Can centrally planned economy work

[Otto Kretschmer]

The most common criticisms of centrally planned economy is that it stiffs innovation and that (due to lack of price signals) it cannot detect and respond to shortages or overproduction as fast as market economy.

Are these valid criticisms? Does planned economy by necessity need to be less efficient?

 

[iNow]

1 hour ago, Otto Kretschmer said:

Does planned economy by necessity need to be less efficient?

I don’t think so, no, but it very much depends on who is doing the planning, how well they coordinate with one another, as well as the quality, timing and robustness of the information they have available when making their plans. 

An example of this working well IMO is Singapore. They’ve achieved amazing things in an amazingly short period of time in large part due to smart leadership being in charge of the various economic levers. 

[Otto Kretschmer]

@iNow 

There was actually a Soviet project (called OGAS) to automate the planning and resource allocation process but it was cancelled in 1970 largely for political reasons.

[iNow]

The Soviet system was appealing to many and seemingly looked good on paper, but as with most systems suffered from human greed and fallibility. The idea of spreading peanut butter too thin comes to mind. Everything overall was less good bc the metrics of success were improperly set.

They suffered also from the added issue  of a tiny few in power reaping and consolidating inequitable benefits for themselves and their cronies at the expense of both fairness and the wellbeing of millions of others not similarly close to power. 

[Otto Kretschmer]

@iNow 

(Replying to your first post)

Centrally planned economy is not when government does stuff. It's a strictly defined economic system in which the means of production are owned by the state.

 

Edited Saturday at 05:22 PM by Otto Kretschmer

[studiot]

2 hours ago, Otto Kretschmer said:

The most common criticisms of centrally planned economy is that it stiffs innovation and that (due to lack of price signals) it cannot detect and respond to shortages or overproduction as fast as market economy.

Are these valid criticisms? Does planned economy by necessity need to be less efficient?

 

No they are invalid criticisms as demonstrated by the wartime economies of Britain and Germany.

There was great efficiency and great innovation on both sides.

Edited Saturday at 10:44 PM by studiot

[CharonY]

7 hours ago, iNow said:

I don’t think so, no, but it very much depends on who is doing the planning, how well they coordinate with one another, as well as the quality, timing and robustness of the information they have available when making their plans. 

An example of this working well IMO is Singapore. They’ve achieved amazing things in an amazingly short period of time in large part due to smart leadership being in charge of the various economic levers. 

In addition, today we have improved information structures and are able (at least theoretically) to handle much higher data inputs. Assuming we have a good idea what to optimize for and by deploying appropriate algorithms it might be possible simulate free market price information. There will be huge challenges of course, and there is good reason to believe that it won't be as effective as a competitive system. But I also don't think that we can take the lessons learned from history without acknowledging the difference in knowledge and technology.

[iNow]

3 minutes ago, CharonY said:

I also don't think that we can take the lessons learned from history without acknowledging the difference in knowledge and technology.

That’s a great point. AI too is already making even our modern approaches look downright Mennonite by comparison so this will only continue to improve (at least for those with access to large troves of data for training them)

[studiot]

Just now, CharonY said:

But I also don't think that we can take the lessons learned from history without acknowledging the difference in knowledge and technology.

Much of the knowledge of today came directly from the stimulation of the economies I referred to.

[CharonY]

21 minutes ago, studiot said:

Much of the knowledge of today came directly from the stimulation of the economies I referred to.

Well then let's say historic lessons plus synthesis and advancement of that knowledge plus tech?

[swansont]

8 hours ago, Otto Kretschmer said:

@iNow 

(Replying to your first post)

Centrally planned economy is not when government does stuff. It's a strictly defined economic system in which the means of production are owned by the state.

 

How can the means of production be owned by the state, without the government “doing stuff”?

[Otto Kretschmer]

@swansont 

@iNow used Singapore as an example which is wrong because Singapore has private property (i.e private ownership of the means of production, not to be confused with personal property, commies don't want to take away anyone's toothbrush)

[J.C.MacSwell]

For a sufficiently small country with a population motivated more altruistically than typical, it can work to some level for a limited period of time.

Capitalism can last longer, as it recognizes the motivations and merits of self interest.

Striking a balance is best, though not easy to implement and maintain to work well for everyone.

[swansont]

6 hours ago, Otto Kretschmer said:

@swansont 

@iNow used Singapore as an example which is wrong because Singapore has private property (i.e private ownership of the means of production, not to be confused with personal property, commies don't want to take away anyone's toothbrush)

That’s a noticeably different response. So it’s not that the government doesn’t “do stuff” because that’s what governments generally do.

It’s about government ownership, i.e the economic side of communism or socialism. (and while “commies” don’t want to take the toothbrush, it’s not that person’s toothbrush. It’s community property, not personal property)

[iNow]

6 hours ago, Otto Kretschmer said:

Singapore has private property

And still the answer to your OP is that it very much depends on who is doing the planning, how well they coordinate with one another, as well as the quality, timing and robustness of the information they have available when making their plans. 

