Central Planning and “Team Human.” Are we able to steer the ship, while letting markets do their creative thing?

Before getting down to the matter of central planning vs. market forces -- an argument that's raged since ancient Egypt -- I need to point out something regarding our current Constitutional Crisis over Congressional powers of subpoena and oversight. Never mind that the GOP used those powers endlessly in 25 years of Clinton hearings (that examined every pore, file and tax return, finding literally nothing). Now that scrutiny might shine on Republicans, Chief Justice John Roberts & co. must prevent a tsunami of light from eviscerating the oligarchy.**

In fact, it's arguable that this is none of the Court's business!

Consider how John Roberts just established precedent that legislatures have sovereignty rights that Courts cannot interfere with. (In this case, a sovereign right to deny voters any rights at all.) Yes, Roberts made that ruling as a last-ditch effort to preserve Republican gerrymander cheating...

... but amazingly, this bit of utter sophistry - The Roberts Doctrine — is one that House leaders could now exploit. Indeed, there is a way -- I believe -- to pull a judo move on the administration's stonewall tactic and get those subpoenas enforced.

The chief element of my proposal would be surprise... it might only be done once... and hence I've restrained myself from describing it in detail anywhere, before floating it past a member or senior staffer.

But one Democratic candidate has noticed what I am noticing. In a field of very bright folks, Julián Castro has been the one smart enough to look to the Fourth Branch of the U.S. government. I'd be happy to explain things to some smart staffer. Though alas, everyone seems so sure they have a clear view of things. What does anyone need outside perspective for?

== The recurring power fantasy ==

Central planning vs. Markets? 
You - yes you - are so sure you know all about this and have a firm 'side.' 
Can you pause to broaden it, a bit? ...

Central control over an economy is the great dream of all oligarchies. Even 'good' lords aim to justify their continued reign by the simple recourse of delivering good statecraft. Early Bronze Age societies succeeded at managing primary economies (hydraulic empires) with the super technologies of their day - irrigation and roads, boats and basic literacy by a few hundred priests and scribes.  Around 1200 BCE they hit a wall of competence and it all crashed down.

The classical powers that followed were more resilient and advanced. The Persian empire and Roman Pax had advanced primary economies, but finally hit their own wall, partly through incapabilityto adapt to environmental effects they were wreaking.

The third wave built a secondary economy of infrastructure and iron and coal, which Marx analyzed -- at first with real cogency, until he began believing his flatterers. Alas for his predictive reputation - the worker's revolution was supposed to happen in advanced economies like Britain or Germany, not the most primitive -- Russia and China. 

Lenin made excuses and declared that a socialist state can dispense with Marx's final stage capitalism, after all! It can plan a major secondary industrial economy as well as Adam Smith's competitive-blind capitalism. And for a while it seemed true! Soviet planners commanded "get a hundred train cars of cement to this dam construction site or you'll be shot." And to visiting western observers, it seemed effective! Dams sure got built.

"I have seen the future and it works," commented one visiting American.

(Elsewhere I show, in some detail, how probably the closest acolyte to Karl Marx, using his catechisms to predict an opposite future, was Ayn Rand.)

== Economies at the third level ==

Alas for the communist experiment, we were transitioning to a tertiary economy driven by consumers. While dams and highways are one thing, the Soviets hit their "wall of competence" when it came to centrally designing a refrigerator anyone would want.

The Japanese took these lessons to heart, with the next planned economy, incorporating what seemed an impossibly competent combination of overall planning with fluidity of market allocation among obedient but competitive companies, all propped-up by American indulgence toward predatory mercantilism.  Led by MITI, Japan blew past the Soviet wall... only to hit its own wall, in the 1990s.

Now it is China, led by brilliant former engineers, who are taking all the lessons from the USSR and then Japan, modifying them with vastly improved planning models, again relying upon the multi-trillion dollar subsidy of predatory mercantilism. The whole world benefits (except for the pollution and oppression). 

But again, we are endangered by the smugness of those who proclaim "this time there's no wall!"

== No wall? Is central planning becoming plausible? ==

History shows several things. First that every pyramid-shaped human society (that’s 99% of them) was ruled by oligarchies that were at-best moderately delusional and usually outright hallucinatory, confident that they knew exactly how to Guide the Allocation of Resources (See where I define and explain GAR.)

Second, as we’ve seen, these GAR fetishists always hit a wall of incompetence… though we have to admit, modern tools have let that wall shift substantially.

