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.
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's no reason to think that economic crises and inequality would be absent in a planned economy.
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.
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 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.
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.
https://en.wikipedia.org/wiki/Holodomor https://en.wikipedia.org/wiki/Soviet_famine_of_1932%E2%80%93...
Which is exactly why "pen and paper" are an issue.
Distributed economies will always be more efficient than planned economies, because everyone on a distributed economy participates in the cognitive load of measuring and distributing resources, so the network has more processing power and less latency than a centrally planned economy.
Also, planning can be distributed too. Historically it always has been, to varying degrees depending on technology available.
Of course if that is the case that that happened, that's an external (government) intervention in a market.
Planning is distributed, in market economies. Central planning by definition cannot be distributed.
Planning hasn’t been entirely centralised in any socialist country. There is naturally a lot of back and forth when determining what an area needs and what it can produce. A lot of planning is also delegated locally for matters that don’t affect other areas. Ultimately planning is the essential part, while some amount of centralisation is useful for optimisation to avoid merely local optimums.
So the problem stemmed from central planning? Sounds like a good example for my point.
> ...some amount of centralisation is useful for optimisation...
See, my point is that this is not the case, and beyond that, that planning cannot accomplish more optimal distribution of resources that markets, and I'm using analogous network topology to demonstrate how this can be proven to be true.
Central planning could optimise further than the profit of individual landlords, since the USSR clearly prospered.
As for food being always produced in market economies, see the Bengal famine. Food wasn't destroyed in the Holodonor, it was simply redistributed. Similar famines happened under capitalism, all it takes is for a crop to come up first or for cash crops combined with the anarchy of production to lead to a crop that is beneath the requirements.
So no, similar famines did happen under capitalism, and your thesis is simply incorrect.
Markets can have latencies measuring in years or more, see the bullwhip effect. It's incorrect to say that they will be lo always have more processing power and less latency. They would if they were theoretically perfect, but markets are already at their limit and are not far away from the most primitive of planning.
Markets emerge spontaneously, like evolution. Evolution functions more optimally than if there were theoretically some god pulling levers. Not perfect, optimally. Markets function better than planned economies for the same reason, that the depth and dimension of the information needed real time does not allow for some entity to make the minutiae of the decisions that need to be made real time. Feedback loops in a complex dynamic multiparty system like a market or evolution sometimes do have much longer latency, but the mean latency of all information flows in both examples is vastly smaller than if every one of those flows had to go through a decision making entity first.
Do you think climate change is an existential crisis? If you do there's flat evidence right there that deliberate design doesn't always beat evolution.
The idea that humans can engineer our way out of everything is hubris. Natural emergence seamlessly takes every variable into account. With man made things, they are designed within a scope so as a result there are always externalities. Literally every problem people are arrogant enough to think they can solve with central planning is an unintended consequence of attempts at central planning.
These unintended consequences are the direct result of part of what I'm talking about. Natural, emergent systems take everything into account because the entire system performs the information processing on behalf of itself. A central planner is incapable of that.
We have ample evidence that production for profit on markets is inefficient and ultimately a disaster, like climate change. All those isolated individuals unable to coordinate but through markets are leading us straight to extinction. It’s precisely planning that could solve this problem.
Climate change can be fixed without falling prey to white supremacist ideas like overpopulation.
I already addressed the planning in companies inside market economies elsewhere in this thread, but to summarize, people can quit Walmart or quit shopping there, you can't quit your nation, so there are no feedback mechanisms to help it reorganize when it is functioning badly.
Where is this ample evidence? Climate change is caused by profits? So the USSR and China never put out CO2?
If planning can solve these problems then how come nobody can even draw me a picture of how planning would solve these problems?
Why did you address none of my arguments? Are you even talking to me? Leave the agitation to the pros man. Or get better at it.
You’re right that it’s pointless to continue, since you’ve been reduced to picking on my non-native English.
The link you're citing had multiple authors resign due to academic dishonesty and is funded by the US government, therefore making it state propaganda.
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.
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.
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.
One can also bypass the production component and measure GDP in terms of the incomes in Ruble's paid to Soviet workers in combination with the export/import figures to arrive at a reasonable estimate.
The basket of goods didn't have any fixed ruble price, as much of it was free.
Much of production was never given a full price in rubles, as a large part of it was by direct resource allocation.
You can indeed estimate it using a basket of goods and their equivalent values, but not with income and import/export + exchange rates because you're then removing all natural wealth.
It's a very difficult problem. You can make an estimation, but it's still an estimation, that is, for hard GDP. For PPP I agree the numbers are accurate, but that's not what was being discussed.
Direct resource allocation implies that valuable resources were taken from one activity and allocated to another, the workers who produce the resource still get paid (hopefully!) and the equipment still undergoes wear and tear or upgrade requirements. The production's value can still be estimated either by the equivalent market rate of the good or by the cost of making it.
When the government pays people to build housing that they give away for free there is still "production". When the government orders a mine to ship steel to another location the workers are still paid.
When the government orders a mine to produce for no input and doesn't bother to maintain equipment they effectively take a loan against the capital equipment in the mine. Eventually the mines productivity falls to zero as the mine fails to remain solvent requiring more capital infusion.
