OldNHMan decided to just about write a standalone post in the comments under my post on how central planning of an economy is FAR worse than millions of people making decentralized decisions on their own.
Ah, yes. The return of the “Five Year Plans” used so effectively in the long defunct Soviet Union. They were so good that they hamstrung the Soviet economy for almost 75 years and finally helped lead to the collapse of the Soviet Union.
As anyone involved with business knows – from schooling, personal experience, or both – that by the time you have all of that information in hand and can start planning, the conditions have changed and any kind of detailed planning will be woefully out of date and inadequate. The “up-to-date” data you have is already out-of-date and reflects what was, not what is. Conditions will have changed by the time the planners have all the data they say they need. How is it the financial market puts it? “Past performance is no guarantee of future outcomes,” or something like that.
A country can make broad plans and put ‘triggers’ into place to shift a plan one direction or another, but even then the planning can be inadequate if an unforeseen event takes place, like 9/11 or Covid-19 for instance, and nothing in that master plan covers that event. Your plan is now useless. The bigger the plan, the more unwieldy it becomes.
Businesses, particularly small businesses, can make plans for their own purposes, plans that are on a micro-scale. They can change them on an as-needed basis because they are on a micro-scale. There is none of the governmental inertia interfering with changing a plan on a day-by-day, or even hour-by-hour basis.
Central planning doesn’t work. It never has. I doubt it ever will, even with help from AI’s.
One might make the argument that it does work, or at least has worked, with the one(s) making the claim pointing to WWII and showing how it helped turn the US into the so-called “Arsenal of Freedom”. There are two things that blow that example out of the water.
First, there was only a broad, general plan that ran along the lines of “We need ‘X’ number of planes, ‘Y’ number of ships, ‘Z’ number of trucks/guns/etc.” The plan did not include who was going to do what, how they were going to do it, and so on. The government went to the manufacturers and asked how they would do the things needed to get the planes, ships, trucks, guns, ammo, bombs, etc. The manufacturers would in turn go to their suppliers and ask them the appropriate questions, and then those suppliers would ask their suppliers. The questions ran down to the bottom of supply chain and the answers would flow back to the top. Once the manufacturers said “Yup we can do it and this is how we’ll do it”, the government said “Go!” There was no central planning at the top calling out every detail.
Second, if there were bottlenecks causing problems, the government would step in and solve the bottlenecks, be it through legislation, direct assistance, or through non-governmental third parties.
One has to remember that in the case of WWII, there was one specific goal in mind, everyone was on board with that goal, and everyone knew what the outcome would be if they failed.
Outside of conditions like that, central planning doesn’t work because the ‘goal’ is always open ended, the so-called goal-posts are always moving, and the planners can’t possibly know everything they need to know in order to make informed decisions.
