Hayek deserves so much more recognition. Now more than ever - we need people to understand the fundamental inadequacy of central planning.
Note that when the pandemic hit, the EU room a back seat to the National governments, even though the EU has a CDC itself. And in Japan success was largely due to local effort: https://fee.org/articles/did-japan-beat-covid-19-with-a-dece...
See also: https://www.hoover.org/research/decentralize-covid-19-respon...
Without crap like that, there’s no reason California or New York couldn’t create their own medical stockpiles. They could run their own testing regime at least as effectively as the Federal government, but the FDA actually hindered testing both by the States and private companies early on due to an old regulation based in an old law that they could not shed fast enough. States were also quick to shed regulatory barriers of their own making, which should probably remain shed after this is all over.
States stockpiling or relying on Federal stockpiles or making agreements to share stockpiles is as much a choice as any other. Seeing as how the Federal stockpile was not properly maintained and refilled by either the Obama administration or the Trump administration (who could have at least checked on it) after H1N1, maybe at least one of them would manage to do a competent job of it.
I recommend listening to this podcast that outlines exactly why smaller polities were able to be nimbler: https://soundcloud.com/reuters/the-exchange-too-small-to-fai...
Yes, economies of scale provide advantages for procurement, but after a while, there are diminishing returns from more scale. That is to say, New Zealand's population is a sufficient scale, it need not pool its procurement operations with Australia. It's a key differentiator between Federalism and Individualism.
My impression is that the people who argue against central planning always rationalize backwards from a pre-established conclusion. The fact is that the experiment has never been allowed to proceed on a national scale without violent undermining from the forces of private capital, both internal and external.
If you study the origins of central planning and the birth of the progressive movement in the early 20th century, you'll see that private capital loved central planning. Notions of ultimate efficiency through experts directing organizations through central planning went hand-in-hand with a lot of evil stuff. The obsession with perfection through "science" and tending to the "societal organism" was really contra the idea of free markets, individual rights, etc. They drew on evolution in precisely the worst way(narcissism and hubris).
Whereas Hayek draws on evolution to say that culture and society develops through independent actors discovering traditions, organizations, etc. Through the observation of many people/organizations attempting things and either failing or succeeding, society picks up things to copy and reproduce - the lesson being that we can't direct evolution, it emerges!
Hayek talks about the error of trying to use in government that in-built but limited capacity for managing relationships at too great a scale.
Computer systems have gotten fast enough that a 00s Pentium 4 can handle all of the US economy, with the rest being a problem of gathering inputs.
This is, perhaps, also the point where I should briefly mention the fact that the sort of knowledge with which I have been concerned is knowledge of the kind which by its nature cannot enter into statistics and therefore cannot be conveyed to any central authority in statistical form.
His bigger argument though, is even if it were effective, it is inherently undemocratic.
It will often be necessary that the will of a small minority be imposed upon the people
He makes the point that so long as everyone is on the same page, working to the same goal, central-planning can be very effective. We can see this historically when a nation unites in defense, as America (and much of the world) did during WWII.
But when every person has their own goals and values, the central planning is no longer able to work effectively. It's not simply that it's hard to optimize that many functions at once, but that much more fundamentally, it's impossible for the central planner to know what those individual functions even are.
So the titular road to serfdom is when we agree to unite toward a central goal and thus subject ourselves to the central planning, that central authority can't easily be removed later when the shared goal has been achieved. Thus we find the central authority acting as an obstacle toward the individual goals that we've returned to.
(Also relevant, in the 20s and 30s, USSR came from a shithole agricultural country with no industry, to the second biggest industrial economy of the world).
I'm not saying that central planning is desirable, but it's for sure more than adequate of your goal is development.
After WW2 India adopted a diliberatly socialst agenda, often called Indian Socialism the was all about top down managment of all markets with heavy government guidence and intervention. This concept was popular in pre-WW2 British Socialism and India served as a huge experiment. While some of this has been removed you can still see it all over Indias economic policies today. India is still a far, far away from any sort of free market economy or liberal political order.
> (Also relevant, in the 20s and 30s, USSR came from a shithole agricultural country with no industry, to the second biggest industrial economy of the world).
