago.
> Problems with variables that are constrained to be integer can take much longer, but they are orders of magnitude more efficient today than a few years ago.
Planned economy is uncompetitive for more reasons than insufficient computing power.
You can't plan innovation. It is hard to plan for knowledge economy in general (material production is increasingly a smaller part of total GDP — something that early Communist theorists failed to predict).
Capitalism is automatic, self-correcting, parallel optimization process. It is asymptotically optimal.
Yes, real question to ask is, why is a good produced?
In a central planned system that is a policy decision based on the knowledge the planners have.
In a market based system that decision is decentralized to the actors in that system and therefore the rate of innovation is based on the sum of the actors distributed knowledge, that sum will always be more than that of a centralized body.
Hayek described that as the Local knowledge problem.
Capitalism has own set of problems like unfair distribution of income, unequal opportunities, patent system that prevents spreading innovation. I think it is used only because we don't have a better system at the moment and because people who benefit from it want to keep the status quo.
For example, in a capitalist economy two people that contribute equal amount of time to work can get different rewards for it. And those who get bigger reward would oppose to changes.
Correct, but he will eventually be replaced by somebody who can produce the same output and ask for less. It makes all business sense. Opposing market pressure is unsustainable in the long term.
Then by that same definition, free market is so fragile that it's an impossible pipe dream. Any actor that gains enough power to influence the market destroys the free market by its mere existence.
To take it to its extreme -- you cannot have a truly free market with existence of the State. However, if you don't have the State, there's nobody to enforce your property rights.
But the real world doesn't run on definitions and platonic ideals. There's no perfect "free market" and there will never be, because it's an inherently unstable state in our reality. For the very same reason you can't have world peace by making everyone agree that all conflicts will be resolved by playing chess.
EDIT:
Here[0] you're actually making the same point as I am. Free markets are fragile. They self-destruct if not externally enforced. Unfortunately, the enforcement itself is not immune to market forces either.
Because insurance companies, big pharma and other usual suspects lobbied the government (it wasn't even lobbying; rather, a "mutually beneficial agreement", which is beneficial to everybody except patients) to eliminate competition and lock their profits in various regulated obligatory payments. Being pro-free-markets in not the same as being pro-big-business. Revolving doors are real.
Ironically, free markets are fragile and require government protection to set the playing rules and step away. Usually, the government is not particularly interested in doing that.
(P.S. while the reason for healthcare inefficiencies looks clear enough for me, the case with education is more curious. I think that US education can be a genuine market failure. Compared to healthcare, it is relatively unregulated, and yet people seem to be OK with paying outrageous amounts for something that is not strictly necessary to choose any lucrative career they want. You don't need college education to become a software engineer or quant trader — I've been both without a completed degree, as there are more than enough materials for self-education in these matters these days. There are some exceptions like medicine, but they are that — exceptions).
I try to use following definitions (of course, both are fuzzy and apply only to some extent in real world):
Free market: A system where the goods are distributed based on prices set through the market mechanism. In particular, anybody can produce and buy anything.
Capitalism: A system where there is a private ownership of capital and human labor is being sold/bought for a price.
So yeah, in theory, you can have free market without capitalism (for example everybody works for a worker cooperative), and capitalism (almost) without free market (there are distinct capitalists and worker classes, and market is heavily regulated or subsidized from the state).
Non-free market capitalism or heavily restrained free market capitalism is basically the programme of the far-right these days in a lot of countries. On the other side, you have Market Socialists (https://en.wikipedia.org/wiki/Market_socialism).
Free markets do require capitalism, but capitalism (as defined by using monetary capital as the primary resource) can unfortunately also operate in various less than free modes.
The article makes me think that the failure of the planned economy system would probably not have happened if they had modern computers (and computing tools we take for granted today). The author thinks this would only be possible in about 100 years because he considers that everything needs to be considered in the model. However, one could make the case for doing central planning of a limited set of goods which are interdependent, of course.
AI being all the rage in the news these days, and pretty much in fashion, who knows, perhaps automatic optimization of a country's economy will start to be talked about as a Good Thing To Have?
The computational complexity seems to depend on the desire to solve all the problems at once. But how about solving just the warped incentive structures of capitalism?
Simulate perfectly rational economic actors that are only concerned with the next upstream and downstream hops in the market, have them take into account the "taxes" and "credits" of externalities without any of the pesky politics, and distribute in-simulation "purchasing power" to end consumers in whatever way you deem fit. You could even distribute this end-user power to actual consumers, in order to allow them the freedom to input their desires into the system.
Basically, remove the capitalists from the capitalist system; or, just use the computational model of capitalism without actually giving power to the computational nodes.
But you're not getting rid of the warped incentive structures, you're just simulating them! Assuming you actually get your data and everything perfect you just get capitalism-world, warts and all.
If you just want to be able to digitally assign more symbolic purchasing power to the agents dispossessed by the current system, the government already has the power and infrastructure to do that. Adding another level of computer abstraction to the already symbolic computerized money system doesn't do anything.
There are a factions in the strong AI community whose members espouse the idea that a planned economy would become feasible given greater computational capacity and better software.
I have to think that the major objection to this is that the complexity of a socioeconomy also scales with computational capacity. Planning an economy is quite likely always beyond the capacity of any portion of entities within that economy, for the same knowledge problem.
Running up a rigorous approach to proof/disproof of that would be an interesting exercise, of course.
But it is an interesting example of the point that AI has a way of being all things to all people, when rigorous testing of ideas is not applied. For the would-be communists and socialists it is a road to a perfect planned technocracy, regardless of the fact that this looks less than feasible.
> There are a factions in the strong AI community whose members espouse the idea that a planned economy would become feasible given greater computational capacity and better software.
The calculation problem with central planning isn't really a calculation problem, it's a missing input problem. You can't optimize utility without a good input on utility.
Capitalism has significant problems by being forced to treat money as equivalent to utility, when it manifestly suffers decreasing marginal utility like everything else. This means people with access to more of it are likely to give up more for the same utility, which means capitalism overweights the preferences of the rich, and this gets worse the more effective capitalism is at optimizing by the one utility measure it has. But centrally-planned systems have even worse utility inputs, which no measure of computational power can correct; it's a GIGO problem.
The experiences derived from that basic problem are (one of several reasons) why market socialism is much more common in socialist circles than state socialism these days (market socialism has been competing with state socialism—which many market socialists have referred to as state capitalism on the view that, in it, the state becomes one big capitalist enterprise—the whole time, but the Bolsheviks managed to fix most popular attention on their particular form of state socialism, and capitalists found it convenient to ignore other socialist viewpoints in their attempts to demonize socialism.)
>The calculation problem with central planning isn't really a calculation problem, it's a missing input problem. You can't optimize utility without a good input on utility.
Historically that has been true, but couldn't technology help? Like, issuing everyone a smartphone and having them register all demand and make all purchases through it. The rest is a problem of keeping capital from aggregating at the top.
> Historically that has been true, but couldn't technology help?
