Comment by jandrese | Hacker News Reader

Comment by jandrese | Hacker News Reader

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It mirrors in a lot of ways capitalism vs. communism. Or more precisely market based economies vs. command economies. The ultimate problem is that efficient distribution of resources depends on the unique conditions at thousands or millions of sites across the country. The people who are most well informed about what is needed are the people at those sites. The fundamental problem with command economies is transmitting that information up to the central source without overwhelming the system. Because it is way too much information to deal with they have to make simplifying assumptions, which lead to inefficiencies that compound over time.

The more decentralized your decision making the more efficient the system runs. However, this has drawbacks as it becomes hard or impossible to focus on big problems. On the flipside centralized systems are highly vulnerable to corruption. No system is perfect, and the most sensible systems use a combination of both.

100% agree. Market economies really do seem like the only way to prosperity in the modern era.

Mao's command economy had the country stuck in poverty. Deng's market economy reforms turned them into a superpower.

Yep, but remember that not everything works efficiently on a market. Utilities like water and power with high barriers, at least on the distribution side, shouldn't be left to the whims of a free market. We have plenty of historical precedent where market based solutions fared poorly compared to a more command oriented approach.

You often see politicians and ideologues who insist that the market is the only solution to any problem, and these people are wrong and their solutions can lead to tragedy.

Agree regarding water and power, and really anything environmental.

As far as the market goes, I think part of the problem is that most industries are not true free markets, AKA: high competition, low barriers to entry.

Industries that are close to true free markets: restaurants, barbers, spas, handcrafted goods, almost any manner of small business.

These are some of the most ancient industries and have never collapsed or become overrun by corporations.

The issue with something like deregulating banks is that banking is not a true free market. There is no high competition (it's concentrated by a few corporations). So deregulating it can be disastrous because it's basically allowing a corporate monopoly to run wild.

If they deregulated it AND made a massive concerted effort to bring a ton of new, smaller, independent banks to the market, perhaps it could become a self-sustaining free market that truly benefits the people, with little need for government intervention.

> As far as the market goes, I think part of the problem is that most industries are not true free markets, AKA: high competition, low barriers to entry.

That sounds like the classic "if all you have is a hammer, all problems look like nails".

It's true that decentralised decision making can make good use of local information. But you're ignoring the kind of problems that are created by decentralisation itself, so they can't be fixed by more of it.

A system that is being optimized with only local information is prone to getting stuck in local minima, situations which can be very far from the true optimum.

To escape from the local minima you need to gather global information compiled from the whole system, and use it to alter the decisions that individual actors would make from just their locally achievable information.

That's the role of regulation, and why regulated markets work better than chaotic ones. Regulation can make individuals coordinate to achieve larger goals than what's possible without it. And to enforce effective regulation you need some kind of authority, which is centralised.

Of course that raises the question of how that authority is created and what goals does it set; for that, we get politics, with various groups trying to influence what the authority will decree and whose interests it will pursue harder.

> We have plenty of historical precedent where market based solutions fared poorly compared to a more command oriented approach.

I'm not sure we do. Most parts of the world have transitioned from state owned power markets to ones that are mostly private sector driven. Even distribution infrastructure is usually quasi-privatized or owned by a collection of generator firms.

Things like pipeline networks and power cabling often seem like good candidates for command economies at first, but in practice governments struggle to spend adequately on capital infrastructure. They tend to take over the infrastructure after it's been built by private actors, then slowly run it into the ground over a period of many decades, then privatize it to try and get it off the books, then blame the private sector when it starts to break down despite their attempts to repair the damage. The left then use the parlous state of the network to argue that things were better when they were state run, ignoring that the reason they're now bad is exactly because maintenance and upgrades weren't taken seriously enough during the state run period - and often, that the private sector struggles to drain the tech-debt backlog because of government price controls.

The above is basically the experience that the UK has had over the last 150 years with water, rail and now they're adding power to the list. A big part of why the NHS is in a state of collapse, or likewise for the German railways, is because governments systematically prefer to spend money on pay rises for large workforces (=new loyal voters) than on capital infrastructure (=no new voters). Private sector network operators don't have that same problem unless they face a heavily unionized workforce, which is again often a legacy of public ownership and left wing union protection laws.

So I think it's a lot more complicated than you make out. A system that transitions between state and private ownership doesn't magically take on the properties it'd have had if that'd been the case all along.

Look up "water barons" for an example of market failure due to high cost of entry.

High cost of entry doesn't mean a failed market, it just means it's not as competitive as one with a low cost of entry. There are definitely cases where barriers to entry become so high it's viewed as almost impossible to enter, but there are usually still ways to do so (e.g. buying an incumbent).

> 100% agree. Market economies really do seem like the only way to prosperity in the modern era.

From a submission about a left-wing subculture to declaring victory for the “decentralization” of capitalism. What else to expect.

Depends on your definition of capitalism.

The original Adam Smith capitalism basically called for a nation of small businesses - ultra decentralized. Modern American industries are very far from that. Some might argue they're more like state-sponsored organizations. Which definitely wouldn't be Adam Smith's capitalism.

Book 1, chapter 7: The workers want to work as little as possible and get as high a wage as possible while the employers want the workers to work as much as possible and for as small of a wage as possible ... yet it is obvious that the employers have an upper hand in this standoff, being easier to organize since they are smaller in number, having more funds to live off of, and by the fact that they in practice enlist the state to go after workers.

I was talking about the only capitalism that has existed.

Capitalism doesn't have a monopoly (heh) on market economies. Market socialism is a thing.

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