Economic "planning"

Economic "planning" is one of many politically misleading expressions. Every economic activities under every conceivable form of society has been planned. The difference is whether the plans are made by individuals or governments. What's politically defined as economic "planning" is the forcible superseding of other people's plans by government.


In an economy directed by national governmental authorities, the directives that are issued must articulate the characteristics of the products to be produced. Firms would then be incentivized to do that and disregard the people's preferences. The inherent limitation of articulation is that it only articulates certain sides. For example, when American politicians demand for more high school graduates, it led to more of that product being produced, by whatever lowering of standards were necessary.

Where prices are set by government fiat, they convey no information as to ever-changing economic trade-offs which reflect changing technology, tastes, and diminishing returns in both production and consumption. Price changes are virtually instantaneous, while statistics available to planners necessarily lag behind.

Another way of looking at the vicissitudes of articulation is that one cannot articulate what does not exist. All values are subjective and ever changing. No one can make decision for others.

But the political appeal of articulation is as widespread as the belief that order requires design, that the alternative to chaos is explicit intention, and that there are not merely incremental trade-offs but objectively specifiable, quantifiable and categorical "needs".


The limitation and distortions of articulation revolve around the simple fact that third-party central planners cannot know what users want, whether those users be consumers or other producers acquiring raw material, component parts or production-line machinery. The real problem is not data, however; instead, the real problem is that the knowledge needed is a knowledge of subjective patterns of trade-off that are nowhere articulated, not even to the individual himself.

Market transaction doesn't need such knowledge in advance.In a market economy, one individual need be concerned with only with a minute fraction of the trade-offs in the economy; under central planning, somebody has to try to reconcile them all simultaneously.