No, it's a fundamental structure problem, not a technology (aside from the sense in which an economic system is itself a social technology) problem.
> Like, issuing everyone a smartphone and having them register all demand and make all purchases through it.
From a utility signalling perspective, that's not significantly different in the information it provides than just retaining currency for consumer purchases, which state socialism generally has.
Or shouldn't be impossible to devise a robust decision and optimization algorithm against missing, wrong or inaccurate input.
That said, linear programming is not it and the problem is extremely slippery.
The trouble with governments as it is is that they make decisions In an extremely non-robust way...
The robust way is supposed to work like a many-worlds predictor- corrector pattern and that's just one way. It is an order of magnitude or two more computationally intensive. (Think robust weather predictions and modelling.)
I think it would pretty much require taking humans out of the decision-making process as much as possible, and maximal transparency where they are involved. Humans provide input as far as what they want and what they are willing to pay for it, and everything else is algorithms.
Apart from dragonwriter's point, that you're just duplicating the signaling that money currently does: You want to let some central authority watch every purchase I ever make, just so that they can try to plan the economy better? Um, hello? Privacy concerns, anyone?
If you don't need your ${purchase you'd like to keep private} to be optimally produced, you could register demand for a facility that allows you to select from an assortment of goods effectively anonymously, i.e. a shop. The demand would then be tracked on the aggregate level. Of course this is assuming that the selection includes what you want, otherwise you will have to be more open about your desires to have them satisfied.
That's a separate issue, but I imagine there's probably a way to collect the demand while keeping the individual anonymous. Besides, in the world of capitalism we have the same concern- Amazon, Google, my bank, and Verizon could all probably tell me things about myself and my habits that even I don't know.
"In soviet union, optimization problem solves YOU!"
(The article includes a link to an article with such name, a good read for an in-depth discussion / comment trail regarding optimization in the USSR / CCCP:)
Excellent post! Very well written an detailed in its analysis. Loved every part of it, especially in the end when the author speculates whether Central Planning could possibly work with the advances in technology in the future (TLDR: maybe).
This is actually pretty fascinating. If we reach a level of automation such that factories are completely automated, I wonder if the data that is gathered from all those factories, along with more powerful computers and algorithms in the future, would allow central planning to work better than no planning. Some of the problems mentioned by the author are caused simply by the data being wrong, because of lying factory managers: automated factories would eliminate that problem at least.
At the very least, I hope that in the future there will be a centrally planned economy managed by the government to provide a decent living standard to most citizens, while minimizing environmental impact. More productive or talented citizens would/could choose to opt to earn more wealth and purchase from an open market.
Central Planning, as reasonable as it sounds, can only play a very limited role in a free society. The goal of production is to meet demands, and one of the goals of planning is to optimize things, but demands are easy to underestimate; the optimization then will lead to planning only for the type of production that can ensure basic survival and not much more.
The relatively high standard of living in the former socialist economies was to a large degree due to the need to compete with the capitalist economies, where standard of living, abundance and variety of products all grow naturally higher with time, rather than get "optimized" into oblivion.
> Central Planning, as reasonable as it sounds, can only play a very limited role in a free society.
USA, for example, has a lot of central planning, in the private sector alone, not even considering the public sector. Any large mega-corp is an example. Walmart has a huge centrally planned operations and supply chain.
> capitalist economies, where standard of living, abundance and variety of products all grow naturally higher with time
How would you explain stalled and declining standard of living in the Western capitalist economies over the past 30 years or so?
That's not central planning, that's just regular planning.
Both Walmart's supply of resources and other producers of its goods (or near-identical substitute goods) are outside the control of its planners, forcing them to spend most of their energy dealing with the vagaries of the market instead of just making their goods, which is what socialist planning was supposed to avoid.
Adding planners doesn't give you more (central planning) it gives you (less central) planning
The point is that companies like Walmart operate internally just like Soviet Union. The USSR was also constrained by a global capitalist market system and traded extensively with other countries, including the U.S.
Further, Walmart has an enormous influence, and often outright economical control over many of its suppliers, to the point that it can make or break them. It's notorious for playing hardball in their negotiations with suppliers.
Even further, there's such a thing as Walmart's brands, which place even further control over white label suppliers, and sometimes take over production on their own: https://en.wikipedia.org/wiki/List_of_Walmart_brands
Even further, Walmart owns its trucking fleet and employs truck drivers directly.
> But now you could issue every citizen a smartphone through which they could register their demand.
Unless they are expending a limited resource to do so, the same problem remains. In capitalist market economy that resource is money [1], and it's universal and fungible, both bid for goods and services (and not just in typically "consumer" markets) and bid against with offerings of labor. If you abolish meaningful markets for some goods and services—including wage labor—you limit the scope of utility signals you get—even if, as most real world state socialist systems have done, you retain exchange of currency for “consumer” goods and services.
[1] which, despite its utility, has significant issues, too. Nothing in this post is meant to endorse the optimality of capitalism, only to explain the problem of utility signalling in state socialism.
It wasn't my intent to imply this didn't involve money. You can have central planning and still have money, no? I would not disagree that it's nigh impossible to have a functional economy without money...
If you can do central planning, money becomes mostly superfluous. The whole point is that factories don't pay for their inputs, stores are stocked without borrowing to buy goods, profitability of individual firms becomes irrelevant, and the overwhelming majority of economic activity is based on supplying planned needs.
You could still have money but needing money to live a normal life or being able to use money to invest or stockpile goods would represent a failure of central planning.
Maybe I'm dense, but I don't see how central planning makes money superfluous. Central planning doesn't mean you're beyond scarcity. Money quantifies the worker's share of the production and their spending communicates demands and priorities for subsequent production. There's no getting around having prices for things, the prices are just lower because they are not calculated to be as high as possible to maximize profits for investors and because the redundant production, marketing, and financing expenses associated with competition are eliminated.
> It wasn't my intent to imply this didn't involve money
Limiting the scope of markets limits the utility-signalling function of money, even if it is retained (as, in practice, centrally-planned systems tend to.)
This is a problem of input data that technology that provides alternative mechanisms to collect the same data (cell phone purchasing) does not address.
Demand can be, and often is, created artificially; it can also be reduced to some "acceptable" minimum. What purpose would nation-wide Central Planning serve? Certainly, not the maximizing of the profit of a company. It would serve to optimally satisfy demand, and minimizing the latter would be a sensible optimization strategy.
Well, it would serve to optimize (or come close to doing so) some utility function, which might be labeled "satisfaction of demand". But who defines that utility function? Some central planner.
But how does that central planner know what I actually want? Yeah, I could tell them with my smartphone. That's going to tell them a pretty coarse approximation to what my actual desires are, though.
For example: Life Savers candy. People choose to buy the stuff. A roll of them costs, what, $1? But how many people are going to bother listing that on their phones? A whole lot fewer people than actually buy Life Savers, I bet.
[Edit: What's actually going to happen is that an element of politics is likely to creep into the definition of the utility function. "Oh, they shouldn't want that; they should want this instead."]
