Allende tried something similar in Chile with project Cybersyn. Not AI yet but it shows how the economy could be centrally planned using technology. Shame that Pinochet's coup ended the experiment.
There are dozens of reasons. Free markets have deduplication of labour, concepts like patents and IP that are inefficient are necessary, there are economic crises that wreck compound growth in the long term, there are issues of inequality, humans may be lazy and not attempt to allocate their capital in the most appropriate way (see index funds), socially useful endeavors may not be profitable, etc...
But central planning is insanely hard, so it's not easy.
That said, the USSR which literally used pen and paper for planning was the #2 economy in the world, so it clearly has some potential.
Now there can be other reasons to not want planning.
> There are dozens of reasons. Free markets have deduplication of labour, concepts like patents and IP that are inefficient are necessary, there are economic crises that wreck compound growth in the long term, there are issues of inequality, humans may be lazy and not attempt to allocate their capital in the most appropriate way (see index funds), socially useful endeavors may not be profitable, etc...
There's no reason to think that economic crises and inequality would be absent in a planned economy.
The USSR didn't have the great depression, but they did have the HoloDomor or terror famine of Ukraine between 1932 and 1933 and the wider Soviet Famine of that period.
The history of the famine later went on to inspire the book Animal Farm and were a pure artifact of the central planning economy forcing the export of the very food required to feed millions of people.
It’s worth looking at primary sources for “Holodomor”, a depressing amount are from Ukrainian fascists.
The consensus among historians is that there was indeed a famine, one of the periodic environmental ones in the region. Planning was indeed slow to react to the famine and the sabotage by landlords, so food aid arrived late.
It was also the last famine in the region. The landlords that destroyed food were expropriated, land was collectivised and agriculture was industrialised. Talk to any older Ukrainians and they’ll tell you there was plenty of food throughout their lifetimes until the 90s after the USSR was defeated.
Wasn't the Great Famine in 1932 and 1933 a direct result of central (mis-)planning? PS: also I wonder if you actually experienced living in a centrally planned economy, the East German economy for instance stumbled from one crisis into the next, not as bad as the Soviet Union under Stalin obviously (as in: people didn't starve to death), but a healthy economy is pretty much the opposite of the "real socialist" economies of the Eastern Bloc.
There had been periodic environmental famines in Eastern Europe for centuries. The one in the 30s in Ukraine was exacerbated by landlords (kulaks) refusing to sell food to the state for lower prices and even destroying grain and cattle in an effort to raise prices. Incomplete information meant central planning was slow to react to both of these problems and many did starve, but of course capitalist countries also exaggerated the numbers.
My parents and extended family lived in România before 89, they describe quickly improving conditions, in some ways better than today. Guaranteed homes, education and jobs went a long way, for example.
All of the Eastern European economies also started off semi-feudal with little industry when compared to Western Europe. They were also under constant attack and blockade from the capitalist countries, that’s what the Cold War was about.
Regardless of all that, it’s a fact that the Soviet economy was unaffected by the Great Depression, which was the whole point on planned economies.
Doesn't it have more to do with the fact that they didn't even recover yet from the 1st World War? Also don't forget Holodomor. It literally happened after the Great Depression yet unlike Western Nations, 3.5 million people died from disease or starvation. Unlike in said Western countries that just had an economic collapse.
Of course there are. If you have good knowledge of the economy and of production mechanisms you can simply not do anything that could cause a crash. The issue is getting the knowledge to behind with, obviously.
Inequality is necessary to some level but empirically it's possible to make it much smaller.
Empirically the USSR had a single economic crisis without exogenous cause which was caused by incorrect accounting of agricultural production at its heart.
> If you have good knowledge of the economy and of production mechanisms you can simply not do anything that could cause a crash
But we don't have that knowledge. Economists disagree on many foundational questions. At some point, economics shades into psychology and we certainly don't have theories that predict human behavior.
I don't discount the possibility that knowledge can help economies run more smoothly but you're understating the difficulty here.
> Empirically the USSR had a single economic crisis without exogenous cause which was caused by incorrect accounting of agricultural production at its heart.
The idea that the USSR had one economic crisis is a bizarre joke. The only way you can justify this comment is to ignore all the shortages and poverty and make some tortured semantic argument about what constitutes a "crisis".
Empirically speaking, free markets trounced centrally planned economies in the 20th century. If you can't recognize that, I'm not sure why anyone would take you seriously.
I mean knowledge of the real economy. What materials there are and what is done with it. That's all you need in a planned economy to avoid crises.
I said that the USSR had one economic crisis that wasn't due to exogenous circumstances. Which is true.
I agree that free markets outperformed them. I'm saying there is clearly potential for improvement since the USSR was so dysfunctional and was planned with pen and paper.
In absolute numbers. But planning economies becomes so much more difficult at scale, though if we looked at the communist country with the highest per capita economy we would still see numbers that are middle of the pack.
The USSR never published a GDP figure. It couldn't, because GDP makes no sense without a market.
But yes, the USSR as a whole had a third of the US's average GDP. I agree, it was less than the US. The thing that is surprising is that they got there by planning an economy with pen and paper, which is insane to me.
