[ue_]

>Markets are necessary for successful diversification - avoiding shortages and economic collapses when key industries suffer downturns.

Out of interest, why do you think this is true?

(Edit: Why does this comment have a score of -2? What can I do to improve the quality or relevance of my comments? Will the downvoters explain, please?)

[padobson]

Theoretically I think it's true because there are far too many variables at play in economies of any decent size for a national government to efficiently organize it.

Historically I think it's true because broad central planning has generally led to unstable economies.

I think the Nordic states best figured out how to provide widespread social programs funded by taxation of market economies - with national programs working alongside of self-organizing markets instead of trying to organize production directly.

[ue_]

> Theoretically I think it's true because there are far too many variables at play in economies of any decent size for a national government to efficiently organize it.

This has been a common complaint, though it's not without response. As to what variables need to be taken into account, there's been discussion that not every product made would have to be. Here's a comment by "Keshav"[0] on Cockshott's input-output tables idea of economic planning, which came about in 1995:

"On a related note, Cockshott and Cottrell have a number of papers arguing that central planning is feasible with modern computer technology. As I understand it, the algorithm they present (e.g. in “Towards a New Socialism”) does not consider a linear programming problem; rather, it takes as given a target for final goods production (determined elsewhere in their model, which includes some markets for consumer goods) and solve for the gross output levels required to meet this target. They exploit the fact that the input-output structure of the economy is sparse (only a small fraction of the goods in the economy are directly used to produce any single good). Their algorithm’s complexity increases with n*m, where m is the number of direct inputs for each product, which seems manageable even with n=12 billion."

Cockshott talks at length about "The problem of scale" (the one which is your theoretical agrument) in his book in the chapter of the same name, which is downloadable for free as a PDF in its LaTeX glory here[1]. I last read it many years ago and refutations of it exist, though it's worth a read in my opinion.

[0] http://crookedtimber.org/2012/05/30/in-soviet-union-optimiza...

[1] https://www.researchgate.net/publication/299519892_Towards_a...

[padobson]

I suppose it's reasonable to suggest that if all of the variables in an economy could be identified and quantified, then it could be fed into central planning software.

But that's a very big if.

Furthermore, I'd suggest "If it ain't broke, don't fix it" applies here. We already know markets are good at organizing production, we should use them to do that.

Any social ills that result because or alongside of markets should be addressed directly.

[ue_]

>Furthermore, I'd suggest "If it ain't broke, don't fix it" applies here. We already know markets are good at organizing production, we should use them to do that.

Although not broken (if we're talking in terms of commodity production excluding what is necessary to cure social ills) then it could be greatly improved, though I'm not sure how, or rather, I haven't decided on an answer.

At the moment several firms repeat the same research over and over again in order to research new product development in secret to stay competitive; this is clearly an inefficient use of resources, and this is seen by the fact that there are two government-granted monopolies created in order to sustain this system: copyright and patents, which have come under criticism and scrutiny even from libertarian (Rothbard not Proudhon) authors.

There are also problems relating to how volatile the market is, held to the whim of mostly speculators, with the strong ability to throw out scores of workers onto the streets, depriving them of what they need to survive if not for the chrity of the State.

There is also the problem of nurturing genuine science and the advancement of culture which is hard to commodify; even State-sponsored research projects have their funding pulled if they go off track or try to find results the government doesn't like. This applies doubly for companies. Likewise the artist is controlled not by his own will but by the will of the market, having to restrict himself in materials and creativity in such a way to please rather than to advance culture and indviduality.

There are problems relating to the psychological effect of the market economy on its participants, both workers and capitalists both of which must make it their top priority in life to rack up sufficient money to stay afloat in their respective spheres, compounded with the worker's alienation, that he does not see himself in the products he makes beacuse of the excessive direction of the capitalist.

There is the problem of education in which students must become indebted to the State or a loan organisation unless already having enough capital on their parent's side in order to pursue education which in many cases is necessary to land a job, some of whose wages go back to repaying that debt; a student thus finds it is in his interest to optimise for a degree which will land him a job, regardless of his passions and interests - if this does not crush individuality, what does?

Then there is the effect on our human nature, the system which encourages greed at almost any cost in order to rack up capital, forcing our nature to see people as means to an end rather than people in themselves, I will relate this to the idea of commodity fetishism which proposes that rather than seeing the distinctive labour content of commodities, people only see the commodities themselves, focusing on the exchange value rather than the utility. People must search for social connection through commodities while ignoring the massive wastage and environmental damage that their production takes.

Relations between people are swapped by relations between commodities, although we see that capitalism has very greatly increased standards of living, its effect on quality of life is often ignored at the expense of the freedom to buy whatever goods one pleases, this freedom is taken to be the only important element of a society but close investigation reveals that it is a very hollow freedom.

I have avoided talking about sweatshops for they are an unfortunately contentious issue, but I hope that can be included in my analysis.

I probably haven't explained this very well, so here is a short list of books, mostly be Marxist or neo-Marxist authors who, rathear than focusing on Marx's primary mode of attack (exploitation via extraction of surplus value) they look at other elements of capitalist society:

- Guy Debord - Society of the Spectacle (philosophy-economics): https://www.marxists.org/reference/archive/debord/society.ht...