Certain basic needs are definitely not created artificially. So every human being has requirement for food, clothing, shelter and the very minimum. The more I think about it, the more it seems like, for instance, primary sectors could be handled so much better with central planning. e.g. instead of growing artificially subsidized corn, grow only an amount of corn that is required by the economy (perhaps a little extra). Continuously adjust production to meet demand if it increases.
Demand for fancy food is more artificial. Maybe I love oysters but you like quail instead. So there could be a free market operating for oysters and quails.
Provision of basic necessities happens to be the cases where central planning has failed most spectacularly in practice. The most recent example would be what's happening in Venezuela today. The most infamous example would be the Great Leap Forward in Mao's China, which led to the single most deadly famine in human history.
There's a reason why nobody tries to declare food a human right and give it away for free, even though people die if they don't eat.
You're examples are, pardon my language, spectacularly bad. Its important to differentiate genuine attempts at solving the problem of central planning v/s populist dreams of utopia. In fact Venezuela was much less central planning and more short term grabbing resources and making the available for free, without any consideration of planning or sustainability whatsoever. The Great Leap Forward was, again, a crazy Utopian plan where it was hoped that China would reach the goal of industrialization, again without any specific ways in which to achieve that.
The Soviet Union and East Germany seem to be the only states which attempted Central Planning genuinely, and from this article and other resources, it seems the problem was simply too complex even then... at that time.
Not to mention that in the USSR and East Germany the process, while the attempts may have been earnest, they were still heavily politicized and often unscientific in their approach. Aside from the lack of computational capacity, there was still a sort of economic Lysenkoism to deal with.
Yes but food for example is a thing markets work great on, there's pricing transparency and it's easy to switch suppliers and shop for better prices. The same cannot be said for healthcare for example where it's pretty clear markets fail precisely because it's nigh impossible to do those things. Central planning works well when markets can't. No one is going to shop for the best emergency room price while having a heart attack, nor can you even get transparent pricing from hospitals; you can't know what you owe until after you've have the services performed because they can't know up front what services you're going to require.
Or, like, I order the quail dish with my phone, or use my phone to let it be known that I would be interested in quail dishes costing less than $15 or something, and you'd do the same for oysters. That demand and potential demand would then be aggregated with everyone else's by the big central computer, which would calculate a price based upon the supply capacity and cost of production (including how those costs are affected by other demands in the economy). That price determination occurs organically in a free market, but it's not perfectly efficient and involves a lot of redundancy and waste. With sufficient computational power it might be possible to formalize that process and make it more efficient.
Sorry to burst your bubble, but this idea is something that economists have already discussed to death: google "the Socialist Calculation Debate". A very brief summary of its conclusions is: central planning can only perform as well as or better than the market when the economy is completely stagnant.
Also, "centrally planned economy managed by the government" by definition leaves no space for "an open market" for "more productive or talented citizens" to "choose to earn more wealth and purchase from." Unless you're talking about a black market.
The "economists have settled this" refrain has become common on hn lately. It is unfortunate.
The reason that conflicting schools of economic can coexist indefinitely in economics (in the contrast to physics, say) is that very little is settled on economics since the question of how an economic system works is predicated
As other have said, your absolute pronouncements about socialism requiring a stagnant economy is coming from a rather specific ideological bent rather than a simple consensus.
It comes from a consensus of people who are skeptical of central planning, which spans more than a single "specific ideological bent" and should be the starting point in any given discussion of the topic since over the decades the planners have produced nothing but failure.
Frankly, the burden of proof ought to be on you to show that it's going to work now just because we have shiny new computers that they didn't have between 1922 to 1991. Which is actually very thoughtfully discussed in the article.
When you can point out a "market failure" that resulted in famines that killed millions of people, maybe we'll have something on the same scale to account for.
Why can planned and market economy not coexist? Some sectors of the economy are or have been state planned in most countries. Come to think of it, in a slightly more complicated planning model, the cost and benefit of nationalising or privatising certain industries could also be included.
If you're really centrally planning the economy, then all of the decisions are made by a central authority. There's no room for anyone else to do anything, because it messes with the program. The central plan can only work of it knows everything relevant.
If you're running a mixed economy, where some sectors are planned and some are not, thats fine... but it's also not what the post is taking about.
Sure they coexist now, because, as sibling commenter pointed out, while outside of corporations market forces exist, every corporation or government entity itself is a separate world, where most of free market rules do not apply. Most of them are centrally planned in one way or another
Ok, I think we need to define what "central planning" means for people who are going to choose to participate in this discussion.
"Central planning" means "the government (or some other single entity, but usually the government) makes all of the decisions in the economy."
Corporations, despite being "centralized," and despite engaging in "planning," do not meet the definition of what we're talking about when we say "central planning." They emerge in a free market economy in order to reduce the transaction costs that would come with trying to coordinate mulitiple people as independent participants to do some specific activity. They do not exist to decide for the entire country exactly what everyone will be doing all the time to meet the entire nation's needs. That's a very big difference.
>A very brief summary of its conclusions is: central planning can only perform as well as or better than the market when the economy is completely stagnant.
I'd hardly say that was either proven or agreed upon
>"centrally planned economy managed by the government" by definition leaves no space for "an open market" for "more productive or talented citizens" to "choose to earn more wealth and purchase from."
I don't see this a being "by definition" either. You can have a centrally planned economy with people who are independent (or at least as independent as they are in any other economic system) in what job they choose, where they choose to work and what they choose to buy. The government could assess the demand for a product at a given price, determine the resources (material or human) necessary to produce that product as well as all other demands for those resources. When the demands exceed resource availability, you then raise the price for that resource, refactor that into the price of the final product and then assess the demand for it at that new price. You raise the price for each constraining resource until the demand drops to a level that can be fulfilled. This would include specialized labor, so if a job is in high demand and short supply, the wage for that job would go up until the supply increases and/or demand decreases to reach equilibrium.
All of this already happens in an ad-hoc way in a free market, but in a free market it can take a long time for changes in input prices to be reflected in output prices, and it can take even longer to determine how those will affect demand. I don't see why that couldn't be formalized and worked out centrally. I'm imagining an economy where everyone is issued a smartphone through which they make all of their purchases and through which they find and respond to bids for employment. Demand could then be assessed fairly accurately and instantaneously. It seems like it would be way more efficient in terms of reductions in redundancy, overproduction, costs incurred attempting to generate demand that does not exist or siphon demand from competitors' products, and price increases solely for profit-maximization in cases where demand is inelastic and supplies are sufficient (like epi-pens or insulin).
Modeling it would probably be extremely complex and might still exceed our current computational capacity, I dunno, but I don't see any reason to call it impossible.
> The government could assess the demand for a product at a given price, determine the resources (material or human) necessary to produce that product as well as all other demands for those resources.
As the blog post notes, politicians will not leave their hands off sensitive prices, leading to unending systemic distortions. This already exists.
> All of this already happens in an ad-hoc way in a free market, but in a free market it can take a long time for changes in input prices to be reflected in output prices, and it can take even longer to determine how those will affect demand.
