Real-world planned economies: what's wrong with 'em?

[Schumpeter]

How do you get from consumer and producer surplus to greater good? The surpluses remain under private control.



Again, I don't see how goods produced in private hands are going to serve any greater good unless people have the money to buy those goods. It's not for the common good, because those products remain in private hands.

You seem to be arguing since private hands control the allocation of resources in a free-market that somehow makes the problem easier? Estimating demand is a very difficult problem to solve in all cases--as are all attempts to predict the future. Perhaps Kenneth Arrow might pose some interesting exceptions, but the problem is for the most part intractable outside of a few corner cases. It is non-convex, and it's something that's been known about for 40 years. I.e. monkeys throwing darts at a chart will fare no worse than most economic planners, regardless of them being public or private. Mutual fund managers rarely can outperform rest of the market, and they can only do so sporadically.

Of course every example you have provided assumes full efficiency, full consumer and producer rationality, and complete consumer information. They also assume a single producer and consumer. Once you involve more than that all the economic models breakdown. Real economies consist of a heck of a lot more than just a single consumer, and a single producer. I think we also know that people are less than rational.

It can be shown mathematically that success or failure in the market, in the long term, has a lot more to do with available resources and random chance than having a better product or service. Given enough resources and time, random chance will grant you the opportunity. And that is precisely how free-market economics truly works--it is a big casino. Of course, you have no chance to win if you don't know the rules or don't play. So either way, it's worth playing it, since you will starve otherwise.

The collapse of these societies has more to do with other factors. Central planning was the least of the problems with these societies.

If you need some papers on more updated economics, I will gladly provide them.

What do you mean 'under private control'? People aren't just stashing money under their pillows.

Because of the profit motive, competition and the ability for others to enter the market (depends on the structure). The point with free exchange is that we can assume people will attempt to maximize their own personal benefit so resources are allocated to those who make stuff other people want, allowing for more of that stuff to be made and incentivising other people to make that stuff.

Everything comes down to chance to an extent, obviously with infinite resources you will eventually hit the jackpot, but casinos don't work like that do they? You have a limited number of chips so you are incentivised to maximise risk/return.

I agree with your third point but you cannot generalise, some markets are close to this model and some are not close at all.

[aristos]

Interesting how the two photos posted are respectively from the period when agriculture was not yet collectivized and from the period when lassez-faire capitalism was going into full swing.
Got any similar pics from the 60s, 70s and early 80s?

[Loony Le Fist]

What do you mean 'under private control'? People aren't just stashing money under their pillows.

Effectively they are. Wealth generation doesn't necessarily benefit "society". If this was true why are we seeing such incredible wealth disparity? People are effectively stashing money under their pillows, because the benefits of this wealth generation only goes to a few.

Because of the profit motive, competition and the ability for others to enter the market (depends on the structure). The point with free exchange is that we can assume people will attempt to maximize their own personal benefit so resources are allocated to those who make stuff other people want, allowing for more of that stuff to be made and incentivising other people to make that stuff.

The problem is for whom? People maximizing their own personal benefit, and making stuff doesn't mean benefits for all. It means they are benefiting only themselves and their targets. Take healthcare for instance. There is no free-market motivation to create cures for disease. If you create a cure that means no more residuals. I think we can see that--there is a focus on symptom control, but no cures.

Everything comes down to chance to an extent, obviously with infinite resources you will eventually hit the jackpot, but casinos don't work like that do they? You have a limited number of chips so you are incentivised to maximise risk/return.

You are assuming there is a finite number of chips. In the current state of affairs governments are influenced by the big players. Capitalism creates a situation where those with money can influence politics. Therefore they can vote themselves more money. This is a casino with an infinite amount of chips handed out by a soverign government.

I agree with your third point but you cannot generalise, some markets are close to this model and some are not close at all.

I suppose we can agree on some things.

It is true that centralized control cannot solve these issues as they are hard enough to solve. The interesting thing is that capitalism leads to a consolidation of control through wealth accumulation creating a de-facto centralized economy. The only way to stop it is through decentralization of control, which is only possible through complete democratization of the economy. Free-markets aren't really free.

[Schumpeter]

Effectively they are. Wealth generation doesn't necessarily benefit "society". If this was true why are we seeing such incredible wealth disparity? People are effectively stashing money under their pillows, because the benefits of this wealth generation only goes to a few.