Its is another bunch of nonsense socialist myth making. The trope of Imperial Russia being a backwards shithole then as soon as Soviets take over its some paradise is nothing but Communist propaganda.
In fact before WW1 Russia was one of the fasted growing nations, that itself was one of the reasons for WW1 as the Germans realized that within a generation Russia would probebly match or be more powerful then them.
If you look at Russia WW1 economy, you will see that in terms of manufacturing it actually performed incredibly well. They had a problem with food distriubtion and political authority, more then with production. The Imperial Russian economy was already one of the biggest industrial countries by a lot of different measures. This is clearly confirmed when you look at the weapons output during WW1.
In the 20s Soviet economy first of all starved millions of people and only by the end of the 20s did they reach pre-war levels of output.
From 1928 they started collectivisation and even more agressive industrialisation, but it should be noted that it required millions of people dead, many more millions put into forced labor and massive starvation of the whole population to export grain and thus import pretty much everything from the West.
To make a point of this, the Soviets literally copied US and German factories and payed tons of money for them and then used lots of forced labor to build them. Putting that as some great success of centralised planning is dubious to me.
And this great plan also didn't lead to much improvment for the actual people, it was primarly about the production of military equipment.
Yes, and with tremendous success (literacy exploded, and starvation plummeted), but such movement is long dea and now. For the past 30 years Indian economic policies have been heavily inspired by the western “neoliberal” trend (which is itself heavily inspired by Hayek's work) . And looking back how China where in 1980 and how they are now is quite telling. Five-years plans really add up in the long run…
But if you don't like the comparison with India (which, now I realize, is pretty ill-advised in this period of nationalist tensions between both countries …), you could do the same with most Western countries and still be astonished how China went and how stagnant we have been.
> And this great plan also didn't lead to much improvment for the actual people, it was primarly about the production of military equipment.
You are mixing up periods: here you are referring to the cold war era (with the arm race with the US) but that wasn't the case at all pre WWII (and they didn't really started the war with stockpiles of new weapons to say the least…).
All that said, I think the diversity and distributed power structure in India could not be overcome by any purely economic philosophy.
About China we should also mentioned that decreasing the control over the economy is what allowed them to grow. Current policy in China is much more like the West then it was under Mao or afterwards. So success came by reducing control over the economy and to reintroduce private property. Market economy today is as powerful in China as it ever was in the history of China by far.
China so far has profited from massive catch up growth and China is not unique in that, just much bigger. The same thing happened with the Asian Tigers. China is now starting to pull ahead in some technologies, but it has yet to be seen if how far that is possible. People also thought Japan would blow past US and the West.
In the end if you have a reasonable competent government and a reasonable market economy with reasonable polices regarding global trade you will likely end up on the same overall growth path of all the advanced economies.
If China manages to avoid this keep growing after the have reached per person parity, I would be incredibly impressed and it would challenge my thinking on economics.
> You are mixing up periods
I am talking about the pre-WW2 period where production was overwhelmingly focused on everything needed for military production. There were exceptions like housing construction but the overwhelming focus was military buildup.
While I agree with you that it definitely shouldn't (mankind already had one too many cultural revolution last century), I think you vastly underestimate the destructive power of totalitarian states…
> The same thing happened with the Asian Tigers. China is now starting to pull ahead in some technologies, but it has yet to be seen if how far that is possible. People also thought Japan would blow past US and the West.
The Asian tiger are also a good example of sucessful central planning though… And Japan did indeed blow past the west by most metrics… including population aging, which has since then crippled the country.
What metrics exactly? Certainly not GDP per capita. It also has the lowest productivity per hour of the OECD countries.
Japan has been almost stagnant for nearly 30 years now, mainly because of demographics (and other reasons, but with such an aging population it's pretty much game over no matter what), but by 1990 Japan has a better GDP per capita than any of the biggest economies in the world at this point, by far (more than 20% over some most western countries). Obviously, when your GDP stay flat for 3 decades, other end up catching up…
> It also has the lowest productivity per hour of the OECD countries.
Productivity is a poor metric, because there is little correlation between time spent working and GDP, so culturally workaholic (Japan) countries ends up with poor results, while hedonistic countries (France) score super well, but that doesn't reflect much.