Market reactions vary according to the market. Petrol prices at the pump move up extremely quickly, because the station owner is going to pay for the next tank out of this tank. They move down slowly because that's about the only time they turn a profit.
Meanwhile, manufacturing industries can need 1-5 years of lead time to increase capacity. They can't and won't make massive changes without substantial, sustained market signals that it's required.
The difference between the market system -- really, the price system -- and non-market systems is that the price system is sufficient to solve the planning problem. A world of agents who know nothing but prices is still able to allocate resources and production in a way that adapts to changes in demand and supply, including large shocks.
In practice, real markets also make use of other information signals. But they do not require them. And they do not require a central coordinating planner to have perfect or near-perfect information of extremely wide ranges of local information.
Probably the best explanation of this distinction is found in Hayek.
With regards to the innovation question: considering that the soviets we're quite good at military and space innovations, and that defense organizations in general produce a lot of innovation(think DARPA), maybe central planning could work ?
Though of course the required central planning here is quite different, more about smart bets than optimizations, and focusing engineering resources at important problems, which doesn't seem that great at capitalistic economies either(think planned obsolesce, "my generation is optimizing ads", browser in-incompatibilities, etc) .
The Soviets were really good at military and space innovations but:
1. They weren't much better than the West. Consider that the capitalist world surpassed them at pretty much anything they started with an advantage in.
2. They were also really bad at managing the scarcity of very basic things their people needed. Like, food and medicine. The joke was that Russia had "bad weather" for 70 years under communism.
>With regards to the innovation question: considering that the soviets we're quite good at military and space innovations
Well, space industry was quite suboptimal in USSR. Successes were achieved because of 1) all resources were spent on space and military and 2) great legacy of Russian Empire (especially great minds like Korolev, Tsiolkovsky and Tupolev). So I see it more like stagnation than development.
Maybe central planning works better on big items than it does on little ones. Gorbachev decided that central planning wasn't working when he realized that the USSR could produce military hardware as well as the US, but couldn't supply toothpaste to its population.
Spufford's book mentions this explicitly: during the description of one of the Central Planning Sessions one of the characters muses (i.e. provides an overview to the reader) about the many unwritten rules that guide each of the calculation steps.
One (possibly the most important) is that "The Army always gets first pick to anything".
So the Objective Function assigned much higher "value" to Military production (either explicitly or implicitly) and this of course made military production more "efficient" than consumer goods production.
(I put quotes around "efficient" because there still was a lot of waste and corruption even in that, of course).
>but this idea is something that economists have already discussed to death: google "the Socialist Calculation Debate"
I wouldn't say it's been "discussed to death" at all; have you read Cockshott's "Towards a New Socialism"? He tries to explain why the problem isn't really a problem at all, with his idea of computerised central planning.
No I haven't read that book, but I have read and heard a lot of people claim that better computers would solve the problems with planning. I've never heard anyone who does so actually make a persuasive case, because they tend to treat the problems as merely being about doing spare matrix math or simply needing more data points to get better answers, which are not sufficient to make the problems of central planning go away.
I will google this book, but could you tell me what you find most persuasive about it?
I can't seem to find the document you're referring to and its conclusions, Wikipedia page? Is there a balanced discussion on the subject somewhere that is not from Mises Institute or some other libertarian ideologically-driven piece?
> That's why I asked about something non-ideological, and neither Mises nor Hayek are that.
You may have mistaken Mises and Hayek, the fairly thoughtful and insightful market-favouring economists, with Mises and Hayek, the caricatures transmitted via a heavily mutating Murray Rothbard into US Arch-Libertarianism.
In particular Hayek is at great pains that he doesn't think the market is magical or morally superior. He clearly points out that markets assign by prices, not by commendable virtues.
But he does say that markets solve a problem that can't, beyond a certain scale, be safely solved in other ways without causing larger problems to emerge.
Hayek was a Nobel prize winning economist who along with Mises brought this whole issue to the attention of the field of economics. If you want more 'non ideological' than that in economics you're not gonna find it. By the definition you seem to be using a non ideological economist doesn't exist.
I don't see how winning a Nobel prize makes someone less ideological, especially if they're already widely known as particularly ideological.
For example, Soviet economist Kantorovich won the same prize the year following Hayek for work related to central planning, and I'd consider him a lot less ideological, not because of winning the prize, but because of his overall approach to issues: http://www.nobelprize.org/nobel_prizes/economic-sciences/lau...
My point was that if you want a non ideological economist you're going to have a hard time finding one and that Hayek is as much an economist and no more 'ideological' than any other influential economist: from Hayek's contemporary Keynes through Samuelson, Friedman to Krugman they're all indisputably significant figures in economics and Hayek is no more ideological than the others. If you're going to dismiss Hayek as ideological you have to pretty much dismiss economics as a discipline entirely.
Winning a Nobel prize in itself doesn't automatically make a person non-ideological. As others have pointed out, Mises and Hayek have faced (justifiable) criticism for being too ideological, which you can't wave away by simply stating that they're Nobel laureates.
It's worth pointing out, for those of you who are playing the "oh it's libertarian so it must be bad" game, that other socialists also reached the same conclusions about central planning. Central planning is not an explicitly required feature of socialist economics, and critique of central planning is not exclusively the province of the right. Trotsky, Kropotkin, and the Mensheviks would be examples of prominent left wing thinkers who rejected central planning, especially the Soviet style.
I meant something that at least acknowledges the existence of arguments outside of Austrian school, let alone capitalist economics, and then analyzes merits of both/all.
Lots of people here confuses planning done in large corporations with central planning.
Even if corporations plans their entire operation it is not the same as central planning, because even if a corporation plans its production it cannot plan it sales. It can only estimate because it operates on a common market.
Estimation of sales plans hiring, production etc, however the actual real sales is a feedback loop into that process, where in a central planned system that feedback loop does not exist. Central planned system will just go on whatever the "sales".
> it cannot plan it sales. It can only estimate because it operates on a common market.
So the USSR as a whole was not selling (exporting) on a common market?
> Central planned system will just go on whatever the "sales".
I do not understand this. The "demand" of products within the USSR should not be compared to the sales of the corp, but to the corp's internal demand for stuff (e.g. office supplies).
Anyway, I'm not a proponent of central planning an economy. I see markets as a great, organic and bottom-up way of having supply and demand meet. I'm no proponent of protection-by-law of the unlimited hoarding of private property; I'm no proponent of the centralized state. Instead I'd like to see the lower level of gov't to be the most powerful. I guess I'm a mutualist.
> So the USSR as a whole was not selling (exporting) on a common market?
What goods was that? Military supplies? On that it operated on a market economy with the West and therefore got competition and a feedback loop and therefore produced some useful things.
Soviet exported oil & gas, but that was also part of global market, which Reagan used against the Soviet by dumping the price. Soviet was largely an oil & gas economy.
Apart from that Soviet didn't produce much consumer goods and exports of that to other communist countries was part of planned system.
