Comment on Why does China have so many multi billionaires if they are aiming to be a communist country?

• skidicarus@sh.itjust.works ⁨3⁩ ⁨days⁩ ago

  I believe so, yes. Other to a the well-documented issues that arose from the information problem, Vivek Chibber has done some recent work on the incentive problems that also plague Soviet-style command economies. …substack.com/…/why-soviet-style-planning-fails

  source

  • UnderpantsWeevil@lemmy.world ⁨3⁩ ⁨days⁩ ago

    Vivek Chibber has done some recent work on the incentive problems that also plague Soviet-style command economies.

    He comes at it empirically - “We ought to be skeptical, as any rational person ought to be, because when you see something failing over and over and over again” - and extends causality from there. And he goes running back to price signals as the proximate cause of the failure, because he conflates market signals with efficient consumption patterns.

    Planning was consciously directing the flows of investment into the sectors that you deemed to be the priority sectors, discouraging investment from sectors that you deemed to be superfluous or unimportant. And then the key — the really hard part — was figuring out how to incentivize the managers of your factories, the managers of the agricultural cooperatives that you had to follow the dictates of the plan, because you cannot rely on price signals.

    Which is all true, but not unique to communist economic planners. We have a bevy of capitalist planners that live all through the corporate world, fixated on directing the flow of investment. And once an industry becomes vertically integrated, it also can’t rely on market signals, because all the company is dealing with is raw material inputs and final product outputs.

    What private industry in capitalist states have achieved that communists arguably lacked was the proverbial “Manufactured Consent” of the end consumer. You take a thing that’s incredibly cheap to produce and engineer at scale - plastic or particle board or ink/paper or data - and you upsell it through marketing. So you end up with a $600B/year budget in the United States that’s dedicated just to telling people that they need to buy stuff.

    And that doesn’t include the budget for industry lobbying or legal wrangling. It doesn’t include the kind of bribery and kickbacks that avoid popular resistance to industry. Or the negative externalities of waste management that are displaced onto end consumers.

    Normally in capitalism, what do managers do? They want to make profits. The way to make a profit is by trying to sell at the lowest price possible, the best quality good that you can.

    That’s straight foward not true. You make a profit by selling at the highest price possible with the lowest quality of good that you can. You aim for higher margins per unit sold. And then you aim to maximize volume. McDonalds would not exist in its current state if it was in the business of undercutting people making sandwiches at home with superior products.

    Everything he’s writing about is just the restatement of the old economic calculation problem posited by Ludwig von Mises in 1920. And it’s been pretty thoroughly debunked with the advent of modern computer technology. But even before the invention of the microprocessor, it was on shaking footing in countries like Allende’s Chile and Deng’s China.

    In fact, the reactionary response to central planning as an institution wasn’t to outcompete it but to demolish the methods by which it was achieved. Most famously, when Pinochet’s troops stormed the Presidential offices and shot the computers.

    Not only is central planning possible, but it is proven successful, as often within capitalism as within the socialist sphere.

    source