[scotty79]

Company prices resources within itself completely arbitrarily. How much the hour of work of an employee A is worth with the company and and how much using paperclip costs has no relation how much these things actually cost in the real money. Once they are acquired by company they are utilized not according to their value but to central plans instead. This way paperclip might get vastly overvalued and scarce while hour of work can be vastly undervalued and wasted.

[xpe]

To make sure we’re on the same page… In economics, “central planning” refers to a system where a central authority (typically the state) makes comprehensive decisions about production, investment, and resource allocation across an entire economy, replacing market mechanisms. This is associated with command economies like the Soviet Union’s Gosplan system.

And of course I will grant firms use hierarchical coordination mechanisms internally (managers allocate resources by command rather than prices).

I suppose my angle here is to be clear that firms are typically a kind of hybrid entity: they mix various coordination mechanisms (prices and hierarchy). This makes them quite different from centrally planned economies.

[scotty79]

There almost never are any markets within any single company. Which makes internals of any company a planned "economy".

[xpe]

I’ve worked at many companies with market mechanisms of sorts in play enough to matter. As one example, product lines that do better (as evidenced by market feedback) get more clout and revenue and command more influence. As another, there are a wide variety of ad-hoc teams that form not because of hierarchy but because people have learned who they like working with and have seen results with. These are closer to markets than C&C or hierarchical decision making.

Next, to avoid a definitional stalemate and talking past each other, let me try a different angle. If you want to predict what a company will do next, what mix of models do you use upon?

If I were to predict a company’s production choices, I would model them as being very sensitive to costs and changing dynamics to maximize profit . I would not do that when modeling a centrally planned economy. For that I would use longer time scales and do long supply chain analysis in the service of a social welfare function. See what I mean? What am I missing from your POV?

[scotty79]

> one example, product lines that do better (as evidenced by market feedback) get more clout and revenue and command more influence.

You describe politics not market economy. It was fully present in communist, state wide, planned economies.

[xpe]

Product lines with market sales are downstream of markets. The degree of per-product profit matters.

If you want to add “politics” to your causal map, that’s fine too. Reality is multi-factor. I do not deny that leaders make (to varying degrees) political and-or command-and-control decisions. This was already baked into the conversational context. Please take the conversational history into account.

[xpe]

> Company prices resources within itself completely arbitrarily.

I wouldn’t phrase it this way — to me, this implies unpredictability and/or a lack of rationale. Perhaps you simply mean “internal managers at companies do not necessarily price resources using market mechanisms” which I would agree with.

Many fields of study give insight to the various kinds of distortions that arise from human psychology and negotiation, etc.

[scotty79]

> "internal managers at companies do not necessarily price resources using market mechanisms” which I would agree with.

Exactly, same as in centrally planned economy.