> but to the corp's internal demand for stuff
In a corporation you know that you need goods based on what you are producing. If you are white collar company, it is quite logical to have office supplies and if you are IT company, you need to have computers and so on.
However in a central planned system, you have to take into account the entire population what they need. But how would a planner know what to who when it does not know what you are producing. Ask every individual?
If one person wants a blue pen and another red pen, what should the central planner do with that information? Produce two black pens?
That is the Local knowledge problem I wrote about in this comment
It's funny how the vast majority of capitalist corporations consider capitalism as a sacrosanct principle, yet when you look at how they operate it's basically Soviet-style central planning. The senior executive [nomenklatura] who, often, are treated More Equal Than Others, centrally plan who works on what and what resources they are allocated: a bureaucratic elite picking and choosing how the wealth of the company is redistributed and used among teams, as opposed to letting a market decide which projects live and die. As Ronald Coase pointed out, companies tend to be "islands of central planning in a sea of market relationships."
Another parallel to the Soviets: Things like good-ol-boy networks and elite school alumni [membership in The Party] are largely what drives promotion within the higher ranks.
I have been thinking the same thing. From the inside a corporation is a planned economy like East Germany. Five year plans, motivational posters and speeches, huge number of bureaucrats and a huge discrepancy between what leaders proclaim and the reality that people on the ground can see.
With a corporation you can always quit but in the eastern block you couldn't do that because of armed border guards.
Hayek says that central planning of an entire economy results in dictatorship, because conflicting interests have to be resolved by non economic means that involves the pressure of a secret police. i think he was right, it doesn't matter how many computers you have for solving planning problems, there always remain conflicting interests when the big father in the ministry has to decide who gets the stuff, central planing turns matters of distribution into political problems
"Hayek says that central planning of an entire economy results in dictatorship"
With some corporations becoming bigger and global we have to be a little careful that they don't turn into de-facto dictatorships either. Internally they already behave like one.
You could, theoretically, leave the USSR, if you paid back what society had invested in you. De facto it was very hard to leave
You can quit your job. Except many of us de facto can't (H1B1, non compete clauses, etc)
Leaving Yugoslavia was probably easier than being an Indian engineer on an H1B working for a company with a non compete clause.
Btw, I don't think Hayek or any of the Austrians had very benign attitudes towards multinationals or large corporations: Begging for tax payer largess, ghostwriting regulations creating artificial barriers to entry, abusing immigration law to have a de facto slave. Mises and Rothbard would tut tut. And they were the hard core anti commies!
Yugoslavia and Poland where the two socialist countries where citizens were allowed to travel to the west. Exceptions: both countries were relatively poor and didn't mind a few people leaving (also in Poland (PPR) the government used to make consessions when it faced popular pressure)
I was not aware that Poland allowed people to leave.
Yugoslavia on the other hand, was more interesting, in the sense that it was not a part of the Warsaw pact, or a puppet state under the USSR. It was a 'non-aligned' communist state, and, after Stalin's death had passable relations with both the East and the West.
No, not really. Poles we're theoretically allowed to get a passport but in practice if one didn't have a good reason to go west and get back one didn't receive passport.
You are right, it is hard to generalize: for example Albania did not dependent on Moscow at all and Romania even had its own foreign policy that did not automatically follow Moscow. Go figure...
You could leave the GDR - but you had to wait for the permit for several years and your ability to earn an income was severely restricted during that period; In the USSR Jews could apply for emigration since the seventies, and permission was very dependent on the current political climate and the whims of the higher ups.
as the saying, at least among Russian immigrants who saw USSR, goes - the bigger the corporation the more of socialism inside it.
In general it just follows from the main principle of Marxism described in the Das Kapital - higher entropy of ownership distribution leads to the higher degree of socialism (as the reverse of that entropy value basically being the strength of coupling between the ownership power and the execution power). From minimum entropy of ownership distribution - one 100% owner - to publicly owned companies to government run agencies and government owned properties to socialist state where nominally all the people collectively own everything. Significant change in entropy of such distribution - when say a significant stake of a public company gets concentrated in some single hand or when the whole company goes private or when some government agency gets privatized - usually leads to significant change in degree of socialism inside the company or the agency.
>higher entropy of ownership distribution leads to the higher degree of socialism
That characterization doesn't fit at all. Capitalist/Market-based societies are far more decentralized, with a higher entropy ownership distribution, than Communist/Socialist ones. In Market-based systems hundreds of thousands of small, medium and large companies and millions (or hundreds of millions) of individuals do day-to-day business with each other without direct oversight or control of a central body.
>where nominally all the people collectively own everything.
Except that's not how collective ownership works. A society of millions of citizens can't collectively manage anything - they need to create representative institutions to do that on their behalf. The bigger the collective, the less entropy the representative institution displays. So collective ownership in practice is a very very low entropy position.
man, you have completely mixed up ownership power with executive/management power.
When everybody owns everything that is maximum possible entropy of ownership power distribution, and that results in practically minimum entropy of executive/management power distribution - the heavily centralized planning&control. By contrast, in capitalist society every piece of property, except for government owned, is owned by a set of people smaller than the whole society and their stakes aren't necessarily equal - thus such distribution has lesser entropy that the socialist one of everybody everything. Where is management and control in the capitalist society and economy being less centralized has thus higher entropy distribution than the socialist centralized.
>man, you have completely mixed up ownership power with executive/management power.
I did not. You have a view of socialism that is not at all grounded in reality. That's where you got confused.
>When everybody owns everything that is maximum possible entropy of ownership power distribution
But that isn't true in practice at all. In every socialist/marxist society collectively ownership is a meaningless idea. It is more of a theoretical concept rather than a practical one. You have no rights as a collective owner to actually influence and decide on how specific resources are managed by some institution charged with exploiting them. The reality is that some central governing body, which under Marxist regimes is usually the communist party, is the one that actually manages all institutions. Usually that body is not even accountable to any democratic action. Worse for you, all power tends to be concentrated in an individual and even the party can be completely inconsequential and used more to rubber-stamp the decrees of the leader.
So I stand by my assertion that in practice, Marxist/Socialist societies actually have a very low-entropy "entropy of ownership power distribution". The central government is the defacto owner and manager of all institutions. That's as low entropy as you're going to get.
>By contrast, in capitalist society every piece of property, except for government owned, is owned by a set of people smaller than the whole society
Sure. But the set of sets of people who own something is itself huge, in theory and in practice, so market-based economies will have a low-entropy 'ownership power distribution' regardless. Even when comparing real market-based societies to your non-existent Utopian socialist societies I'm not sure you can simply assert the latter is more decentralized than the former because in capitalist societies there are more things to own that are in fact owned by more sets of people. Under Marxism, there may be one car manufacturer, and one car model being manufactured. In market-based/capitalist societies, there may be 10 car manufacturers making 10 car models that are then owned by far greater number of people. Each manufacturer can be also be owned by thousands or millions of individuals.