Third, introduced by Adam Smith, the alternative notion was to let the dispersed wisdom of vast numbers of private players coalesce – both cooperatively and competitively – through our arenas called Markets, Democracy, Science, Justice and Sports, where no one can suppress criticism, the only known antidote to error. 

By flattening all power structures and ensuring freedom of knowledge and speech, these arenas proved to be magnificent at piercing delusions… bad products, bad policies, bad theories, bad behaviors and bad ideas. The result? More success than all of the rest of human existence for half a million years.

But that very success generated another bad idea! While flattened power and distributed agency helped these arenas to achieve fantastic success, oversimplifiers turned Smith’s rejection of GAR into a different and just-as-stupid cult! FIBM or Faith in Blind Markets became an incantation, citing Adam Smith for something he never asserted and in fact actively loathed: the idea that society should assert no goals, have no hand on the tiller, insert no values into the mix of incentives that millions consider, in making market decisions.

(In case you missed it or skimmed, that just now was a key paragraph and you ought to at least understand it, even if you disagree.)

In other words, FIBM fanatics claim we should charge into the future lobotomized and blind, considering only what's right in front of us, pondering no long range goals other than the next quarterly profit statement. Indeed, under the Friedmanites, industrial ROI (return on investment) planning horizons shrank from ten years, to five, all the way down to 90 or even 60 days.

Of course the net effect is ironic. It has been to shove all decision making power into the ample laps of a narrow oligarchy, a caste of 5000 golf buddy CEOs and Wall Street arbitrageurs, along with foreign and domestic mafias, all of whom chant slogans of FIBM, but in fact aggressively behave like all past lordly classes… grabbing the power to do GAR.

Reiterating, they do not argue against command-allocation of resources and endeavor. They just want that the power of command allocation be theirs. The "C-Word" -- Competition -- falls from their lips, even as they strive to crush it.

In fact, the true friends of flat-fair-creative-productive markets have been the moderate or “rooseveltean” liberals who knew that Marx was right about a few things, like the tendency of corporate lords to consolidate into monopolies, duopolies or other market wrecking patterns of theft. Or that when parasites pull money out of the economy, it does not get invested in risky R&D or capital production equipment, but squirreled into rentier-passive asset bubbles that slow money velocity down to near zero. Exactly the achievement of every “Supply Side” (voodoo) vampirism of the last 40 years.

Dig it. While Republicans rage at regulation and the far-left sniff at "competition," It is only Regulated Competition that delivered the cornucopia fostered by the Rooseveltean social contract of the Greatest Generation. A contract whose dissolution is the one shared goal of every Republican policy.

Adam Smith would have no trouble with anti-trust laws, or with a society insisting that “externalities” like environmental effects get incorporated into the prices of goods available for consumer choice, so long as those incentive adjustments are flat, fair and predictable over spans that markets can adapt to.

Now, back to the present day and the central planning advocates in this world.

== They truly believe this time they’ve got it ==

Elsewhere I appraise some of the rationalizations that are now pouring from Chinese intellectuals, justifying the claim that only a centralized, party-ruled state can possibly (1) manage a modern economy, (2) distribute wealth properly as jobs disappear to automation, and (3) exert control over the new AI entities we are about to produce. These missives by Chinese scholars are typified by a recent one by Tsingua University professor Feng Xiang, which I critique here.

The crux: It has always been an appealing dream to plan an economy and an ideal state. That alluring notion may have long term merits - certainly we've become a lot better at it -- but we must also remain aware that till now there have always been "walls of incompetence." Moreover, there is a tendentious wish for this dream to come true, on the part of those who envision themselves as the "world directors" (from Huxley's Brave New World.)

The opposite notion has its own cult following: that central planning cannot work for long. That it is a chimera and a meddling tendency that interferes in Smithian market wisdom. 

All too often these folks are even worse! Because their rationalizations almost always excuse consolidation of allocation power in the hands of a small, incestuous and shortsighted oligarchy of owner-lords. Exactly the same old GAR approach but in feudal form, like the last 4000 years.

Adam Smith himself favored some degree of planning when it comes to overall priorities and goals, while leaving most allocation decisions to very well-informed and liberated citizens. In other words, as those computer models keep improving, there is no reason why they should have to be monopolized by top party officials or oligarchs. 

