Economic Planning

Economics Economics Questions
1

In my Micro class I had to answer this question

Do you agree with Robert Moses’ ideas of wiping out cities that are an “impediment to new growth”? (see Scarcity and Eminent Domain) Why or why not?

I wrote:

“No, I do not agree with Robert Moses’ idea of “wiping out cities that are 'an impediment to growth.” Even if cities were an impediment to growth, there is no way Moses, as an economic planner, could facilitate growth in an efficient manner. Growth should be facilitated through spontaneous order which, as Freidrich Hayek says, provides 'a more efficient allocation of societal resources than any design could achieve.”’

In response my teacher wrote:

Even though I do understand your position, spontaneous is not always better. It can, and sometimes lead to chaos. Because of scarcity, choices must be made. Regulation helps avoid this problem. Planning can facilitate economic growth becuase it purposedly creates an economic basis. Look at planned cities as an example. Sometime, it is economically advantageous to rebuild or restructure an area. As mane say, it is the cost of development.

(English is probably not her first language)

Now she wants me to revise my answer (Why do I have to revise an answer to an opinion question?) and of course I’m not going to give her the answer that she is looking for. How should I “revise” my answer?

2

This is an odd question for microeconomics. Typically micro deals with individual consumers, firms and markets,though sometimes some simple introduction to general equilibrium is added. This really sounds like urban planning question.

General Answer:

Here’s how I would go generally about revising an answer to a question like that. First I would demonstrate that I know the material the professor taught in class by giving her an answer along the lines of the principles she discussed. “According to some we should do X because Y”. Then I would add a short critique at the end that describes why I found the previous answer problematic. “However, there are those who would criticize this arguments because blah blah blah”.

Follow-up Question:

Could you give some context about how she is teaching your microclass? What are some of the principles she is teaching? What is the conext of this question in your class?

When she says “economic basis”, that makes think of those Economic Base Studies you used to find a lot in regional economic development books. In that context, “economic base” basically means “export industry”. Is that how she is using the term?

Answers to these types of questions might be able to help us better help you.

3

I’ve said it before and I’ll say it again. What a waste of precious time and money to go these classes. She doesn’t understand your position at all.

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You must first reiterate your position on spontaneous order and explain to her that absent of planning refers strictly to central planning. There is still planning on an individual basis. The many different actors are coordinated by the price system. The result is order, not chaos.

Any course of action that the planners will take suffers from a fundamental problem. The value of their action against its costs cannot be ascertained. In fact, the mere problem your teacher raises is nonsensical in the absent of such a method.

How does she know that the city is impeding growth? What method of valuation is she using? I suspect your teacher may be unfamiliar with the subjective value theory, which is another way of saying that her knowledge in economics amounts to diddly-squat.

4

Here is the section from the book where the question is set up at.

"One of the most controversial figures in the history of New York City is a man named Robert Moses. Why? His extensive use of the power of eminent domain to wipe out what he termed as “blight, broken down cities that are an impediment to new growth.”

What is eminent domain? If you take a look at the 5th Amendment of the Constitution, you will see that the founding fathers gave the government the power to take your home or business away from you, as long as it is for the purpose of serving the public (military bases, highways, bridges, and so forth), and as long as the government provides you with a just price for your property. Thus, the phrase eminent domain means superior ownership.

For the bulk of the life of the United States, eminent domain cases revolved around projects that largely served the common good of the citizens of the U.S. This is where a form of macroeconomic scarcity comes in, as well as the process of cost-benefit analysis. When the government tells you to leave so a new highway can be built, it is because the macroeconomy has limited resources where efficient roads can be built.

When building immense projects like the Triborough Bridge and the Cross-Bronx Expressway, a city such as New York must weigh the opportunity—in this case, being able to move a greater number of people around more efficiently—against the cost of people losing their homes and neighborhoods. Jane Jacobs, in her book The Death and Life of Great American Cities, argued this was not just a cost for the people or the neighborhoods, but also the city itself. What the city might gain in a roadway or the ability to allow people to come in from the suburbs to shop, it will lose in its identity as a city. “It may be that we have become so feckless as a people that we no longer care how things do work, but only what kind of quick, easy outer impression they give. If so, there is little hope for our cities or probably for much else in our society. But I do not think this is so,” she said in The Death and Life of Great American Cities.

Moses said, “Civilization is an outgrowth of cities. You need not live in a city, but you must be nearby or visit now and then if you expect to be recognized as a civilized man.” His objective in creation was very different from what Jane Jacobs sought to preserve. Therefore his opportunity cost decisions and scarcity evaluations were different than hers."

I don’t know why this is being taught in a micro class, but I’m not complaining lol.

The section deals with opportunity costs, but the question doesn’t really ask about the opportunity cost.

5

It deals with opportunity cost in the sense that the question is asking you if there was a better alternative to Moses’ policies or ideals. It’s a difficult question to answer because the government has played such a heavy hand in urban planning that all arguments against it must be theoretical in nature. For example, a Californian may point to the massive highway network which exists “thanks to” government. It is difficult to suggest what would exist otherwise. An Austrian may give the benefit of the doubt to the free-market, but non-Austrians are not so willing.

6

The entire section is economic nonsense. It is easily refuted by what I’ve said above: “The value of their action against its costs cannot be ascertained.” Have your teacher provide an economic method by which the above can be achieved. Remind her that this is a class in economic theory and not political theory.

7

Is it really a difficult question to answer or is it simply the answer that is so difficult to swallow? I think it is strictly the latter that proves to be so challenging.

8

Robert Moses is sooooooooo 1940.

No one could even attempt to do what he did back then.

The problem here is that you are not making a defense of capitalism. A single, enormous capitalist enterprise, just like the kind that used to build railroads before they were nationalized to fight WWI, is the only institution that can build at the scale that Robert Moses built. That’s not a spontaneous order, that is just for-profit capitalist investment by the billions of dollar.

9

Couldn’t you write something like?

"According to Moses, property should be taken away from the owner and put to another use when the value of that alternative use is greater to society as a whole than the value to the owner in the property’s current use. insert text on cost-benefit analysis, opportunity cost, and something on transaction costs would fit if you’ve covered that–IOW: those things that are consistent with the Moses position.

However, there are several points, which I believe Moses argument does not take into account. knowledge limitations of central planners"?

I think she wants you to elaborate more on the stuff that was discussed in class.

Of course, in the question, it sounds like she is basically asking you for your opinion. So i don’t see how she can be too upset with any answer so long as you demonstrate a knowledge of the material.

10

Does not compute. Even if she were right, market systems are mechanisms for dealing with scarcity and are self-regulating, so just because regulation is ‘needed’ it need not emanate from the state. As for planning, for that she should read Hayek or Mises.

11

Tell her that value is subjective. Then tell her that regulation fails. Then tell her about the broken window fallacy.

12

She doesn’t think that a free market has a mechanism to deal with scarcity. I don’t think she’ll understand the subjective theory of value, the economic calculation problem, or the broken window fallacy, if she can’t understand how supply and demand operate.

13

You say this is micro class? As part of what? College, HS?

14

High School

15

Ask to transfer to home economics instead where at least they teach some real economics.

16

provide sources to back up what you’re saying. teachers need not know everything, but any competent teacher is able to at least understand sourcing of material so she has guidance to check its validity, so, she’ll be able to figure out that you’re not making this up, ironically, out of thin air[:P]