Prehistoric Internets
The Guardian has published a fascinating article about Cybersyn, the "socialist Internet" of Salvador Allende's Chile:
What this collaboration produced was startling: a new communications system reaching the whole spindly length of Chile, from the deserts of the north to the icy grasslands of the south, carrying daily information about the output of individual factories, about the flow of important raw materials, about rates of absenteeism and other economic problems.
Until now, obtaining and processing such valuable information -- even in richer, more stable countries -- had taken governments at least six months. But Project Cybersyn found ways round the technical obstacles. In a forgotten warehouse, 500 telex machines were discovered which had been bought by the previous Chilean government but left unused because nobody knew what to do with them. These were distributed to factories, and linked to two control rooms in Santiago. There a small staff gathered the economic statistics as they arrived, officially at five o'clock every afternoon, and boiled them down using a single precious computer into a briefing that was dropped off daily at La Moneda, the presidential palace.
I was aware that there's a subtribe of socialists who believe the calculation problem can be overcome with sufficiently powerful computers. I was not aware, until today, that anyone had tried to put that particular dream into place so early.
[Via Slashdot.]
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The Soviets sent a man into space before any capitalist.
What does this mean?
Jack shit.
That might be because there is no economic benefit to sending a man into space.
In fact, it has never been done by capitalists... only by governments. No private agency has any interest in sending humans outside our atmosphere.
"In fact, it has never been done by capitalists... only by governments. No private agency has any interest in sending humans outside our atmosphere."
Not so.
http://www.spaceandtech.com/digest/sd2001-20/sd2001-20-005.shtml
http://www.amazon.com/exec/obidos/ASIN/0966674839/reasonmagazinea-20/
And of course 🙂
http://www.amazon.com/exec/obidos/ASIN/0671578634/reasonmagazinea-20/
Who knows? If one of Chile's neighbors to the north had shown some respect for that country's elected, democratic government instead of encouraging a coup and assasinating its president at the request of the local Pepsi bottler, it might have worked fairly well as far as heavily nationalized economies go. In the article, some former Allende-era plant managers and officials credit the system with keeping the country running as well as it did amid the right wing's work stoppages and lockouts.
Just-in-time inventory and production principles have worked well in the private sector during the last 10-15 years. It would have been interesting to see similar practices applied to a command economy for an extended period of time. It's not as though Chile's subsequent "mixed economy" of private-sector cronyism and state torture was much fun.
theoretically, it could be overcome and work quite well! it's possible to make a command economy work just as efficiently/optimally as a market economy through the use of linear programming and "shadow prices" 😀
a theory that earned a nobel prize in economics! two even 😀
indeed, linear programming is widely used in supply chain management used by private corporations today. modern day logistics afterall is nothing more than central planning where the cost of performing a transaction internally is less onerous than the cost of performing it externally in the marketplace.
an observation of ronald coase! (who also won a nobel prize 🙂
But of course if something is centrally controlled, there is obviously a central controller - and what shall protect against the controller adjusting it's methods towards, shall we say, less than desirable ends?
But I'm afraid you state the shadow prices and linear programming a bit wrongly, it would seem, with "efficiently/optimally" - all they can do is maximize production given certain demands and supplies, according to certain rules and conditions. But they cannot seem to calculate and decide how risks should be handled, nor am I aware of how they could physically possibly make such considerations as varying degrees of utility and desires and trade-offs inherant in the world.
But if you just meant "efficient" in the strict, proper sense of the term...well, then you might be right, given sufficient information gathering and computing ability 🙂
It's just well that we all take to considering just exactly what "efficiency" is - what it precisely means.
Other than that, neet link. Was an interesting read 🙂
penes areolae,
Mises argued that the "rational calculation" problem applied to corporations as well as governments. Both planned economies and internal planning of corporations are capable of rational calculation only to the extent that they can use market prices outside the planning nexus as a reference point for internal planning.