There are potentially plausible reasons such as that a free economy system could take longer to achieve an efficient market equilibrium compared to a centrally planned system.
So long as a monopolistic centrally planned company acts on a free market do you consider your point unchallenged, or does the fact that the free markets tend to become dominated by large centrally planned corporations cause some tension?
There's no reason to think a free market economy is the single best solution we could ever hope to stumble upon. We keep evolving, we will evolve out of the "free" market economy as well.
The central planning will always produce better results, but only if you know the optimal strategy. Since it's impossible to know the optimal strategy a free market is a better solution in practice. Until a sufficiently strong AI arrives.
Of course, it can be planned - Lenin and Stalin showed that. Just make an AI that emulates those two geniuses.
But the results would be equally great like they were in Soviet Russia or Mao's China. Why would anyone in a centrally planned economy work beyond the bare minimum needed to survive?
It's hilarious that someone has to call you out on that. HN...
> Pinochet's coup ended the experiment.
I won't say that the coup was great, but it likely did less damage to the people than Cybersyn would have done.
> But the results would be equally great like they were in Soviet Russia or Mao's China.
That's your HUGE assumption. While I didn't make any assumption, you are making a big leap of faith here without anything to back it. Pretty much what I would call nonsense.
> Why would anyone in a centrally planned economy work beyond the bare minimum needed to survive?
Sigh. I don't know, maybe ask the many artists, intellectuals, sportsmen, scientists, etc that came out of URSS? How can you be so certain about human nature when nobody can agree on that?
Hayek did not, actually. His argument for it can't work but it can work using markets assumes P=NP and that humans are capable of running algorithms that computers can't, but only when they act as perfectly self interested rational actors.
It does not assume P=NP as far as I can tell, unless you understand something I've missed? I'd be very interested in an explanation for how a market assumes P=NP, if I got one I'd basically be done with the concept of markets because I do not believe P=NP.
A market economy is a distributed network, a self healing network and a self organizing network that optimizes itself for resource distribution, an emergent property of human populations with asymmetric distribution. The network itself runs algorithms much more efficiently than a centrally planned economy which does not have these traits. A sufficiently powerful AI could perform as well as a market economy, but it would be redundant and have other effects, such as taking agency from the benefactors of the economy. I don't know that it could outperform a market economy, it's possible that it could but so far I'm not sure.
The problem of maximizing your self-interest in a market is general enough that finding a solution to it can require solving an NP-hard problem. This is actually true, real financial problems are NP-hard.
The market does not optimize for resource distribution, it optimizes for profit. It is tyrannical in that it removes your agency, as a member of the market you have no other choice but to optimize for profit in many important situations.
This is already dysfunctional enough to completely destroy a society, so we have to implement fictions like IP and regulations to tame the beast.
As far as central planning goes it's certainly possible to plan an economy while allowing people to choose their jobs and start small companies.
A sufficiently advanced AI would inevitably be more efficient, simply releasing all IP restrictions, all binning that is not necessary, ending all unproductive landlordism, and the compound growth from the lack of crises would do it.
Now you could be opposed to it from an ideological point of view, but no matter what you're misstating Hayek's point, as he contends that it is not, actually, possible to perform the economic calculation outside of markets, due to computing brain magic of humans only when they act that way.
Also, the mere principle that a market can run the economic calculations more efficiently than another computer is a violation of the Church-Turing hypothesis. There is no machine that we know of that can do any computation with better complexity than a Turing machine, save for quantum computing.
Do you have an example of an NP hard problem a person would have to solve on the process of optimizing for self interest?
A market optimizes for whatever the participant wants, profit is simply a mechanism by which the overall market performs price discovery. You always have a choice to not optimize for profit, I make trades all the time where profit is not my goal.
Just choosing a job and being kindly allowed a small local marketplace is not agency.
Hayek's point would obviously violate the church-turing hypothesis (unless there's some hitherto unknown quantum-esque computation process going on in the human brain which I doubt, or you're mischaracterizing his point, I'm reading his book as we speak) but I believe that a sufficiently advanced machine capable of outperforming the market given equatable conditions (same information availability and processing) would probably perform those functions with less resource efficiency, not to mention the resources to build a redundant machine we don't need. If you build one that is better by using more energy and resources to scale its capabilities up, well now you're not optimizing resources on the whole because you're dedicating some for this machine to exist and operate, the resources to build the machine and maintain operation are then distributed suboptimally.
If a machine that uses the same net resources for this task and with equal capabilities could outperform the marketplace at efficiently distributing resources, and there are NP hard problems in personal finance, wouldn't that mean P=NP?
I'm on my phone right now, but there is a paper on the exact P=NP efficient market question.
I don't assume that planning an economy would require solving NP-hard problems to outperform the market because I am certain that the market itself cannot solve them efficiently.
As for resources, us as a society already dedicate trillions of dollars a year to market planning - its called profits and capital gains, as well as the entire finance and real estate industry. As long as the planning system requires less than a trillion dollars a year to run even without being more efficient than the market at whichever cost function we choose it will be more efficient overall.