Essentially, yes—they're both examples of centralized planning, where the conceit of politicians drives complex economic systems arbitrarily, resulting in chaos.
The problem comes in when people imagine that what's going on is "unplanned." As the economist George Reisman has pointed out, decentralized activity by actors who have a financial stake in the game and who are thus guided by profit and loss is exactly what economic planning is. Centralized "planning," as the economist Ludwig von Mises pointed out, is planned chaos.
I'm not trying to quote you out of context, sorry if it came across that way.
Central Planning = Government decides and industry follows, like in China.
If you want to take this as a definition, then fine, we have nothing to argue about. But if you just give the phrase its literal meaning, I believe the article is arguing that: One form of central planning is what you described. Another is a very small number of entities controlling a very large amount of money.
However you might want to define "central planning", there's a massive difference. The business people are using their own money, but central planners use everyone else's.
Central planning, in this context, is not the same as political philosophy. So be careful not to conflate the two.
Central planning does happen in free-market economies all the time, at various levels. An HOA for example is a hyper-local example of central planning. The larger the scale the stronger the lever, and hence the more variable the result.
The "free market" brings all kinds of its own oroblems of course - I'm not arguing for the elimination of planning - but long-range planning at national scales, is hard.
That's a pretty catchy way of phrasing what I was trying to get at.
I'm pretty sure central planning is inherently coercive and tends to be more expensive than distributed planning. I also think distributed planning is generally more efficient
Hah, I'd given some thought to malinvestment in capitalism but never quite connected it to malinvestment under central planning.
It feels about right... it's almost the same thing. Except there are multiple competing "central authorities" with money, so the ones who fuck up do get burned a lot harder than they would if they were part of the very big government.
Central planning isn't bad just because it's bad, there's reasons for its badness. Here's a few -
First, you get people who don't know about a profession trying to dictate to people who do know about it. EX: Hitler and Stalin managing farm production, even though they didn't know anything about farming - agricultural production goes down leading to famines.
Second, you lose the price signal which says what people really want enough to act on, given scarce resources. This leads to a feedback loop where goods priced below the equilibrium have demand far in excess of supply. EX: Everyone would love to buy a subsidized steak instead of a hamburger, so if steak is subsidized to hamburger prices, there'll be shortages and you'll need to impose rationing and coupons and things (which becomes a dual currency system where the coupon/ration becomes the real constraint currency, and then those become blackmarketed until an equilbrium is reached - but only with a lot of hassle).
Third, central planners generally have incentives that diverge widely from the people they're supposed to be planning for - ex, making sure those new centrally planned jobs go to your political supporters. This has happened in the majority of centrally planned economies.
You wouldn't expect a high concentration of wealth to have these same problems. Steve Jobs having central planning ability over Apple, and by extension, over a lot of the high quality glass and semiconductor industries isn't the same as Brezhnev having that power. Jobs, of course, is much more competent at building high end consumer technology than Brezhnev and not prone to make some of the common errors.
Examples of central planning do not imply a centrally planned economy, just as examples of free markets do not imply a free market economy. Every nation on earth has a mixed economic system (except maybe North Korea?) so let's not waste any more time denying that fact.
any kind of central planning creates a large bottleneck and creates a brittle system with a single point of potentially catastrophic failure. It's why dictatorships tend to be fragile compared to a more decentralized system.
A centrally planned economy is still subject to market forces. They manifest as the effort required to implement the central plan.
The difference between centrally planning your household finances, a company or a whole country is really just one of scale. Because the plan can allocate internal resources arbitrarily so long as the external forces are matched out, it's possible for this internal allocation to be wildly imbalanced. But if you're personally overspending on some item, you're going to feel that pretty quickly, while a corporation might sink a lot of money into a doomed project before it gets axed, and a country can spend decades before correcting. The larger an organization is, the longer it takes for a pressure felt at just one part of the organizational border to propagate far enough that it affects the overall plan.
This is actually less a problem of central planning than of an aversion to change the plan. In a market, there is little attachment to other participants, and if a better supplier for something pops up, nobody has any qualms about switching to them. But most companies would hesitate much more before cutting an internal department than they would if it were just a question of hiring a different contractor. Because changing the plan feels like admitting failure, inefficiency creeps in.
So central planning could actually work, but you would have to continually adapt the plan to changing circumstances. The end result might look a lot like a market economy, though.
how are those corporations the result of centralized planning?
Every instance of centralized planning by an authoritarian gov't has ended in disaster. And yet, every time, different excuses have been brought up about why it failed.
> The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
Pretty much. When money consolidates at the top, you effectively get a centrally planned economy. The problem though isn't fiscal policy which is a bandaid for an underlying problem. The rich don't spend their money, they endlessly reinvest it to grow their share of the economy until they have become such a large parasite that the host economy collapses, which is why politicians are constantly trying to grow the economy faster that the parasite can suck it dry.
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