And then the Chicago boys, all fans of Friedman, did for the rest
And don’t forget that utility functions are dynamic. The utility of the fifth ice cream cone is much less than the first. Just to add to the complexity.
I think central planners have convinced themselves that they can do better than the market, and that control is a necessary evil to accomplish this. To start at least - no doubt there is power for power’s sake at the end. And the refusal to recognize errors.
Take a look at China today for an excellent example in zero-covid. Xi may have started from a good place, but at the moment they are sinking the economy for a very trivial return. And that seems to be because no one can admit they are wrong.
Certainly, if a player—it could be a government entity, but at least as likely a monopoly, cartel, syndicate, or anyone with enough influence— does not like the current rules, they can attempt to control the market by changing them. The results may not be good for everyone, but even that depends on who gets to dictate what counts as good.
I do not think we should dismiss even simple game theory as applicable to real-world situations, but, as I said, every such mathematical model has rules which must apply in the given situation. There are long discussions and disputes about what, if anything, to do with the simplest models like the Laffer curve.
Modnote: This is not attacking or debating the posts but it is making points about the poster. Please refrain from this, it is very clearly against the rules of Great Debates.
An interesting perversion of incentive here is people who don’t pay for their own gas. When I worked for a utility company, some of the other techs would specifically seek out the highest priced gas, since they weren’t paying for it, and it gave them more points.
There is a gas station that I drive by that is consistently $0.40 more than the other stations around here, but it is next to a bunch of high end hotels, the people staying at those hotels either don’t pay for their own gas, or they don’t care what they pay.
We had a similar experience at one of my employers where field reps were given company credit cards. The credit cards gave air miles, which each employee kept for themselves. Of course, this encouraged everyone to charge as much as they were possibly allowed to charge for travel expenses, and to bend the rules wherever possible, since more charges meant more air miles.
Whatever the reason, this is, in economics terms, price discrimination.
The purpose of central planning is whatever motivates the central planners. Setting prices and price ceilings and floors are standard tools of central planners. So are specific production targets, industrial policy, and all kinds of interventions they do not fully understand because they don’t have the information needed to make reasonable decisions.
Right, I’m just pointing out that a very obvious “law”, that people will seek the lowest price of a good or service, is going to have a number of exceptions.
Eh, the alternative is a bunch of people making self centered decisions, also without the information needed.
For luxury goods like iPhones, concert tickets and diamonds, this is fine. For necessities, the hand of the free market is very poor at ensuring that everyone gets what they need.
Say you can make twice as much growing cotton on your field than you can growing wheat. Makes sense to grow cotton, even if that ends up leading to food shortages. At some point, someone not invested in pure profit motive needs to step in and do some level of intervention and market distortion to prevent the citizens from starving.
I’d say that there is just one fundamental rule of economics, and that rule is that there will always be at least someone left behind.
I’m not sure I agree. Experience would suggest the free market is actually pretty good at ensuring people get what you need - as compared to any other approach. To the extent we have hunger in the developed world now, the solution isn’t to tell the free market what food to make, it’s to give some money to the poorest among us so they can buy some food.
You are going to have to look awfully hard to find a case of a free market resulting in a food shortage. Free market economies tend to be awash in food - we enjoy a ridiculous level of availability of affordable food - and every modern famine I can think of was the result of government action (often related to war.)
Are there any countries in the developed world that don’t have significant agricultural subsidies?
I never said that the solution is to tell the free market what food to make, however, I did say that the free market, on its own, may not choose to make enough food for everyone.
Giving people money to buy food is a form of market distortion, especially when that money comes in the form of food stamps and free school lunches, both of which are an additional subsidy to agriculture.
I think you are going to have to look much harder to find a case where the food supply is left entirely up to the free market.
The US puts a lot of money into making sure that farmers are incentivized to grow food crops, rather than just cash crops. Left to its own free market devices, cash crops would make the farmers a whole lot more.
Most famines are prevented by government action along with a global supply chain. If a country experiences drought or other crop failure, that government, along with other governments, will assist that country in not having a starving population.
If it weren’t for government action, then a local drought would mean famine for the people.
And sure, the Soviet Union did some stupid shit that starved a bunch of people to death, but that’s not the only way for a government to affect its food supply. There are a number of options in between the extremes of “free market” and “telling people what to grow.” (And taking land away from farmers and giving it to people who don’t know how to farm.)
Don’t you think some central planners are convinced that planning is for the greater good? Just like some pure capitalists think pure capitalism is for the greater good. The planners ignore market dislocations, the capitalists ignore hurt to people on the bottom and the environment, but we all are good at closing our eyes to whatever disagrees with us.
Do you mean that they charged expenses which were not legitimate, or that they used their cards instead of cash? When I had a company card I was encouraged to use it for everything when I traveled for easy tracking and to allow the company to perhaps leverage a lot of sales for lower prices. That’s why you have to use the company travel agency even if you can find a cheaper fare elsewhere. You ruin their kickbacks.
It is a rule of menu generation that you put an expensive dish on the menu, so expensive that you don’t expect to sell much of it. This is because people tend to select the second most expensive dish, and feel like they are getting a bargain even if they pay more than the average menu item costs. People on first dates are not going to pick the cheapest item. Perhaps I should say men of my generation whose first dates were 50 years ago. I have no idea of what the dynamics are now.
The limits for every kind of expense were pushed. No one had the slightest motivation to save a dollar.
