1. Justin writes: >Please show me how the Hayekian argument I have been
running depends on any particular features of planning that are peculiar to
a Soviet-style planning process. It doesn't. The argument is abosolutely
general. Waving the words "decentralized" and "democratic" doesn't expalin
where we get incentives to find out correct information, reduce waste,
innovate new producrs, services and production methids. "Decentralized
democratic planning" is a shibboleth, meaningless. It answers NO questions. <
So you say. And I did NOT use the phrase "decentralized democratic
planning" but instead _explained_ what I meant. Please read what I say.
The point is (to repeat myself) that if the _centralized_ part of the
planning process is only dealing with _abstract_ (or general) issues like
the growth rate of the economy or the percentage of the total product that
goes into investment or the balance between broad industrial sectors,
there's no need for some Hayekian all-knowledgeable mind. If the Federal
Reserve can make the decisions it makes in planning the US economy (along
with its spillovers to the rest of the world), it's pretty easy for a
democratically-controlled planning agency to deal with equally general
issues. It might be more difficult, because there are more issues, but not
impossible.
>I also think it's not planning: I mean, what makes it planned, if the
decisions are made indeoendently of each other by production units and not
coordinated? How's that different from markets operating "behind the backs
of the producers," with all their disadvantages and none of theor
advantages? But set that aside.<
Did you read the part where I noted that individual units made decisions
within the framework set by the central planning agency? If so, you would
have noted that decisions are not made "independently of each other." I
used the word "independent" to mean as opposed to being under the thumb of
the central bureaucracy. True independence of all of society is in any case
impossible.
>The point is that we can learn from the Soviet experience of planning
just as we can learb from the capitalist experience of markets. But the
Hayek argument is general. It applies to all situations where there are no
markets and production and distribution are authoritatively (or if you
will, democratically) allocated. The objection is not based on the Soviet
experience: in fact it antedates the Soviet experience. It does not
presuppose an undemocratic one party state and a top down planning process.
It presupposes only lack of competition and production being determined by
some sort of targets arrived at politically. So let's avoid this red
herring and actually argue the issues, shall we?<
One of the problems with the Hayekian argument is that it ignores the role
of the undemocratic one-party state. In fact, Hayekians want such a state
in order to prevent popular-democratic meddling with the beloved and sacred
free market. (If he's like other "great thinker," Hayek was superior to his
followers.) The ideal _laissez-faire_ system has a Pinochet in charge or a
denatured democracy with many important powers spun off to "independent"
agencies like the Fed which respond to the moneyed interests.
Another problem is that there's an either/or here: plan _versus_ market. We
don't have to go that way. For example, in Pat (no relation) Devine's model
of planning, markets are used to make static decisions (subject to all
sorts of government regulations to deal with externalities, unlike in the
Hayekian vision) whereas the plan is used for more dynamic decisions. Note
that in a different post, Justin gives a vague description of Schweickart's
scheme that sounds similar to P. (NR) Devine's scheme. Maybe this can get
us away from false market vs. plan dichotomies and allow some agreement.
And what is competition? is it the mythical passive competition of lemonade
stands for the consumer's business? is it the competition of small
workshops hiring small numbers of workers who had similar resources to
their "masters" that Smith saw? is it the grinding competition that drives
small farmers out of business, into the hands of agribusiness, or under the
thumbs of the agro-industrial complex? is it the aggressive competition of
oligopolistic firms, trying by hook or crook or dirty trick to get
advantage and market share? is it the competition of factions within the
CPSU? We need clarity, not the wielding of neoclassical shibboleths.
2. in a different message, Justin wrote: >No, we are not against democracy.
But we have to recognize that not all its effects are wholly good in every
context. In the context of planning, democarcy would make the calculation
problem worse by amplifying the information distortions it involves.
Democracy is not part of the solution to the calculation problem.<
What do _you_ mean by the "calculation problem"? To me, ultimately the
democratic electorate must be sovereign, i.e., determining the "value" of
various goods and services and the allocation of resources between
different uses. So the _basic principle_ of any "calculation" must be
democratic. Markets and technocrats must be subordinated to the people. The
special moneyed interests and those who monopolize expertise should have no
special powers.
>That is not a reninciation of democracy. It is a criticism of a proposed
solution to a problem with planning. Am I speaking Latin or something, why
is this simple stuff so hard to understand? I thought you guys were
economists. <
One problem is that I (for one) am quite familiar with the idea about
markets automatically dealing with shortages and surpluses via price
adjustment, etc. and am I trying to get beyond that cant, trying to delve
deeper. Economists know better (or should know better) than to throw around
words like "competition" without qualification or explanation. They should
know that market failure is as rampant as market "success."
You seem to do nothing but compare ideal markets to Soviet-style top-down
planning, without acknowledging the real-world problems of markets (e.g.,
adverse selection and moral hazard, external costs and benefits).