What if we all had them? A world market economy in which every citizen and consumer knew almost everything, with super models and analytic engines at beck and call? It's an image I don't see much discussed. Yet, it would still aim for that sweet spot, between fallible-but-necessary foresight and the flat-competitive interplay that gave us everything we now have.

We're told we must choose between two models: on the one hand proponents of centralized state planning who are clearly very smart and who have yet to reach their 'wall,' but who rationalize despotism while ignoring how much of their mercantilist success came because of western indulgence...

... versus a clade of would be oligarchic lords who claim to champion open-competitive-Smithian markets, while hypocritically joining with world mafia forces to send wealth and power disparities skyrocketing toward French Revolution levels. Their sycophant-flatterers are proved wrong, of course, when these would-be aristocrats cannot perceive the foolishness of waging war upon all fact-using professions, nor can they stretch their minds to ponder the word "tumbrels."

No, my friends, face it. Were he alive today, Adam Smith would be a Democrat. And the #1 (of many) silliness of democrats is that they don't proclaim it.

====

** CORRECTION: In an earlier version I said that an appeals court had ruled against Congress in the emoluments case. Actually the court did not rule against Congress on the emoluments case.The three-judge panel of the United States Court of Appeals for the Fourth Circuit in Richmond, Va., found that the state of Maryland and the District of Columbia had no legal standing to bring suit on the emolument case. The Congressional case is ongoing. Fine. But when it comes to potential corruption of the entire Executive Branch via a crime specifically called out in the Constitution, I believe any and every citizen has "standing."

The alluring dream of "Central Planning."

== Central Economic Planning ==

Central economic planners generally do it badly, and we know this since the Pharaohs. But Guided Allocation of Resources - or GAR - has improved somewhat, over the centuries. The Soviets used simple accounting tools and firing squads to build massive, primary infrastructure... dams, railroads and steel mills etc. But they were incompetent at the secondary economy... making a refrigerator anyone wanted. The Japanese took computerized skills and capitalist zaibatsu structures and planned their way to great success... that hit a wall in the tertiary economy. The brainy engineers in the Chinese politburo think their shiny AI models can evade any wall. They are probably wrong, but we'll see.

If you find yourself with some time and really want to dive into this, here's my older piece explaining the underlying difference between GAR or "Guided Allocation of Resources," which all but a very few kings engaged in, for 6000 years, commanding from atop... 

...vs. FIBM or "Faith in Blind Markets," which is a libertarian religious dogma in the west that never, ever was verified, because almost all FIBM preachers just want power transfered from the state into the hands of a few thousand corporate oligarchs. In other words... more GAR! Just a lot less diverse or accountable. Seriously, see the point made here. 

A third path, the one actually prescribed by Adam Smith (he never called for a completely "invisible hand") and used successfully in our recent renaissance, has been Maximized Open-Fair Competition. Only, in order for it to be open and fair, the state has to intervene, at-minimum to prevent inevitable cheating. Also, by investing heavily in education, health, infrastructure and the environment, we raise up the maximum number of poor children out of cauterized-possibility, and thus maximize the utility-availability of competition-ready talent! 

Read that again. Some kinds of socialist interventions -- those that reduce cheating or that raise up the children of the poor -- are competition friendly, according even to the values of Friedrich Hayek and especially Adam Smith. This supplies a pragmatic -- not just moralizing -- justification for at least half of liberalism.

(Any libertarian who questions specific methods of liberal MOFC intervention may be helpful; criticism is valuable and some liberal "programs" really sucked! On the other hand, any who disparages it in principle is not only heartless, but either a fool or a hypocrite, no market-lover, after all.)

And yes, these MOFC interventions to keep competition flat-open-fair, plus generous state investments in R&D, are definitely a form of state planning. Much looser than most forms of GAR and certainly better than the oligarch-loving prescriptions of FIBM. In fact it is the only way to keep the "half-blind" mass-creativity of modern markets alive and vibrant.

The crux: Our system is based on a belief - rooted in our success over 200 years - that you cannot define optimum conditions for an economy, but you can create general attractor states. Example: the existence of any flat-fair-open competition at all is an attractor state that results in vastly more creativity and production…


...but that condition is unstable and critically vulnerable to cheating. Our society achieved a semblance of flat-fair-open competition by intentionally - and with deliberate foresight - altering the boundary conditions of market forces so that fair competitors and not cheaters prosper.