“Along with” is doing a lot of work there. The availability of huge amounts of food that can be verily easily transported is what prevents famines. The free market is really, really good at keeping that up. People keep wanting to eat, and are willing to pay to do so. Yes, government can step in and help pay for it if necessary, but it’s the free market that will happily sell the food.
This is why the proper route for government assistance to needy people in my country is GIVE THEM MONEY. If they have money, the market will sell them food. The government doesn’t need to buy the food. People know what food they need.
Hell, I wasn’t even thinking of that one when I wrote my post, but there’s another example. The Bengal famines of 1943 and 1974, the Ethiopian famine of the 1980s, the Biafran catastrophe, time after time we see governments starving people, often deliberately.
And the governments are doing a lot of the work there as well. At the very least in maintaining the infrastructure for global trade, and very often highly subsidizing the food purchases for their populations as well. (Or, as is often the case, the governments of more prosperous nations subsidizing those purchases.)
Once again, can you name any country in the developed world that doesn’t have agricultural subsidies and protections? You keep saying the “free market” while ignoring that it’s not really a free market. It has government distortions to it.
Once again the government giving money to people to buy food is a distortion of the market.
People talk about how the subsidies for electric cars are a distortion of the market, how student loans and student loan forgiveness are a distortion of the market, and any time the govt puts its finger into a pot or a thumb on the scale, it is a distortion from the free market.
Is somehow agricultural unique, in that it is a free market, even with government distortions, or are you using the term free market in a different manner?
You are in Canada, right? Canada subsidizes agriculture, as well as imposes some trade restrictions as a protectionist measure.
And I repeat myself, but giving people money to buy food that they otherwise would not have bought does distort the market, just as giving students loans for educations they would not have gotten distorts that market.
And yet, the government does buy food. It does so to prevent surpluses that will drive down prices, it does so to provide food to the less fortunate, and it obviously does so in order to feed its enormous military.
The idea that agriculture is somehow not influenced by government actions is an argument that I am having trouble comprehending. Is this the argument that you are trying to make?
Right, deliberately, they wanted to kill people off, so they starved them. Governments also go and shoot people that they want dead, and they do that deliberately as well.
What I would be looking for if you want to make your point would be agricultural subsidies that were well intentioned, but ended up causing famine. (And for fun, I’ll give you the failed Lamarckian based agricultural policies of the USSR for free, even though that was less of a subsidy, and more of an ideology gone horribly wrong.)
Those distortions aren’t helping feed people. I mean, I live in Canada, we have a number of such things. They exist entirely for political reasons, to help win votes in key areas, and hurt the common person. People struggling to make ends meet are paying more for food than they need to so the government can win votes from the dairy lobby and such.
No. I haven’t even hinted that.
What I am saying is that the free market doesn’t cause famines; the free market is BY A MILE the most important tool we have in preventing famine. Where the government does help prevent famine it’s working in concert with a free market as a consumer. The government trying to interfere in the free market is way likelier to make people hungry than satiated.
I see where you are coming from now, and while we may agree on some facts, I don’t think we can see eye to eye on anything else here.
Breaking this post down some.
So if what motivates the central planners is developing a stronger economy and raising the standard of living for the general population, then by your definition, the purpose of central planning is to develop a stronger economy and raise the standard of living for the general population.
But I guessing you wouldn’t agree with this. Based on things you have written, I would conclude you feel central planning is wrong and the central planners are wrong.
However, that’s a tautology. Your argument has to be more than saying central planning is wrong because it’s the product of people who are wrong and the people who do central planning are wrong because they’re doing central planning.
I agree with all this.
Is there any reason to assume that private individuals have more information than central planners? If they don’t, then private individuals will also be making the wrong decisions due to a lack of sufficient information.
If private enterprise and central planning both make bad decisions due to a lack of sufficient information, then how can we say this problem is acceptable in private enterprise but unacceptable in central planning?
I disagree. The free market can cause famine because each individual in a free market system is acting in their own best interest and each individual may find that they gain more benefits from doing something other than producing food.
This is not just hypothetical. This happened in the Virginia colony in the seventeenth century. Farmers could make huge profits by growing and selling tobacco. So everyone planted as much tobacco as they could. At harvest time, everyone had a good crop of tobacco.
But nobody had planted corn or wheat or potatoes or rice. So people had a valuable product but they didn’t have enough food to eat. Everyone had apparently assumed that other people would be producing food while they were making money.
A lot of people died and officials addressed the problem by enacting laws requiring farmers to set aside a certain proportion of their land for growing corn. And these laws were often resisted and had to be enforced by corporal punishment.
A better plan might have been to place a tax on tobacco and then use the revenues from this tax to offer a financial incentive to people growing corn. The right balance would have led to people growing both tobacco and corn without any coercion being needed.
The point however is that some form of government intervention was necessary. Individuals are going to do what is best for themselves as individuals. But there is no guarantee that the collective actions of individuals will produce what is needed for the society these individuals live in. That’s why we need a government; to see to the interests of society in general.
CIte? (Not because I don’t believe you, just because I want something more official to link to than some guy’s forum post.)
Here’s one from the National Park Service.
Also, the flip side of focusing on tobacco was the price of tobacco dropped, exacerbating issues. The authorities had to limit tobacco production.
Not exactly central planning but certainly heavy government intervention in the market to avoid multiple sorts of disastrous results.