Hell, you can take a thermodynamic view if it helps to illustrate the concept. Historically market-based societies have been far better at increasing universal entropy than Marxist ones.
The difference is that the corporations are still participating in a free market trade, no one is forced to be a customer while communist governments don't have to worry about losing a customer.
It can be vastly more complicated than that. What with the auto industry bailouts, sub-prime lending, subsidized minimum wage jobs, etc. Corporations will take advantage of the government in ways that are very not capitalist if it suits them.
An interesting example of this is the modern Israeli kibbutz. These are literal socialist collectives [1] that function as actors in the capitalist economy. And a lot of them are quite good at it! It may be hard to motivate innovation in a nation-size egalitarian society, but it seems to work quite well in an economic unit where everyone knows everyone else and you personally know, or at least recognize, everyone who benefits from your innovation. (And they know you and recognize your accomplishments, which is also a big motivator.)
[1] In the ideologically pure case, which is a common case but not universal or even the majority.
That's a scaling issue. Communes work well up to about 100 people. Today's larger kibbutz is more like a company with worker housing. "Differential pay was introduced into the kibbutz structure; management has become increasingly professionalized; and the community and business structures have been separated"[1]
Hence the "ideologically pure" caveat; there is a fascinating subset of kibbutzim which make enough money to essentially function as post-scarcity economies (making things like Humvee armor add-ons for the Americans, or high-end vending machines for e.g. movie rentals). Those have been able to stay ideologically pure by being more effective players in a capitalist system [1], and once they reach that state they are able to maintain it through social forces.
[1] which of course creates some serious cognitive dissonance for all involved
> yet when you look at how they operate it's basically Soviet-style central planning
What are you talking about? Big Corporations will have thousands of suppliers, thousands of partnerships and millions of customers - none of whom are directly (centrally) controlled or managed. They are also far more transparent and truthful about their production numbers and costs. They are far more nimble, far more efficient, and far less corrupt.
The scale matters and managing even not so small companies Soviet Style is quite OK. As the article point out for small number of products optimization problems are solvable in one way or another. I will not even be surprised if few rules of thumb that a good manager instinctively uses give good enough solutions in most cases that matter. But that fails as n growths.
It's probably worth noting that centrally-planned corporations receive feedback from the market in the form of sales but the USSR's central planners didn't really have any equivalent.
This might be surprising to you, but consumers still used currency to buy goods, and both surpluses and shortages were tracked. It isn't exactly the same as market feedback, but it did serve the same function.
Not quite. There had been two currencies in the USSR, "cash" and "cashless" (нал and безнал). Retail consumers ("physical persons") could only use cash and institutional consumers ("juridical persons") only cashless. There had not been an easy exchange between the two by design. As the result, all consumer goods production ("group B") was flying blindly under the directions from the central planning. The government's own production ("group A") did have market-like feedback loops since it was running on the same currency and few people complained about this area's performance.
Consumer goods were in total ruin by the 1970s. People used word "deficit" to refer to anything desirable. And no, it has not been a common word or its usage in Russian before the advances in planned economy.
As a Russian, and as a Russian interested in economical history of both the Russian Empire and the USSR, I have to notice that before the communists the Empire had serious famine problems [1], and had no serious modern (19-th centure style modern) economy, which did not allow for effective product exchange between regions. For example, the Empire was exporting a lot of grain, but still had regional hungers every 5-10 years.
"Deficit" literally means "lack of something", and hunger is definitely a lack of food.
Food supply problems in the region were only solved by late 30s (if one skips war-related problem of 40s), when painful - like, really painful - communist reforms and modernization settled down.
>"Deficit" literally means "lack of something", and hunger is definitely a lack of food.
Sure. Yet, being a Russian myself also familiar with the history, I cannot recall people using that word to describe "hunger". In Russian of 1970s-1980s the word "deficit" was used to refer to the goods not a lack of them, see this example : https://www.youtube.com/watch?v=ZKWQ2UxXSLY
As for you remarks about RI's economy - I am not sure what you mean. In your own link there is no reference of an economy-related famine. Famines used to be caused by weather and wars all around the world.
Actually the central planners did plan backups and alternatives for everything. With all its flaws even the SU was not so flawed to let total idiots make every economic decision.
Just think of Mig and Sukhoi, for a simple example. Or NPO-Saturn and Tumansky, if you prefer jet-engine manufacturers.
> not so flawed to let total idiots make every economic decision
You might want to read up on Khruschev's corn farming plans, Gorbachev's prohibition, Mao's backyard furnaces and many more. Slightly tangent, check on Trofim Lysenko's anti-genetics antics. USSR style socialism explicitly declared ideology over science, engineering and what not. And by ideology they meant whatever The Great Leader says.
I guess the equivalent for nations could exist, but it would require free migration. USSR central planning screw up? Guess it's time to emigrate to China. Of course switching the nation you are part of is usually (but not always) more complicated than switching the product you buy.
Have you read the actual article? It explains in detail why it didn't do as well, namely computational complexity (essentially solved today), and the general non-adoption of ideas.
There's no reason to believe it wouldn't be viable today.
In short, managers often don't pay attention to how the products are created. They instead rely on checklists to "prove" that processes were followed.
Nothing beats "feet on the ground". If you know what's going on, you know how to manage it. If you're managing based on summaries of summaries of summaries... it will go badly.
See Jim Sinegal for a real-world example of this success story:
The career of Jim Sinegal largely proves you wrong.
As does the career of Tim Cook. Before he was CEO, he was managing Apple's global supply chain. Which involved a lot of on-site visits.
Try to explain how both of these people could have been just as successful while locked in a cubicle, and digesting reports from underlings.
If you believe that, I have a bridge in Brooklyn to sell you. Cheap. Just read the remote reports, and spend the money without ever visiting the bridge.
The computational complexity thing seems solvable. For one, it mentions today it would require 1,000 desktop computers to find the optimal solution. 1,000 computers is a pretty affordable thing for the benefit of managing an entire economy.
But most importantly you don't need to find an optimal solution. Things like gradient descent and hillclimbing will very quickly find locally optimal solutions. That's basically what capitalism is, prices and business demands propagate and sort of do gradient descent (but often very slowly and inefficiently.) Algorithms like scatter search and novelty search can be used to explore the wider search space and find the global optimum. E.g. "what would the locally optimal solution be if we shut down this factory and built a new factory here, and would it be better?"
As described above and in Cosma Shalizi’s post, the number of steps required to solve a linear programming problem with nn products and mm constraints is proportional to (m+n)3/2n2(m+n)3/2n2. The USSR had about 12 million types of goods. If you cross them over about 1000 possible locations, that gives you 12 billion variables, which according to Cosma would correspond to an optimization problem that would take a thousand years to solve on a modern desktop computer. However, if Moore’s Law holds up, it would be possible in 100 years to solve this problem reasonably quickly.
I found Red Plenty fascinating and I enjoyed the Crooked Timber seminar that Chris Said links to, particularly Shalizi’s post. I'm still wondering: why is the compute-unit "a modern desktop computer?" Is parallel scaling poor for this kind of problem?