Not really. I think people wastly exaturate the amount of central control because that is what they want to focus on. People love to say things like 'look the government invested in X industry and that insutry is now successful'. Ignoring the tons and tons of wasted investment and industries that didn't go anywere. It also ignored the massive amount of success private companies had that didn't explicity been pushed by specific government planning.
The believe that Japan only has problems because of an aging population is also pretty false and was even more so in the early 1990s. I disagree that Japan blew past the West in most metrics, in some maybe but in others they are worse.
And pre and pots ww1 arms production was not massive Russia was buying massive amounts of guns from the USA and look at the performance of Russia vs Japan.
> And pre and pots ww1 arms production was not massive Russia was buying massive amounts of guns from the USA and look at the performance of Russia vs Japan.
Russia did produce a large amount of war material and every academic source agrees on this.
Military production certaintly wasn't the issue in that war. That war more then anything else shows the weakness of the political system that was again evident in WW1.
Russia had a gigantic army, rifles are a simple mass market commodity the the US was selling cheaply on mass. Simply sensible to buy some when there are so many other important things that you need to produce. Rifles are very small part of the overall military economy.
It starts with raw resources like steal, coal and everything you need to make explosives. Munitions production, heavy artillery and so on. Railroads, planes and so on.
Again, scholars pretty much agree on the success of Russia military economy. Compared to the state in the beginning of the war they did incredibly well.
Check out this serious of 24 lectures that goes a bit into technology and so on, the last couple are about the time we are talking about:
https://www.youtube.com/playlist?list=PLEETkM6vwQPHJHhXinsuQ...
Having to buy basic stuff like that on the open market is a sign that your in trouble.
Wikipedia says
"With the start of World War I, production was restricted to the M1891 dragoon and infantry models for the sake of simplicity. Due to the desperate shortage of arms and the shortcomings of a still-developing domestic industry, the Russian government ordered 1.5 million M1891 infantry rifles from Remington Arms "
This even said 'with the start of WW1' to it not even an argument about how they did during the war.
India is probably the most bureaucratic country on earth. It may be a democracy but that does not mean it is economically more liberal than China.
China's success is actually a very powerful illustration of this, in fact. Through the 1980s-1990s, China went through dramatic economic reform, and the results largely speak for themselves[1].
Before the reforms, the Chinese economy was dominated by state ownership and central planning. From 1950 to 1973, Chinese real GDP per capita grew at a rate of 2.9% per year on average, albeit with major fluctuations stemming from the Great Leap Forward and the Cultural Revolution. This placed it near the middle of the Asian nations during the same period, with neighboring capitalist countries such as Japan, South Korea and rival Chiang Kai-shek's Republic of China outstripping the PRC's rate of growth. Starting in 1970, the economy entered into a period of stagnation, and after the death of Mao Zedong, the Communist Party leadership turned to market-oriented reforms to salvage the failing economy.
The first stage, in the late 1970s and early 1980s, involved the de-collectivization of agriculture, the opening up of the country to foreign investment, and permission for entrepreneurs to start businesses. However, 87% industry remained state-owned. The second stage of reform, in the late 1980s and 1990s, involved the privatization and contracting out of much state-owned industry, followed by the 1985 lifting of price controls. The private sector grew to the extent that it accounted for as much as 70% of China's gross domestic product by 2005. From 1978 until 2013, unprecedented growth occurred, with the economy increasing by 9.5% a year.
India actually experienced a similar trajectory — from 1947 until the late 80s/early 90s, India's economic system was described as "Nehruvian socialism". It was more derogatorily called a "License Raj"[2]. Under the License Raj, India's annual economic growth rate stagnated around 3.5% from the 1950s to 1980s, while per capita income averaged 1.3%. In the same period, Pakistan grew by 5%, Indonesia by 9%, Thailand by 9%, South Korea by 10% and Taiwan by 12%. Before 2015, India grew at a slower pace than China, which had been liberalizing its economy since 1978. In 2015, India's GDP growth outpaced that of China.
Better to compare China to Korea, Singapore, Hong Kong and Taiwan, which all started at a similar position (and have similar cultures), but now those others all have way higher GDP per capita than China.
Less than 10% of Chinese agriculture employment is in state owned enterprises now, for example.
https://www.econtalk.org/branko-milanovic-on-capitalism-alon...