> I don't think we're all talking about the same thing here. You seem to
> be talking about whether "planning" can work well. On that there was
> never any disagreement. Planning works well - libraries, subways,
> Medicare, etc - no argument there. What others are talking about is
> whether *central* planning works well.
>
> An economy where virtually all production is planned = a centrally
> planned economy. An economy where libraries and subways are planned =
> capitalism as we know it. You seem to believe that the former is just
> an extension of the latter, but that's the whole point - it's not.
Following up on this, in the context of innovation....
What distinguishes central planning from a market system is that there is only one single agent with the power to authorize innovations - the central planner. Innovation-ideas require capital to be realized and the central planner has total authority over the allocation of capital. If 200,000 people have innovation-ideas, how does the central planner decide which ones to allocate capital to, and how much? How can the planner really know which ideas are worthwhile beforehand, until capital has been allocated and the product developed? Given the inescapably tacit nature of the knowledge embodied in an as-yet-unrealized innovation-idea, how do these innovators convince the planner that their ideas will work or be worthwhile? Once a product is developed, how do you determine if it should continue being produced, and in what quantities? And of course, every time a new product is introduced into the overall national economic plan, it requires that scarce inputs be committed to its production, which requires that those inputs be re-channeled away from other existing uses; how do you know the new product is more socially valuable than the alternative uses of the scarce inputs?
Under a market system, the same questions must be faced, but there are limitless numbers - maybe millions - of potential "planners" (i.e., capital suppliers) who can make these decisions at an individual level. And the only criteria the innovators and capital suppliers need employ are whether costs, given by market prices, will be covered by projected revenues, also determined by market prices. Now, this is the part where the planning advocate starts bewailing the notion of such decisions being made solely according to private cost/revenue criteria: "Oh, the market will only nix innovations to feed the hungry and heal the sick while greenlighting innovations that give rich people fake tans and boners and help them more efficiently crush the oppressed!" But this thinking is the result of a massive blind spot. Remember all those lovely examples of planning under a market system Miles was talking about? The libraries, subways, public health insurance, etc? If you want more resources devoted to healing the sick and less devoted to boners for the wealthy, you can get that through planning - in a *market* system.
There are two types of planning: (1.) planning-through-prohibition ("you may not build that strip mall on the edge of town - sincerely, the zoning board"); and (2.) planning-through-public-undertaking ("we need a subway system and no one is building one; let's build it ourselves - signed, the transit authority"). A market system with planning means that (a) private innovators may undertake profitable and socially beneficial innovations while (b) being prohibited from undertaking socially harmful innovations and (c) the public powers will undertake beneficial but unprofitable innovations. By contrast, under central planning, private innovators may undertake no innovations - even socially desirable ones - without authorization from the central planner, who solely bears the entire burden of ensuring that all feasible and beneficial innovations are actually undertaken. It's hard to see the benefit of that.
SA