[WS:] If I understand the essence of this 19th century debate of markets vs planning, it is all about attaining Pareto's optimum - a mythical state in which every individual will receive the best possible allocation of goods. The free marketers claim that they are in a better position of achieving this mythical state than planners, because prices contain accurate information about supply and demand. Under the planning system, the argument went, the prices could not perform that information-bearing function because they are set administratively and thus do not change to reflect the supply/demand situation. Lange countered by claiming that prices can play the same function under the planning system because human agents in both systems - capitalists or planners - do not have a priori knowledge of the "equilibrium" but rather try to find it through trial and error i.e. adjusting prices and seeing what happens to supply and demand, then adjusting it again and see what happens, and so on. There is also a moral side to this argument - free will vs. compulsion - but I will pull a Burke here and say that this a diversion since everything short of physical coercion involves consent and free will, even if it is a response to a threat.
That is all that is needed to settle the issue - because it demonstrates that free markets do not have any secret ingredient that planning does not to achieve the mythical economic nirvana of Pareto optimum. In other words, both have the same capacity to reach the nirvana. If they are impediments, they are of sociological or political nature - such as distortions to prices created by unequal distribution of private property under capitalism or by administrative fiat under planning, and there is no reason to believe that these obstacles to "market efficiency" cannot be mitigated by a proper set of policies - at least in theory. That is all that there is to it - any "computational debates" that Andie mentioned are basically pissing contests that do not alter the fundamental logic of the problem. Or, as John Kenneth Galbraith aptly observed - they are efforts to provide needed conclusions to those in a position to pay for them.
My problem with this fundamental logic of the problem is that it is based on a fundamentally false premise of the existence of Pareto optimum. It is basically an econospeak term for the ancient canard of philosophers and theologians - Ideals, gods, pre-established harmony, heaven, nirvana etc. These are nothing more than constructs of human imagination but the fact that they have attracted so much human attention throughout human history suggests that there is some emotional need they fulfill. I think that this need is glorified memories of early childhood when we were seeing our parents as omniscient, all powerful and benevolent beings that sustained our very existence. We then grew up, we noticed that our parents are human - old coots no better than ourselves, but the ideals they impersonated when were shitting our diapers remained imprinted in our subconsciousness. And since some people have an affective defect that makes it difficult for them to live a life that is full of uncertainties - they escape from it into the the world of ideas where certitude rules. That explains Plato, Leibniz, Pareto and scores of other idealists and priests. They are essentially good shysters that made up convincing stories about escaping to the imaginary worlds. But I am digressing - it is just that people who seek certitudes rub me a wrong way.
The bottom line is that if Pareto optimum is a myth then the ideal social order cannot be grounded in the claim of the most efficient and "natural" (meaning consistent with popular will) distribution of resources. From that pov, every socio-political system, whether we label it as "free market" or "central planning" results in some arbitrary distributions that in themselves are not intrinsically "ideal" - but rather they are good for some but bad for other. There is no other way. The only question is good for who and bad for whom. Answering the latter question does not requite PhD in economics or philosophy, but some knowledge of sociology can be helpful.
More specifically, people's preferences and goals constantly change depending on how issues are being framed. They are for-life when it comes to unborn babies but against life when it comes to criminals. They are for capitalist markets when it comes for grocery shopping, but for socialism when it comes to automobile transportation (i.e. they like free roads build by government.) They demand equitable treatment from their bosses, but they renounce equitable treatment when it comes to their underlings. And so on. So searching for some mythical equilibrium or optimum in this world of ever changing and shifting preferences and definitions of situations is a wild goose chase indeed. The best we can hope for is to negotiate most acceptable at the moment solutions and maintain institutions that make this negotiation process effective and meaningful.
-- Wojtek
"An anarchist is a neoliberal without money."