If parallel scaling is poor, might better speedups be available with ASICs? Or are there heuristics that run faster and produce usually-close-to-optimal solutions on this type of problem? I'm just running through some common ways to accelerate solutions for compute-intensive tasks that run slowly on a single-socket of general purpose CPUs. For all I know, none of these avenues are promising.
Now that we are discussing Central Planned Economy I'd like to drop a link to a fascinating and mostly forgotten attempt to make it work in a more "democratic" way in Chile, during the short-lived Allende government: https://en.wikipedia.org/wiki/Project_Cybersyn
I too highly recommend Red Plenty, it's one of my favourite books, I'd also recommend Cultural Babbage by the same author, it's a compilation of essays on the topics of culture and technology, It's wrote in the 90s and very interesting to read, to understand the relevance and the thinking of the day.
I suspect the main reason why central planning fails is not actually the planning part. The problem is human hubris - the idea that if the plan fails, then all you need is a "better" plan that accounts for more things.
In the real world, things break constantly for various reasons. And there is a trade-off between efficiency and robustness. If you try to make something very very efficient (i.e. optimal), then you also make it very brittle. So for instance, in the communist economies (not that they wouldn't have other problems, they were dictatorships after all), the planners would decide that it is "optimal" to have this one factory producing something, like computer chips. But then something got delayed there, and everybody who expected the thing to be delivered had to wait. These unexpected delays accumulated through this "optimal" solution.
I think main reason why capitalism works is actually because it is terribly inefficient. It duplicates a lot of work, through competition. But the robustness is much higher. And that's why it's a success and has higher overall economic throughput.
You can see this paradox in large corporations, which are, as many people noted here, centrally planned economies. They suffer from the same problem - human planners are trying to be too optimal, the robustness suffers, and the result is often spectacular internal failures.
It's like with spacecrafts. Of course it would be more efficient if the spacecraft had only one engine, one computer, and so on. But what if it breaks? Then the whole mission fails. That's why it needs backup engines, backup computers, and so on.
The biggest mistake of communism is that it assumes that entrepreneurship is economically worthless. It's literally the opposite extreme of capitalism which assumes that entrepreneurship is the most important profession.
I think communism might have worked better if it had given more autonomy to managers to make decisions and used output data for the previous year to decide budgets for each factory/company.
Really sucks that the word communism is now used to describe Lenin's legacy. Even the USSR 'communists' said that what they have is not communism.. but 'socialism'.
Prior to the rise of the Bolsheviks, there were a number of Marxists that were equally popular as Lenin such as Rosa Luxemburg. They were opposed to what the Bolsheviks were preaching.
Nowadays, now a listener of Prof. Richard Wolff and his the Democracy at Work project he started.
It's worth noting that Chile under Allende was working on implementing a computer-based planning system[1], but unfortunately we don't know how it might have worked out cause of the US-backed military coup shortly after :^(
I'm still thinking that USSR approach to have planned economy is much better than free market economy in the long run. They just lacked proper software (and hardware) to do the proper planning and it turned out that at that time free market was better. But with today's algorithms (or may be with tomorrow's) country-scale planning should be possible and it will be much more efficient.
Other question is do we really need that efficiency? Robots are more efficient than people, so people are already losing their jobs and it'll continue. Now with planned economy there will be much more jobs to lose. May be it's better for our civilization not to be very efficient, at least at current period.
> It is likely that many recommendations for the broader economy would have been ignored as well. For example, if a computer recommended that the price of heating oil should be doubled in the winter, how many politicians would let that happen?
The heating oil required to maintain temperatures in so many cubic feet of air space in the country, given some quantity of heaters at various levels of efficiency, themselves producable by the same giant calculation. The problem is the dimensions/variables are endless and subject to change based on the uncalculable whims of people. Stopping at any one point is arbitrary
Say this is possible. Say this would even work (for some definition of "work"). I still have a nagging question: Is there any reason to suspect that this would work better than the current system? (Yes, I know, you can list all the problems produced by the current system. You can't list all the problems that would be produced by the proposed new system, though, because you haven't experienced them.)
I see comments saying that smartphones will provide the needed data to make this idea work well, but that doesn't do anything to answer the question "Will it be better?"
If the system can be set up so that the status quo is one possible result, the risk of it getting worse is bounded by the difference between the optimization criterion and whatever you think of as better. If you are reasonably sure they are well-aligned, you can just try it out to see if things get better.
The paper describes a real parameter function optimization problem, but the Gosplan was I think more of a combinatorial one. According to the author, the method described there can also be parallelized.
One thing I don't see mentioned here is how miserable a centrally-planned economy is for the people living in it. My parents lived during the heyday of the Soviet Union and it was pretty awful.
As an example, let's say you want to go and buy shoes. You go to the shoe store and you buy a pair in your number. You don't actually get to choose, the shoes you can buy have already been made for you, you just have to pay for them the planned price you're expected to pay for the pair of shoes. It's also planned when these will wear out and you'll need to go buy a new pair. In fact, all the pairs of shoes you'll need to buy for the next five years have been planned.
You want something else than brown shoes? Fuck you (except if you're high enough the totem pole that you get a choice between brown and black).
You want high-quality leather shoes? Fuck you.
You want to start your own shoe factory? Fuck you, the state owns all the factories.
You want to make your own shoes with leather? Fuck you, all the leather usage is planned centrally by the state using statistics.
You want to raise your own cow on your own land to have your own leather? Fuck you, fuck you and fuck you - you don't get to own land, or have cows. The state owns all the land and all the cows. In fact, the state has already planned all the usage of the leather it will get from killing cows that are yet to even be born.
And shoes are just one good among many. If the state determines only 10% of the population gets to ride a bicycle, it will produce exactly that amount of bicycles. Central planning never speculatively overproduces, or even innovates, because that hinges on thinking you can sway the market this way or that. You think "hey, I bet people will really want to buy wine-red shirts, instead of white striped shirts", so you try it out and you capture part of the market. Central planning can't account for people coming up with ideas in the middle of a 5-year planning cycle.
Central planning is also a form of totalitarianism. Every single totalitarian system in history has always pivoted (if it didn't start as) to a form of serfdom, with all benefits going to the people on top. It doesn't matter if it's a king, or "The Party", C-level management always looks out for themselves first. A state with total power is a really shitty place to live in for most subjects.
That said, you could probably have some sort of rationally chosen economy just for the state's own needs, i.e. the state takes care of the roads, so it needs this much asphalt, so taking a survey of the available factories, it should order from this and that factory for maximum quality at minimum price. Something like an alternative to public bids.
But a fully centrally planned economy only works with robotic workers that never ever consume or buy anything unplanned. You want to know why corruption was so pervasive? Because people want something more than only being allowed to buy thin brown leather shoes, blue jeans and white striped shirts. Centrally planned economy is something like India's caste system on steroids.
If you still think central planning is a good idea, please talk to some people who lived in the USSR, they're about 50-60 years old today and can still tell you good stories. Some of them speak good English. Then think really hard how you'll make sure your proposed central planning system won't devolve to that level of corruption.