- Herbert Marcuse - One Dimensional Man (sociology): https://libcom.org/files/Marcuse,%20H%20-%20One-Dimensional%...

- Erich Fromm - Escape From Freedom (social psychology): https://libcom.org/library/escape-freedom

- Habermas - The Structural Transformation of the Public Sphere (sociology-history) - https://en.wikipedia.org/wiki/The_Structural_Transformation_...

- Peter Kropotkin - The Conquest of Bread - https://theanarchistlibrary.org/library/petr-kropotkin-the-c...

[dreamdu5t]

Processing inputs is not the whole of economic calculation. Me and you may value things differently – that's the problem. In other words, utility is unobservable a priori, as are my economic preferences.

[hueving]

There has never been a successful centrally planned economy. Perhaps with the assistance of massive computation and information spread via the Internet it could be conceivable. But without that it seems like every toy model a central planner uses is going to fail miserably.

[flukus]

How about ancient egypt (http://www.reshafim.org.il/ad/egypt/economy/)? A planned economy that lasted far longer than capitalism has existed.

[padobson]

Oh man, awesome reference!

I read biographies on Cleopatra and Julius Caesar a couple years back and was amazed how much planning went into Egypt's economy.

The similarities to Venezuela can be pretty interesting! In the ancient world when economies were highly reliant on wealth created by agriculture, the Nile delta was the most fertile land in thousands of miles in any direction. Each year the Nile flooded predictably. When irrigation was plentiful, all of Egypt prospered. When the Nile went through a dryer year, all the peasants working the land starved.

Excellent reference!

[vixen99]

You mean a planned autocracy that persisted - oh bravo! Maybe Kim will do that.

[Iv]

To be more precise, there were successes of centrally planned economies, but all in the same circumstances: under-developed countries trying to modernize themselves. It is hard for a central planner to be an innovator, but it is easy to be a follower.

USSR industrialized itself very quickly. China had some success and did not shut down its central planning but hybridized it. South-Korea's steel production is an example of success in state-planning that contradicts market logic. Depending on your metric for success, you can also cite Cuba's life expectancy as it planned to become a medical nation.

Central planning fails when you have to invent new things. New services, new products can't be planned. Very few anticipated internet, almost no one expected cell phone and then smartphones to be that prevalent.

But do not throw away central planning as a systematically failed decision process. It works for :

- big scale infrastructure projects that require little innovation. - wars - big research programs: Apollo, Operation Manhattan

Actually, I think that with a public funded, government-supported centrally planned program, we could have deployed a self-driving cars network as early as the 90s.

[padobson]

I don't know where the dividing line is between "regulated markets" and "central planning", but I think you raise the need for some distinctions.

The space program is a great example. Could the US have beaten the USSR to the moon without private suppliers like IBM? IBM couldn't exist in a centrally planned economy, and the Apollo missions wouldn't have been successful without private suppliers like IBM.

Apollo, Manhattan, WWII and South Korea via the Korean War and post-war American influence are all great examples of successful government programs, but I don't know that any of them would have happened without US markets providing funding and infrastructure. Ford was building a Sherman tank every 90 minutes during WWII.

There's probably a tipping point where large programs like these extract so much value from the markets that fund them that those markets cease to function, which is probably why wars are often funded with debt instead of direct taxation.

[Iv]

Yes, it is less about "central planification" than "total planification". The former can and did work in many instances, the latter never succeeded or at least never out-performed free markets (still I would have loved to see how Cuba would have fared without the embargo)

Intelligence is scarce, honesty too and information is often only partial. Some decisions are better done at a local scale.

I believe that NASA would have designed computers even without IBM. Possibly even faster but it would have been a tailored computer that would have been very expensive and of little civilian application.

We see it now with SpaceX: NASA sucked at cutting costs. But it excelled at skipping steps and it put a man on the moon in 1969, a goal that vastly outpaced the private space industry, that did not even exist at the time. The whole space industry was quickstarted by this centrally planned effort.

My personal opinion is that the red line that a state should not cross lest it has a complete information and huge stash of intelligence to process it, is price setting. It can have, for many things, a target and try to enforce it (in the case of oil, through some sales quota for instance) but it should use failure to achieve these targets as an indication that it misses some information about the economy or that its incentives are insufficient.

[padobson]

I believe that NASA would have designed computers even without IBM. Possibly even faster but it would have been a tailored computer that would have been very expensive and of little civilian application.

You don't have to guess at this - just look at the Soviet space program.

[caseysoftware]

Yes, "central planning" works for large projects. But running a large project is nothing like running an economy.

In large projects, you generally have a major single, measurable goal (interstate highways, a man on the moon, a nuclear weapon) and may have lots of little milestones and spinoffs along the way.

An economy is millions of little goals - some complementary, some competitive - that might add up to something larger but no one knows. But most of are okay with it because some portion of those people will be able to meet their goals and strive for bigger ones.

[Iv]

Yep.