National Economic Planning
by Don Lavoie

A terrific book. A masterpiece. Except for the subtitle (What Is Left?), which is a play on words that makes the book sound trivial. The two main problems with central economic planning are: (1) the knowledge problem and (2) the totalitarian problem.
"A modern economy can generate and disperse the knowledge its operation requires only by permitting a competitive process to operate in an unplanned manner. In short, our economic malaise cannot be blamed on the fact that our economy is out of control because no modern economy could possibly be otherwise." pages 8-9

"The knowledge relevant for economic decision making exists in a dispersed form that cannot be fully extracted by any single agent in society. But such extraction is precisely what would be required if this knowledge were to be made usable for a single planning agency." page 56

"That a child, who may not learn the rules of grammar for a decade, if ever, can nevertheless construct grammatically correct sentences is evidence of the kind of tacit knowledge that underlies all articulated knowledge. It is only because our minds are capable of operating according to effective rules of which we are unaware that we are able to learn to speak a language. The act of forming an explicit statement in a language requires our use of an extremely complicated system of rules, of conventional interpretations of words, of syntax, and of idioms, which could not be fully understood by anyone who had not already thoroughly mastered that language." page 61

"A substantial degree of opposition to the use of force in human relationships is not merely one particular moral position among others, it is a prerequisite for the growth of knowledge." page 64

"The human analogue of the insects' pheromone is the expenditure of money in market exchanges." page 70

"Just as an insect deprived of its ability to sense pheromones would be helpless to engage in complex social behavior, so a human, deprived of the opportunity to observe, respond to, and try to anticipate price changes, would be completely in the dark about how to make rational production plans effectively." page 72

"Each price of purchased, rented, and hired factors reflects a complex tension among diverse plans that have tried to pull the relevant factor into alternative uses." page 71

"As Hayek (1982) puts it, the price system represents a stage in sociological evolution comparable to the emergence in biological evolution of eyesight. It permits decision makers to take account of conditions beyond their immediate locality, indeed beyond what they can physically see, just as sight enables animals to take account of conditions they could not touch." page 72

"Articulation is an indispensable tool we use for the advancement of our mostly tacit understanding of the world." page 77

"Thus both the property rights that permit separate owners to use their resources as they see fit and the intellectual freedom that permits scientists to adhere to theories of their choice play the same roles. To the extent that either form of personal commitment is undermined--when scientific reputation or economic wealth depends on loyalty to a party line rather than to a personal devotion to truth or a pursuit of anticipated profit opportunities--each of these great achievements of civilization, science and our advanced economy, is to that degree sabotaged." page 84

"Rivalrous competition means that one agent's plan can succeed only at the expense of some other, incompatible plan. In such circumstances (which always exist in the real, disequilibrium world) adding together the values of the capital used by rivalrous firms has about as much meaning as adding the value of a bridge to the value of the bomb being built to blow it up." page 104

"It makes no more sense to plan the total quantity of sheet metal an economy should produce than it would for a chess team captain to plan to have his team move twenty bishops by an average of three squares. The reason both of these plans are nonsensical is that they treat aggregate summaries of detailed decisions apart from the context of the decisions themselves." page 115

"Actually it appears that one of the things the corporations do that most irritates advocates of economic democracy is to cater to the demands of consumers. Despite all the rhetoric against the corporate elite and in favor of democratized, decentralized control over our own lives, and so on, most of these writers reveal a deeply ingrained bias against the actual tastes of the consuming public." page 134

"These writers seem to find it demeaning to imagine that most Americans really want to do things like pursue vicarious sports thrills and eat fast food, and so they focus their outrage on advertising. But is it not far more demeaning to view Americans as such dupes as to consume whatever the corporate elite's advertisements tell them to consume?" page 165

"... when several monopolized institutions vie with one another for political power, the success of one rival will tend to reflect directly only that institution's perceptiveness of the workings of the political structure, not its understanding of the workings of productive relations in the economy itself. Struggle for the command over political institutions, which the modern public choice economists call rent seeking, will tend to supersede struggle for the command of direct sources of money profits from mutual gains of trade." pages 135-136

"It is indicative of a peculiar view of society when the (voluntary) actions of millions of market participants are dismissed as inaction merely because active (coercive) involvement by the government is minimized." page 187

He shows that Japan's economic success was accomplished in spite of Japan's Ministry of International Trade and Industry. pages 194-196.
"...since the case for any particular use of planning power lies beyond the capacity of human reason to establish, that power will instead be wielded in response to political clout rather than careful debate." page 201

Year Read: 1988


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