Minnesota’s Economic News — W/E 9/22/23
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With socialism apparently enjoying a resurgence of popularity, many discredited old economic policies are getting dusted off. One of these is economic planning. Policies such as the proposed federal jobs guarantee and green new deal all propose that the federal government should vastly expand its control over the lives of American citizens according to some government plan. While these are ostensibly economic measures, as Ronald Reagan observed, “you can’t control the economy without controlling people”. That is why the Soviet Union with its planned economy ended up as a vast, spy ridden prison camp.
A common argument made in favor of such planning is that competition is wasteful. Why do we need so many different brands of deodorant, as Sen. Bernie Sanders once wondered, surely we could get by with some smaller number? The resources being used to produce these ‘excess’ varieties could surely be put to some more socially beneficial use?
1 – What is the optimal number of deodorants?
2 – Who decides?
3 – What are the socially beneficial uses the resources could reallocated to?
The truth is that question 1 has no objectively right or wrong answer. It is a subjective question the answer to which will vary from person to person. In a country of 326 million people, that gives you a lot of answers.
This leads us to question 2, who will decide between these myriad subjective judgments? All the economic plan will amount to is one group of people imposing their preferences on the rest of us.
The same problem arises with the reallocation of these resources, question 3. Are these government planners likely to allocate resources to some tech geek sat in garage with a new idea? Or are they more likely to allocate it to some politically connected insider? In a nutshell, this is why planned economies can be reasonable imitators for a while, but make lousy innovators.
But if you don’t believe in government planning, what do you believe in? The economist Milton Friedman answered this question in a column for Newsweek in 1975
The real issue is not planning vs. no planning, but what kind of planning, by whom, for what purpose.
The central planners want planning by them for us. They want the government—by which they really mean themselves—to decide “social priorities” (i.e , tell us what is good for us); “rationalize production” (i.e , tell us where and how we should work); assure “equitable distribution” (i.e , take from some of us to give to others of us). Of course, all this can be voluntary—if we are willing to turn our lives over to them. Otherwise, “antisocial behavior” must be restrained—who can gainsay that? The iron fist must be there—just in case.
Such planning, from the top down, is inefficient because it makes it impossible to use the detailed knowledge shared among millions of individuals. It undermines freedom because it requires people to obey orders rather than pursue their own interests.
I am for planning, too, but planning by each of us separately in light of our individual, though shared, values, coordinated by voluntary exchange in free markets. Such planning, from the bottom up, enlists the interests of each in promoting the well-being of all. Government has its role—to provide a stable legal and monetary framework, enforce contracts and adjudicate disputes and protect us from coercion by our fellow citizens. If we could limit government to these, its proper, functions, perhaps it could perform them successfully.
This is a plan too—a far better plan than establishing yet another Federal agency to control our daily lives.
John Phelan is an economist at the Center of the American Experiment.
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