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923 sats \ 3 replies \ @gnilma 29 Nov 2023 \ on: Meta Econ Takeover Day 43 (I think) meta
As history had prove over and over and over and over again, central planning doesn't work. As pointed out numerous times by Safedean (if you listen to his podcast or read his books), the problem with dictatorial central planning is not an incentive problem. In fact, when your life is at stake (work hard or get sent to the gulag), you are very incentivised to work hard. The problem with central planning is the central planner's inability to make economic calculations and thus leading to an inability to properly allocate capital / resources. Division of labour on a country scale is an extremely complex system, and the economic calculations required can only be properly calculated through spontaneous order of free markets. Misallocation of capital / resources in centrally planned economies always end up leading to shortages of everything, which will then collapse the economy and all forms of production, and kill millions of people.
Accidental double zap. At least it's a good comment.
The only quibble I have is about the incentive point. In the standard sense, central planning introduces the incentive problem that workers don't get paid more in proportion to how productive they are. There are enormous incentives to do whatever it takes to not get punished, but that isn't the same as being more productive necessarily.
The Soviet joke "We pretend to work and they pretend to pay us." comes to mind.
Mises' great insight was that the fundamental problem of central planning is the knowledge problem. In a way the incentive problem is just one example of the knowledge problem. It's a type of principal-agent problem that central planners can't solve because they aren't able to measure productivity accurately.
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I sent half of the zaps back to your reply plus my usual zap amount in an attempt to fix the accidental double zap.
I agree with you that under dictatorial central planning, there is a huge incentive problem, as people don't truly want to be productive and, like you said, "are pretending to work".
I think when Safedean said that there is not an incentive problem, he might simply be trying to emphasize the economic calculation problem. Maybe downplay the incentive problem a bit to put focus on the economic calculation problem. I think he believes that the economic calculation problem is the true root cause and also the biggest problem causing central planning to fail everytime. Just my speculation though, not trying to put words in his mouth.
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I'm sure that is Safedean's view, because he's a devotee of the Austrian School of Economics and that's one of their most famous contributions to economic thought.
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