If the government can order workers to work without pay then the estimation has to account for similar economics to slave states, which unfortunately is also well trodden ground owing to economies such as the US's prior to 1865.
The government may pay people in other things that were the result of direct resource allocation, so you simply cannot put a price to it.
What is the cost of land that the government gives you? What is the cost of a lump of coal? Clearly this is a lot more than the simple capital cost used to extract it.
The long and short of it is, you're not getting a meaningful price is US dollars.
Nonsense. Hayek explained why that can't work: https://en.wikipedia.org/wiki/The_Fatal_Conceit
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.
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 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.
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 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.
That sounds to me like an ideological position, which is fine of course.
But the question arises, if solving distribution problems requires a participant to solve NP hard problems as you've said (I'd appreciate a link to that paper whenever you can get around to it, I seriously do want to read it and am not just shouting "source", same goes for the distributed planning in anarchist planned economies we were discussing in another thread) then how would that not be true for a machine? Either the problem is NP hard or it isn't, regardless of what entity is trying to solve it.
NP-hard problems can be approximated. You get the machine to approximate a solution that is better than what the market could do or thereabouts.
The fact that it has to aproximate at all however completely invalidates Hayek's argument, which is why it is worthless - his assumptions beg the question.
That being said, given the ability of incredibly rudimentary paper-and-pen, low tech planning systems where planning is basically a very difficult computer science problem to get within a third to a half of what markets can do, I think there is a solid shot that planning can outperform markets in the majority of industries, though perhaps for smaller industries a flexible hybrid will be more useful.
I did enjoy this conversation though. And again, I'd love to read what you have on decentralized planning in anarchist planned economies and NP hard problems humans have to solve in markets. If you can show me a paper that demonstrates that markets require participants to solve NP hard problems I'll be done with markets.
I personally don't care for the purely theoretical arguments that Hayek makes, and yes the arguments are full of apriorisms and assumptions but that's the Austrian school for you and that's what you need to prove that markets must be better than planning.
The actual argument I'd make why planning can outperform markets in many industries and cases is pretty straightforward - markets require duplication of labour, they cause intrinsic crashes, they hurt knowledge transfer because they require intellectual property, they require infinite growth, and more.
Meanwhile actual implementations of planning have been plagued by incredibly slow iteration times (in the order of 5-4 years), access to data so horrible that CIA data was sought by planners, excessive centralization due to the impossibility of getting popular input, very low transparency, limitations in processing as data was collected and processed by hand, allocation of resources by hand, etc...
Planning is fundamentally a computer science problem at every level, and every single major defect can be fixed or palliated using techniques developped from computer science.
Because of this and the relative competitiveness, on the order of 1/3, of planning despite horribly deficient implementations, I think that there's a solid shot that planning can be a better solution than markets in most cases, though not all.
Finally, central planning doesn't actually mean eliminating markets - they are still useful for gaging the relative value and demand in consumer goods. Rather, the goal is to replace capital markets.
There, that's my case for why it is very probable that planning can be a better alternative to capitalist markets in most cases.
From the linked paper (which is very interesting):
> Financially, the "economic calculation problem" of von Mises (1920) and Hayek (1935) suggests, among other things, that even if a free market is not perfectly efficient, it will certainly be more efficient than a regulatory or government alternatives. In other words, even if mispricings occasionally occur, most of the time they are smaller than any other alternative system.
> Both of those arguments are similar in their domains but neither applies to the results of this paper. Whether markets are efficient or not, and whether P=NP or not, there is no doubt that there will be markets that can allocate resources very close to efficiently and there will be algorithms that can solve problems very close to efficiently. The results of this paper should not be interpreted as support for government intervention into the market; the fact that market efficiency and computational efficiency are linked suggests that government should no more intervene in the market or regulate market participants than it should intervene in computations or regulate computer algorithms.
So basically the author does not argue that markets are suboptimal at distributing resources and even goes on to state that a government should not intervene. The paper basically demonstrates that if P!=NP then no system can achieve true efficiency, and argues that markets achieve at least as much efficiency as any other system through approximation.
You list the arguments you'd make defending the idea that planning can outperform markets, but you don't actually make the arguments. So I'll ask.
Where is the duplication of labor in markets? What is your argument that markets cause intrinsic crashes based on? why do markets necessitate intellectual property? I don't believe they do. People traded for centuries before the concept of intellectual property was invented. What is it you mean by "infinite growth"? There is ambiguity there that is often misunderstood, there is creation of wealth which is things like inventing the wheel, inventing the airplane, things that are real growth (and I'd add, preclude intellectual property) that are deeply connected to free markets, and then there is the concept of infinite growth of an economy in scale, something that is not necessary in a market. The two are often conflated.
Also is it possible, even probable, that the problems that plague implementations of planning are symptoms of my argument, and will structurally plague all implementations due to the limitations inherent in central planning systems I've laid out in this thread?
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?
> Nonsense. Hayek explained why that can't work: https://en.wikipedia.org/wiki/The_Fatal_Conceit
Ah yes, Hayek, the economist accomplice of the brutal Pinochet's dictatorship. Definitely someone without a strong bias.
Funny that they could only force people into the "free" market under the authority of a dictatorship born from a military coup.