Advantages of a planned economy(according to Wikipedia)

[Capital_Pumper]

http://en.wikipedia.org/wiki/Planned_economy

An important advantage of a planned economy, one which was among the most important for socialist economists of the early 20th century, is that it’s not subject to major pitfalls of free markets. A planned economy does not suffer from business cycles, it does not experience crises of overproduction such as the one that was believed to have contributed to the Great Depression. From the modern perspective, it does not result in asset bubbles - irrational massive misallocations of resources such as the dot-com bubble of the late 1990’s or the housing bubble of mid-2000’s.

The other aspect is that a centrally planned economy can easily provide public goods which would not have been available at all, or would require explicit government intervention, in a free-market economy. For example, a nationwide highway system is a public good - it benefits everyone, but no market participants would voluntarily spend money to build one. In a free-market economy, the government would have to achieve this goal through taxation. In a planned economy, state planners would simply allocate resources to building highways.

Funny, I come across people who churn out identical arguments. I think debunking this and using it for reference would be conducive, since people tend to flock to Wikipedia. Maybe it would aid in educating those who are new to economics, or have been bitten by the statist bug.

[Laughing_Man]

Exactly, people there would be no trade, therefore no money, therefore no price system therefore no economic calculation. Having a socialist economy would end booms and busts because we would just be in a permanent bust. I would contest though that public goods will not be able to be available to all nor would planning a highway be at any rate successful in terms of profit and lose…but hey…at least we will get rid of those pesky boom/bust cycles! Onward to starvation comrades!

[Capital_Pumper]

To say that planned economies “don’t work” is historically false. In reality, most of the world’s planned economies stopped working around the year 1980 - but they had worked very well for many decades before that. And some planned economies had greater achievements than any market economy ever had (for example, the Soviet economy in the 1930s achieved the highest growth rate of any economy in history; planned economies resulted in extremely fast industrializations, and many scientific and technological “firsts” - such as the first artificial sattelite, the first man in space, etc). Furthermore, it is wrong to consider the Soviet system as the model of a planned economy. The Soviet Union had a certain kind of a planned economy, but many different kinds are also possible. After all, there are many different methods of planning. – Mihnea Tudoreanu 14:25, 24 Nov 2004

Aside from the blatant contradiction in that discussion quote, I am interested in witnessing the historian’s (you) killing blow.

[Laughing_Man]

@Capital Pumper

Aside from the blatant contradiction in that discussion quote, I am interested in witnessing the historian’s (you) killing blow.

I’m actually reading a book right now that is dealing with this topic. Robert Conquest’s The Harvest of Sorrow. It concerns the collectivist farm planning by the Soviet Bolshevik’s. Robert Conquest is really good on early 20th century Soviet Russia, if you are so inclined to read about it.

[hayekianxyz]

Well, the key to the ABCT is that entrepreneurs are led by profit signals to invest in goods that are further away from consumption than consumer preference will allow. The important fact is that as the interest rate is lowered it becomes profitable for entrepreneurs to devote resources to the low stages of production, and when consumer preference asserts itself it becomes profitable for entrepreneurs, on the whole, to realize that these investments should not have been made and move resources closer to consumption. Now, I don’t believe that the ABCT is a general theory, but, since the planners aren’t guided by profit and loss, the “bust” will never come, resources will continue to be placed where they shouldn’t.

Also, the biggest problem during the bust is that factor prices can be rigid and it’s no capital good is entirely substitable and all goods require some complementary good. As societies become more wealthy there’s a general trend, under the division of labour, for capital goods to become more specific. Which, of course, means that it will take longer for these goods to be reallocated once the bust hits.

The public goods argument is, however, entirely valid. If the anarchist wants to argue against that they’ve got three options, as far as I can tell:

1. All (some public goods) can be provided without the state.
2. There’s no feasible way to limit the state to the production of public goods without allowing it to expand and become exploitative.
3. Who cares about public goods?

(There are probably more, this is just of the top of my head).

[Knight_of_BAAWA]

First, Giles, a demonstration that there is such a thing as a “public good” is in order. Don’t want to beg the question, right?

[I_Ryan]

@GilesStratton

All (some public goods) can be provided without the state.

If that were true, they would not be “public goods” anymore.

[filc]

Someone needs to correct the article to state:

“One of the alleged advantages of”

I won’t do it because I hate editing stuff on wiki.

[xahrx]

@GilesStratton

Well, the key to the ABCT is that entrepreneurs are led by profit signals to invest in goods that are further away from consumption than consumer preference will allow. The important fact is that as the interest rate is lowered it becomes profitable for entrepreneurs to devote resources to the low stages of production, and when consumer preference asserts itself it becomes profitable for entrepreneurs, on the whole, to realize that these investments should not have been made and move resources closer to consumption. Now, I don’t believe that the ABCT is a general theory, but, since the planners aren’t guided by profit and loss, the “bust” will never come, resources will continue to be placed where they shouldn’t.

You’re ignoring the effect of continual inflation which masks the misallocations for a while. The economy isn’t really getting wealthier during that time, it only looks like it. The bust happens when it can’t be hidden anymore. In the planned economies the bust is perpetual because instead of false signals there are no signals period. Resources are misallocated in perpetuity. What’s missing is the correction, not the bust, which is indefinite.

The public goods argument is, however, entirely valid. If the anarchist wants to argue against that they’ve got three options, as far as I can tell: All (some public goods) can be provided without the state.

Which has already been proven time an again for ‘some’. Everything from roads to lighthouses were privately provided at one time. As for proving all public goods can be provided, that’s complete nonsense. First you would have to prove all public goods are even necessary on some level, and then there is not the question of necessary but if they were built at a profit and not an economics loss. The issue with public goods like bridges or roads is not whether or not people find them useful; of course they do. People obviously get some utility out of them. But you’d probably find some schmuck who’d love a square wheel too. The real issue is whether or not a higher valued end was sacrificed in order to bring it into being, and if the government had to redirect the funds the answer is a definite yes. Which means that not only have people had to forego something they valued more for a bridge which they valued less, not which is valueless, but also the price they paid for it was higher than they were willing to lay out.

There’s no feasible way to limit the state to the production of public goods without allowing it to expand and become exploitative.

That would actually be up to you to prove there is such a way.

Who cares about public goods?

To be discovered, not answered or proven.

[meambobbo]

This is ridiculous. Overproduction, when defined specifically in a free market context, cannot apply to a planned economy. How can http://en.wikipedia.org/wiki/Great_Leap_Forward not qualify as overproduction?

Production is always good. Overproduction can only be rationalized in saying that some more highly desired good was underproduced.

[Jon_Irenicus]

Aside from the blatant contradiction in that discussion quote, I am interested in witnessing the historian’s (you) killing blow.

Eh, the proper approach is to question why anything she (?) said matters outside of the valuations of market agents. What is good about an “extremely fast” industrialization or being “first” (whoop-dee-do) in putting a satellite in space or having high “growth” rates (really? reported by whom? are these rates even efficient and are they servicing consumer wants?) and at what cost did they come? There’s a huge amount of implicit assumptions here aside from the vagueness of the quoted paragraph.

Generally, eliminating business cycles because one has eliminated business altogether doesn’t really say much at all (and like Xahrx said anyway, the system will be afflicted by permanent misallocations of resources due to a lack of a profit/loss signal.) But then again central planning is their cause to begin with…