In the case of the Soviet economy, it was kept in at least tenuous relation to rationality through the availability of market price data in other countries, and historical records of pre-revolutionary prices. But since prices change from area to area and over time in response to unique conditions of the market, reliance on data at such a remove severely distorts the calculation process. And the larger the portion of the world taken in by planned economies and the longer the period of time, the less feasible such indirect rational calculation becomes.
Likewise, a completely vertically integrated monopoly would be incapable of rational calculation, since there would be no independent market price for its factors of production.
I don't know, when I was in the Navy back in the '70s they had a worldwide telex network set up with all kinds of info being shared. Does that count?
The problem with any system that uses linear programming is that it requires that the interactions involved are all mathematically modelable. This may work for producing commodities like steel, cement, and corn, but it can't handle abstract matters of preference, such as appearance, trendiness, and the desire to express oneself through one's possessions. Such a system couldn't produce automobiles effectively, let alone books or music. The advantage to a market economy is that it provides an effective way of quantifying mass amounts of preferences without having any understanding of the mechanism that generates them.
Also, as S. M. Koppelman pointed out, corporations have access to as much computing power as they please. Yet, businesses make decisions that are frequently disastrous for their objectives. In the market economy, business failures are a natural part of the efficient allocation of resources, since the resources of the failed businesses are bought up by more successful ones; in a command economy they are disasters, since there is only one producer out there. Also, businesses optimize profits, a nice quantifiable variable, whereas the government would have to optimize utility, something that is not even definable in any abstract way, let alone quantifiable.
businesses optimize profits, a nice quantifiable variable, whereas the government would have to optimize utility, something that is not even definable in any abstract way, let alone quantifiable.
Well, there you have it: the mis-apprehension of profits (exchange value) with utility (use value or more precisely social value--as identified by Joseph Schumpeter in 1908, "For the system of economic science the main importance of this theory lies in the fact that, if distribution can be described by means of the social marginal utilities of the factors of production, it is not necessary, for that purpose, to enter into a theory of prices. The theory of distribution follows, in this case, directly from the law of social value.") leading to the misallocation n?e inefficiency-cum-imperfectly informed that arises in laissez-faire markets necessitating gov't oversight and regulation however imperfect and subject to the whims of democractic process and
Hi -
Gee, are there no economists here?
I'm one. As part of a project for a customer dealing with the Comecon markets, I analyzed the NOeSPL as it functioned in East Germany. NOeSPL is the acronym in German (Neue Oekonomische System fuer Plannung und Leistung) for their feedback loop "System of Plannung and Performance for the Economy".
And it didn't work. Why? Because the incentives built into the system - and they *seemed* to make sense - never took into account human nature.
Simply put, the system required managers to report their capacity and provided them with capital to increase their capacity when productivity couldn't be increased any further by simply working more. The incentive was monetary.
The managers very, very quickly learned that they could exploit the system. If they had a basis of production of 100 when the system was implemented, they reported 80 and got capital to increase that to 100. Now, of course they had capacity of 120 and only had to produce 100 to meet their production goals: but they also knew that if they produced 110, they would get a bonus.
This is the way the system worked for about 5 years. Then the managers realized that their bonus was monetary and hence worth little, and that their workers would be much happier producing 101 instead of 110, let alone the 120 that could be produced. Then the clever ones realized that if they produced 120 and only reported 105, they could sell the 15 on the black market and pocket real money.
So they did this. The machiney in the mean time was being heavily used and needed to be replaced, but couldn't due to the fact that officially they weren't be run at full capacity. Hence no money to keep up plant and equipment and everything starts to get pretty decrepit. Managers would report that the machines weren't up to snuff and they needed new machinery, but since they weren't producing enough to justify new machinery, no monies were made available, since capital just doesn't grow on trees, does it comrade (actual quote!).
In other words, you can dream up any sort of complex and sophisticated feedback system for determing allocation of scarce resources via needs and prices, and your best people will in a rather short time frame will find the best way to exploit the system in order to maximize their profitability, which in the case of East Germans was to fund a black market and/or to increase their leisure time.
The Chilean system was also doomed to failure: the collapse was preceded by the coup against Allende.
John F. Opie
No economic benefits to going into space? Since when?