Central planning, totalitarianism, and communism/socialism are not the same thing, and can't be used interchangeably, just because the USSR happened to have all three going on. Each one of those can be a thing without some or all of others.
You can have a democratically run, centrally planned economy. In fact, that's what many Western capitalist countries are in many ways. On the opposite spectrum, a truly democratic, anarchist-style "centrally" planned economy could also be possible, check out "The Dispossessed" by Ursula Le Guin for a fictional example.
As someone who also lived in the USSR and also caught the tail end of the country's life, I know of older people who would prefer Soviet-style life to what they see now unfolding in capitalist societies. And that's taking into account all the worst problems and mistakes of the USSR and not even talking about what could have been done better, or fundamentally different, while still rejecting capitalism.
USSR of the 80s was different from the USSR of the 70s, and that was different from the 60s, etc. And you'd probably get different reactions from ex-Soviets, if they only experienced the turmoil of the 80s vs the optimism of earlier decades.
So again, I agree that non-democratic or totalitarian control of the economy is indeed bad, but that has nothing to do with central planning.
I don't understand why this comment is downvoted. These are features of central planning of the entire economy that are not going to go away just because the planners have better computers that can do fancier math with strong artificial intelligence. The article even explicitly discusses some of these problems, which is why it's TL;DR is merely "maybe" and not "LET'S DO IT!"
Those of you who are enamored with the idea that it's all going to play out differently just because you can give everybody smartphones should at least acknowledge that you're advocating for a system that has devolved to unpleasant tyranny every time that it has been tried, and at least attempt to explain how the technology you're love is going to make those problems go away.
I think my coarser language might have prompted the downvotes, but I didn't see another way to get the point across. It's really hard to explain how it works to people who haven't lived it themselves. A lot of people are also entirely too optimistic about politicians doing what's good for the people without any checks and balances in place, and I don't mean just people here or there, this seems universal.
Also, in fact, lots of people liked central planning. Yes, you didn't have a choice, but you had a completely guaranteed life. As long as you remained loyal to The Party and as long as enough raw resources were being mined, theoretically the entire supply chain was planned and guaranteed. You just had to do your part. UBI is talked a lot about these days and central planning is UBI on steroids. Sort of a Uniform Total Income scheme. Some people really like that idea - they just want a stable secure life. I'm sure you can think up of many more examples where people want their life to be guaranteed and are willing to give up choice for security, and they really are happy in that environment.
It almost kind of worked out in practice, if you didn't mind queuing up at 5am at the general store to be one of the first in, so you could grab one bag of milk (one allowed per family per day, bring your daily coupon if you want it), because we didn't actually manage to produce enough milk for everyone to have a bag of milk. Even though we actually have enough land and cows to do so. Because some higher ups are skimming part of the milk, because they want more than one bag per day. Sorry, I'm starting to go bitter again.
Even though I've seen the tail end of what central planning causes, I'm still up for UBI, actually. Social programs are needed for a healthy society, it's just that anything taken to extremes usually ends up badly. Mostly because you can't take it to the extreme without the use of total power. This can be the central argument against many such extremes: "If your idea requires or results in a person or group of people wielding total power over the rest of the population, then it will inevitably end up in a form of serfdom/slavery".
Years after communism ended a colleague of my mother's travelled to Spain (IIRC) wanting to see how oppressed the people in a capitalist country are. Before he left, he still believed in the central ideas of communism and central planning. After he came back he pretty much said "Fuck central planning, we didn't lose because the dirty capitalists fought us, we lost because our shit doesn't fucking work".
Those are issues of centrally planning the entire economy in 5-year cycles. I don't know of what centrally planning a part of the economy would look like, nor what planning by a democratically elected government, as opposed to a self-appointed one, would be. However, as I noted, political power always tries to grow, so the moment you place that much leverage in the hands of the government, you could expect to end up with a totalitarian system, which is my primary fear of central planning.
One more thing to consider - companies are generally fully centrally planned top-down, until they reach a certain size, after which the top only set some direction for the lesser managers, who then delegate planning to middle managers. It seems to come naturally to distribute the planning computation among independent agents.
In a perfectly honest world with perfect altruists, top-down central planning probably works. However, in that world full anarcho-capitalism also works ¯\_(ツ)_/¯.
> Those are issues of centrally planning the entire economy in 5-year cycles.
This is not the only constraint on method. They had some ways to make predictions about future demands, they had some optimization criteria.
> I don't know of what centrally planning a part of the economy would look like, nor what planning by a democratically elected government, as opposed to a self-appointed one, would be. However, as I noted, political power always tries to grow, so the moment you place that much leverage in the hands of the government, you could expect to end up with a totalitarian system, which is my primary fear of central planning.
I agree, this is a problem. But at my opinion, its not a problem of central planning (viewed as algorithm of optimization of economy), but problem of society, which have no idea how to combine in one system democracy and central planning. Nevertheless its a problem.
> It seems to come naturally to distribute the planning computation among independent agents.
Yes, but everything comes at cost. By delegating planning to independent agents you lose ability to find optimal solution of optimization problem. Such a distrubuted planning computation gives all pluses of distributed computation, its great and, probably, unavoidable, because of computational complexity. But such a system will not give us the best solution. We hope that solution will not be the worst.
Practice shows, that such a solutions is good enough, but will such a solutions be good enough in competition with supercomputer crunching numbers and searching for the best solution?
AFAIR, Kahneman told a story about lesser managers who failed to behave risky enough, because from their subjective point of view such a risks was too high. But from point of view of higher level manager those risks were acceptable.
I'm not saying that existing methods is bad, I'm wondering if there are better methods to plan, and is there are possibility to see them implemented in reality somewhere in the future.
I think a computer might do better planning decisions than humans do in a capitalist society. Problems like computational complexity or inprecise data apply to human managers too, and unlike them the computer doesn't make mistakes and isn't motivated to get maximum profit fot itself.
The data problem could have been solved with bar-coding. That's how WalMart got tight control over their inventory. Master Control in Bentonville, Arkansas can see pallet 2345235 leaving warehouse 242 on truck 24343 headed for store 2514. If store 2514 doesn't report arrival of that pallet, questions will be asked and the pallet will be found or somebody will be in big trouble. When the pallet is found, broken down, and product placed on shelves, the items will eventually show up in cash register data. If shelf inventory minus sales is not very close to incoming shipments, the "shrinkage" security people are informed and start looking for theft.
Gosplan had an annual planning cycle and monthly reporting. WalMart has a weekly planning cycle and daily reporting. A year was far too much lag for the system to work well. Although it did for heavy industry, where things take months anyway.
The huge linear programming problem isn't insoluble. It's a sparse matrix; potato chips don't affect steel tubing much. There's probably some way to come close to an optimal solution.[1] Sparse matrix techniques were in their infancy when the USSR was active, though.
[1] http://www.gurobi.com/resources/getting-started/lp-basics