Maybe the primary reason why the USSR wasn’t a roaring economic success was that central planning is inferior to free markets, but I don’t think we have enough evidence to make that claim with a lot of confidence.
So intended to address question of central planning --> bad economy? rather than bad economy --> central planning bad? Maskin’s lecture speaks to that point. But unimportant.
Maskin, like most economists, confuses efficiency with efficacy. I cited him just to indicate that academic economists are very confident that markets > central planning. (Hurwicz shared Nobel with Maskin in 2007.)
Academic economists’ preference for markets more to do with observation than math. Adam Smith didn’t know what linear programming is. Wasn’t until the advent of mathematical tools that central planning could even be conceived of as feasible. The spread of markets is associated with rising prosperity, peacefulness, and civilized behavior. Economists had been observing and theorizing about this fact long before they had the math they do today. Qualitative reasoning combined with observation are basis for most of support for markets, not formalized quantitative models.
Lumifer’s approach not my own, but Jiro’s suggestion to interfere with prices based on their own judgment violates long and uncontroversial position in economics: Thou Shalt Not Substitute Thine Own Judgment For Market Prices. Violating that rule writ large is not a bad summary of central planning. Lumifer’s reaction understandable, albeit perhaps not commendable.
Why markets work and central planning doesn’t is very complicated, difficult subject; in some ways economists’ understanding of this question is quite primitive. Work on this subject myself (right now in fact; this is pleasant distraction). Am working on sequence of articles that, among other things, should indicate why economists have this consensus in favor of markets.
The specific question on which I was disagreeing with Lumifer was: does the late-20th-century failure of communist countries make it obvious that unfettered free markets are always best and that no interference with pricing can be justified? I say it doesn’t seem to.
academic economists are very confident that markets > central planning
Sure. I’m pretty confident of that too. But I don’t think that has much to do with the disagreements between Lumifer, Jiro, and me in this thread.
more to do with observation than math
I took a look at, e.g., Hurwicz (1960) as cited by Maskin: math, theory, math. I’m sure it’s true that the mathematics is motivated by observation—but observation that serves as motivation, rather than as the actual content of the scholarly articles, doesn’t get peer-reviewed :-).
Thou Shalt Not Substitute Thine Own Judgment For Market Prices
Understood. But, in fact, it’s pretty common for governments to mess with market prices via (e.g.) taxation, minimum wages, rent restrictions, etc., and to mess with other aspects of markets via (e.g.) regulation on what’s allowed to be bought and sold at all—and the thing we have empirical evidence for the effectiveness of is markets with all this interference, not the idealized perfectly free markets preferred by academic economists. (Or am I confused about this?) In any case, “the dose makes the poison” and the fact that some variety of interference produces bad results when engaged in on a huge scale doesn’t tell us much about what it does when applied on a small scale in unusual circumstances.
in some ways economists’ understanding of this question is quite primitive
Which is absolutely fair enough—but seems to me to indicate that Lumifer’s dismissiveness is, well, let’s say “perhaps not commendable”.
(PS. Notice you omit many words. Looking at other comments seem not always do so. Related somehow to something I’ve said, e.g. not worth taking trouble to write sentences when addressing foolish person? Sorry if so.)
See slight edits to beginning of previous comment.
Notice you omit many words.
Am lazy, arbitrary choice. Helps to knock out this stuff quickly (fairly typical conversation with the intelligent-but-uninitiated).
Can attribute growing prosperity, stronger economy to markets despite interference rather than markets and interference on the whole because have some theoretical understanding of how growth works. Smith’s Wealth of Nations, founding text of economics, is book all about why some nations rich and other nations poor. Like how physicists could know what was their theories working and what was due to friction and air resistance long before possibility of designed controlled settings to prove beyond any doubt.
Specifically, what Lumifer quoted end of:
So intended to address question of central planning --> bad economy? rather than bad economy --> central planning bad? Maskin’s lecture speaks to that point. But unimportant.
Maskin, like most economists, confuses efficiency with efficacy. I cited him just to indicate that academic economists are very confident that markets > central planning. (Hurwicz shared Nobel with Maskin in 2007.)
Academic economists’ preference for markets more to do with observation than math. Adam Smith didn’t know what linear programming is. Wasn’t until the advent of mathematical tools that central planning could even be conceived of as feasible. The spread of markets is associated with rising prosperity, peacefulness, and civilized behavior. Economists had been observing and theorizing about this fact long before they had the math they do today. Qualitative reasoning combined with observation are basis for most of support for markets, not formalized quantitative models.
Lumifer’s approach not my own, but Jiro’s suggestion to interfere with prices based on their own judgment violates long and uncontroversial position in economics: Thou Shalt Not Substitute Thine Own Judgment For Market Prices. Violating that rule writ large is not a bad summary of central planning. Lumifer’s reaction understandable, albeit perhaps not commendable.
Why markets work and central planning doesn’t is very complicated, difficult subject; in some ways economists’ understanding of this question is quite primitive. Work on this subject myself (right now in fact; this is pleasant distraction). Am working on sequence of articles that, among other things, should indicate why economists have this consensus in favor of markets.
The specific question on which I was disagreeing with Lumifer was: does the late-20th-century failure of communist countries make it obvious that unfettered free markets are always best and that no interference with pricing can be justified? I say it doesn’t seem to.
Sure. I’m pretty confident of that too. But I don’t think that has much to do with the disagreements between Lumifer, Jiro, and me in this thread.
I took a look at, e.g., Hurwicz (1960) as cited by Maskin: math, theory, math. I’m sure it’s true that the mathematics is motivated by observation—but observation that serves as motivation, rather than as the actual content of the scholarly articles, doesn’t get peer-reviewed :-).
Understood. But, in fact, it’s pretty common for governments to mess with market prices via (e.g.) taxation, minimum wages, rent restrictions, etc., and to mess with other aspects of markets via (e.g.) regulation on what’s allowed to be bought and sold at all—and the thing we have empirical evidence for the effectiveness of is markets with all this interference, not the idealized perfectly free markets preferred by academic economists. (Or am I confused about this?) In any case, “the dose makes the poison” and the fact that some variety of interference produces bad results when engaged in on a huge scale doesn’t tell us much about what it does when applied on a small scale in unusual circumstances.
Which is absolutely fair enough—but seems to me to indicate that Lumifer’s dismissiveness is, well, let’s say “perhaps not commendable”.
(PS. Notice you omit many words. Looking at other comments seem not always do so. Related somehow to something I’ve said, e.g. not worth taking trouble to write sentences when addressing foolish person? Sorry if so.)
See slight edits to beginning of previous comment.
Am lazy, arbitrary choice. Helps to knock out this stuff quickly (fairly typical conversation with the intelligent-but-uninitiated).
Can attribute growing prosperity, stronger economy to markets despite interference rather than markets and interference on the whole because have some theoretical understanding of how growth works. Smith’s Wealth of Nations, founding text of economics, is book all about why some nations rich and other nations poor. Like how physicists could know what was their theories working and what was due to friction and air resistance long before possibility of designed controlled settings to prove beyond any doubt.