3. yet another post:
I had said: >> The problem with [the Hayek argument] is that it's not
talking about a real-world situation but instead about ideal models inside
economists' heads.<<
Justin writes: > I am presenting the argument abstractly, but I think it is
amply confirmed the real world experience of planning.<
Markets also have a severe problem of information (e.g., adverse selection
& moral hazard).
>> Market incentives . . . encourage the willful ignorance of external
costs (pollution) and the unwillingness to provide external benefits.<<
>No shit. That's why we have governments and regulation.<
which Hayek would oppose (or at least his followers). After all,
governments and regulation are part of planning, right?
The problem with market systems is that those with the most money -- or
simply those who are specifically being regulated -- also have the most
political power and influence and can thus "capture" the agencies that are
supposed to regulate them. To break this, we have to get away from the rule
by the one-dollar/one-vote principle (markets) and move to the
one-person/one-vote principle (democracy).
>> market incentives encourage the interpretation of legal contracts to
benefit oneself, theft, and embezzlement.<<
>Well the first of those is certainly terrible, and no doubt could be
avoided by planning. As for the rest, yes, markets encourage self
interested behavior. But planning doesn't? The USSR was a kleptocracy. <
again, the USSR!
If the planning system is subordinated to democracy, then the encouragement
is to keep an eye on all politicians to _keep them_ from becoming
kleptocrats. This is an important reason to eschew Hayek, who doesn't care
about the party-state's monopoly on political power (according to Justin).
>> The process of competition is also not the passive supply-and-demand
process described by orthodox economists, but is profoundly affected by the
drive to accumulate capital.<<
>Really, you should (a) read some Hayek. Austrians and Marxsits agree in
their contempt for neoclassical economists. Both of them, btw, write
political economy with (generally) few equations. The Hayek arguments do
not presuppose "orthodox" Walrasian models of markets.<
I didn't say that Hayek did so. However, he had a totally idealized vision
of markets as some sort of "natural" process, while minimizing the role of
market failure (referring to externalities as mere "neighborhood effects"
for example).
> (b) In a capitalist economy, you are right, but in a market socialist
economy, not. That is because workers cannot accumulate capital: they can
use it and capture the income from it, but the capital assets and fianncial
assets are the state's.<
an economy where all assets belong to "the state" isn't socialist unless
the people own the state.
>> As Polanyi made clear, the market requires a governmental and societal
framework to keep it from self-destruction.<<
>Oh, gee, so market socialism can't be anarchism? That never occurred to me.<
but then why is it _market_ socialism rather than a socially-controlled
(democratically-controlled) market? and why do market socialists tend to
forget about the downside of the market?
>> This assumes that planning is of the sort that prevailed in the old
USSR. <<
>No it doesn't. Or explain in precise dretail how it does.<
you never have given any information about how the Hayek critique applies
to anything but the old USSR.
>> Trotsky, among others, argued that planning worked better when it was
under democratic control, because this encouraged the flow of information
from the "bottom" to the central planners, in addition to keeping the
central planners honest.<<
>As I have explained, the more information, the worse the problem with
managing it. <
you repeat that, but I don't see why _all_ the information has to be
centralized in order for abstract planning (described above) to be done.
The idea that all the info needs to be centralized seems a red herring.
>Undemocratic planning was overwhelmed with the amount of inforamtion it
hjad to deal with,a nd your solution is to add more information to the mix?
Moreover,w hat makes you think that the information from below will be
honest? You would expect the opposite. Consumers who want more will ask for
more than they want. Producers who want to work less will say they can do
less than they can do. Etc.<
the problem with the info that undemocratic planners get is that almost
all of it is lies. If people are providing info to a planning agency that
they _trust_, they're less likely to lie. Also, there are more ways for
people to express their wants democratically than in simple votes. If
there's a clear _cost_ to getting something, people don't automatically
"ask for more than they (truly) want." Market prices aren't the only way to
ration scarce goods.
<ellipsis>
>> An individual capitalist conception of efficiency ignores external
costs and benefits (which violates NC strictures about allocative
efficiency).<<
>As I say, Hayek and the Austrians are not NCE-ists, and dispsie the
stuff. By "waste" I mean that resources, inclusimng human timem are either
used making stuff that no one wants, or more of these resources are used in
making stiff that someone wants than is necessary, or that resources are
used that could be used to make stuff that people want less than they want
more. The problem with planning is that it promotes waste in all these
senses in part because we have no idea how much things cost in resources,
lacking a measure of price.<
that's an artificially restrictive definition of waste.
>>You use the word "politics" as if it were a dirty word. I think we
should avoid the illusion that collective decisions that affect large
numbers of people can be insulated from "politics." <<
>I would like the economy to be subject to political control. But not
absolutely: theory and experience teach us that that leads to too much
waste and inefficiency. However, I am not a fan of laissez-faire markets
either.<
the economy is already subject to political control. The issue is: by whom?
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
