> 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.
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.