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December 15th, 2014

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01:08 am - Musings on Planned Economies
So, one of the truisms we all heard is that "Planned Economies" are horrid and don't work. We are basically presented with two archetypal visions – kleptocrats designing and economy to make themselves wealthy (which to be honest, reminds me uncomfortably of the US economy) and fanatical ideologues designing an economy to fit their own narrow vision, regardless of any limits imposed by practicality or even physical laws – in short we all think of the infamous Soviet 5-year plans or the Chinese Great Leap forward.

A while back I read about how Salvador Allende attempted to use computers to help plan Chile's economy. The article goes on to describe an attempt to actually plan an economy which involved making plans based on collecting data & using statistical modeling (and of course ideology) rather than solely on blind ideology.

Project Cybersyn (as it was known) was never fully deployed, but according to the article seemed like it might have worked, except for the fact that before it was finished, Chili was conquered by Augusto Pinochet, a brutal kleptocrat who took power via US assistance.

In any case, I was reminded of Project Cybersyn when I read this NYT article
CONSPICUOUS consumption is everywhere, but it’s not the same everywhere. People living in certain cities spend far more than the national average on particular goods and services that they believe will enhance their social standing.

In New York City, favored items include luxury watches and shoes. In Boston, the status signal of choice is tuition to a private school. Clothes are the go-to goods in Dallas. Wearing high-end makeup says you’ve arrived in Phoenix. In San Francisco, one telling sign is women’s sport coats and tailored jackets. And in Washington, D.C., encyclopedias and reference books are top status markers. Go figure.

I study urban economies for a living and what I found made me wonder if the different profiles cities present to the world have as much to do with their consumption patterns as with their local industries. To find out, I used the Bureau of Labor Statistics’ Consumer Expenditure Survey to track differences among cities in household spending from 2007 to 2012.
We've got "Big Data" now, rather than telex's delivering data (all of which had to be entered by hand) from every factory, or citizens registering their happiness by turning a dial, it's now possible to track production and consumption minute by minute, monitor the location of every individual item in factories, warehouses, or stores and even to to deduce the average local and national mood using tweets. The fact that we have computers that are more than one million times faster and better than people had in the early 1970s would also obviously be a major help.

Thousands of businesses are now making and using decisions using applicable subsets of this stupendous mass of data, and it seems to me quite possible that this data could be put in the service of an ideology other than the current neoliberal economic goal one of maximize shareholder profits ((or perhaps more accurately, at least since the late 1980s, CEO pay)), and don't worry about anything else except the most direct & short-term consequences.

Now, add in the fact that there's no evidence that privatization increases efficiency, and it looks to me that a centrally planned economy could work at least as well as the current US economy if it was managed using the exact same data that is currently being used. An obvious planning goal (assuming any sort of reasonable socialism) would be to first guarantee every citizen has all of their necessities taken care of and that production beyond that be determined by some mixture of what people actually want and what can be sustainably provided, with an emphasis on providing a variety of options that are all considered desirable by the citizens. Diversity in preferences could be addressed via a wealth of small projects, run much like Kickstarters, using whatever sort of money analog was being used (which would presumably be some mixture of a fixed citizen's allowance + additional earned units.

I have no idea if this sort of arrangement would work better than the current system in the developed world + the addition of a basic income or perhaps minimum income, but it's certainly unclear to me that it would be worse.

In any case, I'm interested in the thoughts of anyone reading this on these ideas – if nothing else, much of the RPG material I'm working on of late are for SF settings, and that's an excellent place to play with such ideas.
Current Music: Seer - Fear of Men

(3 comments | Leave a comment)


[User Picture]
Date:December 15th, 2014 07:18 pm (UTC)
I'm leftist enough to be friendly to an outright wealth cap, but I think this is a pretty wrong direction of thought.

"Now, add in the fact that there's no evidence that privatization increases efficiency,"

I looked at the PDF. Key sentence, I think: "They reach a consistent conclusion – that the evidence shows no significant difference in efficiency between public and privately owned companies in public services." Bolding mine.

Certainly there are public goods and services which markets are not good at providing, for reasons we can enumerate, and there's no clear advantage of a regulated monopoly over a direct public service. (Yglesias said the reverse is also true, and suggested switching back and forth on occasion in order to shake loose cruft.)

But there are also many domains for which competitive markets (I disdain the term "free markets") are possible, effective, and innovative, and I see no benefit in trying to replace them with central planning. Complementing them, sure -- markets can benefit (but also capture) externality taxes and subsidies, governments can mandate or directly provide information to make markets work better. But big bureaucracies -- even corporate ones -- aren't noted for their innovation; small firms are.

As for collecting enough data to do the planning properly, that's far from trivial. There's a lot of know-how and local conditions in running a business, much of which has never been written down, existing as expertise and people's brains. And local conditions can change fast; a classic example is of a Soviet factory that finds it needs some more wood, and has to requisition more (making a case and all) from the bureaucracy because it's not allowed to simply buy some.

Mixed economies work really well. Throwing out the market part seems just as misguided an idea as throwing out the government part.
[User Picture]
Date:December 16th, 2014 06:58 am (UTC)
Out of both spoons and time, but I wanted to chime in I've been having these musings (with fewer cites :) for quite some time now.

When I was an egg, I was taught that the Soviet planned economy system didn't work because there was too much information to be handled in any other way than by markets. This caused me to think, "So... you're saying that that problem goes away if we have powerful enough computers?" And, lo, here we are.
[User Picture]
Date:December 16th, 2014 09:47 pm (UTC)
Powerful computers are useless or worse than useless without accurate information to feed into them. GIGO.

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