Looking forward to your discussion of Road To Serfdom! I don't see many explicit calls for central planning these days, but I do see demands for industrial policy or small d democratic control of all sorts of aspects of our environment these days. How are these modern pursuits different from ye olde central planning? What do you see as the appropriate realms for democratic control vs individual decision making?
The Road to Serfdom is interesting because it was written in a point in time in which a lot of people (including liberals at the time, not just socialists or communists) really did think government central planning was the future. Obviously that turned out not to be the case, which does make it kind of funny in retrospect how terrified a lot of people were at the time about it.
On the flip side...the central planning advocates did actually prove to be right in a lot of cases within the structure of corporate america. Wal-Mart for example is an incredible central planning success story, they use complex algorithms to set prices, they have highly centralized logistical systems, etc. (This is what makes the panic about algorithmic pricing so funny, it's been around since the invention of the computer, what most people actually dislike is algorithmic spot pricing)
One thing I would really like to see the arguments writers try and grapple with (because I do find it sincerely interesting) is Hayek had a lot of correct points about the data compression inherent in how prices work and how governments trying to set prices would therefore not work at the time. Now? Every company uses algorithms to determine their prices the problem of "how do you collect enough data to set prices" has for many things, actually been solved.
I think with big data, you could probably imagine a central planner that could get fairly close to setting all the prices at their market clearing level. But then you've just reproduced the free market, so why trample all over individual agency for that? The hope of central planning was that a central planner could set prices that diverged from the market clearing level in a way that let them achieve desirable ends with minimal trade-offs. I'm not sure there is any reason to believe that is more achievable now than it was in Hayek's era.
There's a key difference between corporate and government of course. The need to make a profit rewards and punishes good or bad planning as well as good or bad prices.
If you raise your prices too high then consumers go elsewhere (in a competitive market). But when government interferes or worse controls things then those signals are muted which can result in large wastes of capital.
On the other hand, China clearly demonstrates that a country with deep pockets a clear mission can create artificial monopolies at a country level. Rare earths are a great example of this.
So in that type of situation were you are no longer dealing with a competitive and fair market, some type of government intervention will be necessary
In modern times many companies actually don't need to make a profit, that is, you have to be a very mature company to be actually bringing in more revenue than expenses, and often times investors see this as a bad sign rather than a good one. I'm not making any judgement of that, but it's worth pointing out we do not live in an age where companies value profit over growth.
The bet is that the company will eventually be massively profitable, for governments the equivalent of this is programs that are on net in long term growth revenue positive.
wrt to reward incentive, that's why having a democracy is important, so you can reward good behavior and punish bad behavior. central planning without democracy is a very bad idea.
Short term, there are some companies that can get away with focusing on growth over profit.
But as you note in the long term, profitability is expected, and if investors start to think that that's not gonna happen, they will stop funding your business
It was a poor group of people to discuss the first topic cuz you all agreed on pretty much everything of consequence.
The second little mini-debate on privacy vs efficiency/safety in the age of AI was actually interesting cuz Matti argued for a Chinese surveillance state. That'd have been a fun pod!
Looking forward to your discussion of Road To Serfdom! I don't see many explicit calls for central planning these days, but I do see demands for industrial policy or small d democratic control of all sorts of aspects of our environment these days. How are these modern pursuits different from ye olde central planning? What do you see as the appropriate realms for democratic control vs individual decision making?
The Road to Serfdom is interesting because it was written in a point in time in which a lot of people (including liberals at the time, not just socialists or communists) really did think government central planning was the future. Obviously that turned out not to be the case, which does make it kind of funny in retrospect how terrified a lot of people were at the time about it.
On the flip side...the central planning advocates did actually prove to be right in a lot of cases within the structure of corporate america. Wal-Mart for example is an incredible central planning success story, they use complex algorithms to set prices, they have highly centralized logistical systems, etc. (This is what makes the panic about algorithmic pricing so funny, it's been around since the invention of the computer, what most people actually dislike is algorithmic spot pricing)
One thing I would really like to see the arguments writers try and grapple with (because I do find it sincerely interesting) is Hayek had a lot of correct points about the data compression inherent in how prices work and how governments trying to set prices would therefore not work at the time. Now? Every company uses algorithms to determine their prices the problem of "how do you collect enough data to set prices" has for many things, actually been solved.
I think with big data, you could probably imagine a central planner that could get fairly close to setting all the prices at their market clearing level. But then you've just reproduced the free market, so why trample all over individual agency for that? The hope of central planning was that a central planner could set prices that diverged from the market clearing level in a way that let them achieve desirable ends with minimal trade-offs. I'm not sure there is any reason to believe that is more achievable now than it was in Hayek's era.
There's a key difference between corporate and government of course. The need to make a profit rewards and punishes good or bad planning as well as good or bad prices.
If you raise your prices too high then consumers go elsewhere (in a competitive market). But when government interferes or worse controls things then those signals are muted which can result in large wastes of capital.
On the other hand, China clearly demonstrates that a country with deep pockets a clear mission can create artificial monopolies at a country level. Rare earths are a great example of this.
So in that type of situation were you are no longer dealing with a competitive and fair market, some type of government intervention will be necessary
In modern times many companies actually don't need to make a profit, that is, you have to be a very mature company to be actually bringing in more revenue than expenses, and often times investors see this as a bad sign rather than a good one. I'm not making any judgement of that, but it's worth pointing out we do not live in an age where companies value profit over growth.
The bet is that the company will eventually be massively profitable, for governments the equivalent of this is programs that are on net in long term growth revenue positive.
wrt to reward incentive, that's why having a democracy is important, so you can reward good behavior and punish bad behavior. central planning without democracy is a very bad idea.
Short term, there are some companies that can get away with focusing on growth over profit.
But as you note in the long term, profitability is expected, and if investors start to think that that's not gonna happen, they will stop funding your business
And primaries are not real life.
Best suoergroup since The Power Station
It was a poor group of people to discuss the first topic cuz you all agreed on pretty much everything of consequence.
The second little mini-debate on privacy vs efficiency/safety in the age of AI was actually interesting cuz Matti argued for a Chinese surveillance state. That'd have been a fun pod!