A not Unminor problem for the Left

JKSCHW at aol.com JKSCHW at aol.com
Fri Apr 14 06:05:53 PDT 2000

In a message dated 00-04-14 08:30:17 EDT, you write:

<< Justin wrote:

>It is for reasons like this [they were about efficiency --dd] that I think

Hayek will be a great hero to a

>future socialist society.


I doubt it. Hayek's planning problem is getting easier, not more

difficult, every year, and the wasted effort in transactions costs is

getting greater. Worth remembering that Hayek's critique of planning is an

empirical claim about the difficulty of planning, not some fantastic

logical truth (the Lausanne School's proof of optimal allocation through

market transactions is another matter). If Hayek had lived in the days in

which linear and even nonlinear) programming was something that could be

done on a desktop, he might have wondered.


You miss my point, and also Hayek's. My point was that Hayek calls out attention, emphatically, to reasons to care about costs and waste in realw orld term, wothout the unrealistic assumptions of Walrasian economics about perfect information and cotsless transactions. You can accept that even if you think that compters make planning possible. It is a point Marx missed with his idea that economic relations under communism would be transparent and his idea taht the unleasing of the forces of production would overcome scarcity under communism.

You also miss Heyek's point about planning, which, as you say, is pragmatic and not logical. Hayek was aware of linear programming and he didn't die so long ago. But he would say (did say) this: no matter how powerful your computers are, even if they can do the whole input/output matrix for an economy in a microsecond, the output is only as good as the input, and there is no way to get the input accurate in the matrix in a purely planned system.

That is in part because each unit in the planning system has an incentive to lie, to say that it has less resources and capability than it does,a nd that it needs more resources and capability than it does. This is in part because the planning system rewards unbits for meeting targets, and the best way to make sure you meet your target is to say you need more than you in fact do to meet a target you say is lower than the one you can in fact meet. So the whole system encourges inaccurate information, promoting shortages and bottlenecks, which in turn amplies the effect just described. As the programmer's say, garbage in, garbage out.

Hayek calls attention to incentives to gather accurate information. It is not raw compuing power that concerns hiim. It is incentives to get the costs right. Market systems create those incentives because individuals profit by accurate information about particular things. Planning systems do not--everyone is better off if the information is accurate, but since each individual bebefits if it si not, we have a classical n-pesron prisoner's dilemma or collective goods problem.

This should be obvious. but it doesn't seem to be, at least it isn't understood on the left. I have been waiting for 20 years for someone to face thsi directly and I am still waiting. Maybe you, DD?


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