[studiot]

I see that vague questions receive vague answers  - suprise suprise.

I a

19 hours ago, Otto Kretschmer said:

Are these valid criticisms? Does planned economy by necessity need to be less efficient?

I also see that specific answers to very specific questions do not even receive acknowledgement.

[TheVat]

Depends on what is planned.  Our government made few plans or regulations for affordable housing.  The free market failed to supply them.  So we are about 3.5 to 6 million homes short, depending on metrics used, resulting in massive problems including homelessness, people unable to move to economic opportunity centers due to housing costs (so they move to affordable backwaters with dead end jobs), people who are rent-poor/house-poor (bulk of income goes to shelter, causing hardship in affording other basic amenities), people living in substandard and sometimes health-damaging units where no other option is available, NIMBY political pressure from the spoiled affluent (further worsening the problem and fostering enclave mentality), and developers struggling with haphazard and antiquated zoning laws.  

So, yes, planning has its place.  

 

Edited Sunday at 04:44 PM by TheVat

[Otto Kretschmer]

@studiot Vague questions allow for a much broader scope of discussion. Folks are free to ask and answer more specific questions.

[Sensei]

Quote

Can centrally planned economy work?

It can work.

The problem is that I would have to be "The Prime Minister Of The Planet Earth", "President of the United States of Earth", aka "God Jesus", etc. etc.

I have some ministers from this forum who can help me
@studiot @swansont @Phi for All

 

[Phi for All]

8 minutes ago, Sensei said:

It can work.

The problem is that I would have to be "The Prime Minister Of The Planet Earth", "President of the United States of Earth", aka "God Jesus", etc. etc.

I have some ministers from this forum who can help me
@studiot @swansont @Phi for All

Persuade me. What would be your first three steps to "It can work"?

[Sensei]

41 minutes ago, Phi for All said:

Persuade me. What would be your first three steps to "It can work"?

If I do something/anything you will say that hackers hacked into your computers and your cell phones etc. etc. etc.

 

this is a public forum so we can't just write (because everyone can see)

 

The biggest problem that scientists don't go into politics but some incompetents with humanitarian profiles.

If you are a scientist you want to discover, not to rule people and order them around!

 

If they are all your brothers and sisters, there is no point in wasting resources on armaments and on creating weapons to kill people..

..at the moment people who are from another street are treated like strangers..

 

POTUS politics etc. etc. are obliviously accelerating antagonisms..

Reducing antagonism between warring nations would be the right thing to do.

 

Edited Sunday at 08:20 PM by Sensei

[Ken Fabian]

On 2/16/2025 at 1:45 AM, Otto Kretschmer said:

The most common criticisms of centrally planned economy is that it stiffs innovation and that (due to lack of price signals) it cannot detect and respond to shortages or overproduction as fast as market economy.

Are these valid criticisms? Does planned economy by necessity need to be less efficient?

 

Does China count as centrally planned? Does allowing and encouraging "free market" commercial activity and competition with strong direction from government count as planned?

Clearly China's government supports innovation - companies like battery maker CATL have 10's of thousands of employees devoted to R&D. In the science journals the proliferation of publications from Chinese scientists is clear. Hard to count China as evidence that central planning is counterproductive - their standards of living have greatly improved, vast numbers have been lifted out of dire poverty. A lot of anti-China sentiment and policy is based on fear that China prosperity can support large and well equipped armed forces as well as commercially outcompete the "free" world. If central planning were so innately counterproductive those fears would not be so strong. I think China as military enemy becomes more likely by seeking to suppress their economic growth - and by undoing what institutions of international law and international planning have been doing.

Like with every nation and economy I'm inclined to see ethical and law abiding versus ruthless and corrupt as more crucial to sustained economic success than planned and regulated versus unplanned and unregulated. China has serious corruption problems yet their leadership does demand some level of competence as well as loyalty in their appointments. Corrupt regimes often do not and often appoint incompetent (and corrupt) people to positions of authority. Some people get very rich like that, but not so often oversee and promote more comprehensive economic development.

I think when it comes to critical economy wide infrastructure that supports economic growth having no overarching planning and regulation is damaging; few nations got roads and railways and electricity grids or provided universal education without it. Those that have the least such planning don't stand out as economic powerhouses. Seems like it is in a healthy balance between planned and competitive that the most benefit emerges.

Edited Sunday at 09:20 PM by Ken Fabian

[npts2020]

It also depends on what your metrics for "success" are. Using China as an example, there were fairly frequent famines there in which millions of people died, the last being in the very early 1960's. I bet most of the people doing food distribution worldwide would call that successful but that isn't a metric I typically see economists use much.

[iNow]

65 years ago was different and the central planning post was talking about today / last decade or so 

[npts2020]

I see, so the Chinese no longer use central planning or a you saying there are no longer famines in the world for the Chinese to avoid?