The problem is for whom? People maximizing their own personal benefit, and making stuff doesn't mean benefits for all. It means they are benefiting only themselves and their targets. Take healthcare for instance. There is no free-market motivation to create cures for disease. If you create a cure that means no more residuals. I think we can see that--there is a focus on symptom control, but no cures.



You are assuming there is a finite number of chips. In the current state of affairs governments are influenced by the big players. Capitalism creates a situation where those with money can influence politics. Therefore they can vote themselves more money. This is a casino with an infinite amount of chips handed out by a soverign government.



I suppose we can agree on some things.

It is true that centralized control cannot solve these issues as they are hard enough to solve. The interesting thing is that capitalism leads to a consolidation of control through wealth accumulation creating a de-facto centralized economy. The only way to stop it is through decentralization of control, which is only possible through complete democratization of the economy. Free-markets aren't really free.

Due to the elasticities of supply of unskilled and skilled workers, economic disparity is a natural result of economic growth in which the incomes of both groups rise, its just the skilled workers get relatively more - but both get richer.

Ofc there are negative externalities that come from the mal distribution of wealth which need to be accounted for.

What? Firstly healthcare is a really bad example, for example companies which provide anti viral jabs positively effect those not associated with the consumption or production of the vaccine due to protection from herd vaccination for example. Furthermore, even if a product has no external benefits or costs it is still making people happy and thus is till contributing towards the greater good.

I don't know where you live, but I'm from the UK and that conspiracy theory has very little evidence to support it here.

[Loony Le Fist]

Due to the elasticities of supply of unskilled and skilled workers, economic disparity is a natural result of economic growth in which the incomes of both groups rise, its just the skilled workers get relatively more - but both get richer.

Ofc there are negative externalities that come from the mal distribution of wealth which need to be accounted for.

Not really. Poor people have actually become more poor. And wealthy people have become more wealthy off their backs, and by manipulation of currency. Along with having the influence to vote themselves more chips to gamble with. If what you say is true, then we would have seen equal rises among all income groups. This simply isn't the case. Poor individuals have become more poor--every econometric shows this. Even the bourgeois don't deny this.

What? Firstly healthcare is a really bad example, for example companies which provide anti viral jabs positively effect those not associated with the consumption or production of the vaccine due to protection from herd vaccination for example. Furthermore, even if a product has no external benefits or costs it is still making people happy and thus is till contributing towards the greater good.

First off vaccinations for flu virus don't count, since influenza is always changing--so there is a motivation to make that kind of vaccine. It's a great way to make residuals. I'm not saying vaccinations are bad, I agree with them.

As to your point about things making people "happy" and so it contributes to the greater good. That's a pretty weak point. I mean you can't feed, clothe, provide health, or provide shelter for people with happiness. That viewpoint has some serious problems. Just cause a solution makes people "happy" doesn't mean they are objectively better off. And that is where that view of utility fails miserably.

Societies don't run off happiness, they run off doing productive things.

I don't know where you live, but I'm from the UK and that conspiracy theory has very little evidence to support it here.

I'm not talking about a conspiracy theory. It's just about analysis of motivation. What motivation is there to make a cure for a disease, when you can get residuals fixing symptoms? I merely posing a rhetorical question.

[Vladimir Innit Lenin]

Take something like take aways (assuming you are not using LTV) this industry should be relatively unregulated and is very easy to enter. As it would not be too far off the utility maximizing point.

You mean aside from negative health externalities (in the short-run from poor hygeine, and in the long-run from the type of fare offered in take-aways) that are ruining the world and the contribution of take-aways, as part of the service industry, to the de-skilling of the workforce, leading to lower wages and lower job satisfaction.

A perfect example of how an industry can be equilibrium-passing in the minds of the capitalist, but oh so wrong from every social, moral and ethical standpoint.

Something such as rail travel should nationalized due to the barriers to entry etc.

Agreed.

Just because of a few industries do not give the desired results in a relatively free market does not mean that those which do should suffer over regulation.

As i've shown above, many industries which pass capitalist theory's ideas about equilibrium, where price and demand do indeed match up, do not take account of the dreadful negative future social externalities that will meet a society based purely on profit and laissez faire economic policy.