Case in point: the breakup of toxic pools of economic power - like monopolies and duopolies. Anti-trust rules enacted by several generations (under several Roosevelts) were spectacularly effective at limiting cheating and opening up genuine competition. Take the auto industry. With 25+ major car-makers across the globe, competition is genuine and hence, we get better cars for less money, every year. Add in further regulations to incentive emission and efficiency improvements, and one result has been that consumers saved scores of billions at the pump, since the CAFE rules were enacted.




Of course, eliminating all such regulation, especially against toxic concentration of market share, has been among the top goals of cheater-oligarchies, who seek economy-warping power. Above all, the wisdom of the Greatest Generation -- using regulation as a means to keep markets vibrant -- has been relentlessly torn down by the supposed "friends" of competitive enterprise, with the result of skyrocketing wealth disparities and decline in every metric of economic health. 

See how Robert Reich explains the “Monopolization of America.” And be outraged that the Boomers let slide the wisdom of their parents and grandparents (who adored Roosevelts for good reasons.)

Yes, I am libertarian enough to want a light hand! I am also fiercely liberal about eliminating unfairnesses, cheater conspiracies, and the prejudices and poverties that waste talent. Liberal interventions that enable all children to shoot for their potential aren't just moral, they are pragmatic -- any society that wastes talent to poverty or oppression isn't just evil, it is stupid.


And clearly we need the boundary conditions to include incentives and deterrents that account for externalities, like planetary health.


On the other hand, how liberated and healthy-educated young people then sort themselves out to work for (or create) truly competitive companies should be up to them. This is a conversation that the two cousin philosophies - liberalism and libertarianism - could be having! And the top priority of the Murdoch-Putin-Mercer-Koch oligarchy is to prevent those cousins from ever recognizing what they share... a common enemy.

Hence, I feel behooved to veer toward a small but important faction on the American political landscape. One that has been suborned to side with aristocracy. But if they shift, they might make a crucial difference.

== Grab the lapels of those lapel=grabbers... ==

You LIBERTARIANS out there need to to stop imbibing Forbes/Koch-financed propaganda that Republicans are somehow “just enough less-bad” than Democrats in matters of liberty. 

The common aphorism is: “Democrats favor freedom in the bedroom and republicans like freedom in the board-room.” 

Well, yes, if by “freedom” you mean liberating 5000 golf buddies in the CEO-Wallstreet caste to connive in secret, ending free-market competition by creating market-stealing feudal zaibatsus. You must mean that “freedom.” Not the kind that Adam Smith and the Founders fought for and the real Tea Party was all about. (BTW, you Rand followers... ever notice that her novels always portrayed old-boy corporate lords as the real monsters, not pathetic socialists? Try actually paying attention to your patron saint!)

You  freedom-lovers should notice the color of the states who are ending the goddam Drug War. States where who-you-love is nobody’s darn business. States where the attorneys general let you record your police encounters, training cops to shrug it off and act professional. States with open meetings laws for councils and agencies. States where your freedom of information requests are (mostly) not stonewalled. 

Oh, and competitive enterprise always does better under Democrats. Yes, including in "pinko" California and New York. Are you scientifically rational and "objective" enough to look at actual outcomes? I will bet you my house. 

Step outside. Breathe the much cleaner air and tell me that polluters who wreak damage on our commons should not be told to incorporate those costs in their offered goods. Eat some fresh fish caught at piers in downtown Pittsburgh. Now go to the nearby college and test for pollutants you can't smell. Go to the beach with a Ph meter and measure ocean acidification. You nerdy libertarians are supposedly bookish, so which political party is waging open war, not just against science but against every fact-using profession, even the U.S. military officer corps?

Yeah, yeah, you hate campus lefties (I despise the worst SJWs, too.) And you nurse theories about a so-called “deep state.” Sure, five million officers, scientists, teachers, journalists are all in a conspiracy together, secretly agreeing on identical lies. Riiiiiight.  Yet somehow you never cast your eye on those 5000 lords who are working with foreign mafias to restore the feudalism that crushed freedom for 60 centuries… 

...while empowering their cops to smash your camera and maybe your head. Face it, the civil war is back and the same side that made America and ended slavery is now fighting for your very right to live.

== International ==

How to “win the present rivalry with China?” asks Fareed Zakaria. “Were Washington to be more strategic, it would have allied with Europe, Japan and Canada on trade and presented China with a united front, almost guaranteeing that Beijing would have to acquiesce. It would have embraced the Trans-Pacific Partnership as a way to provide Pacific countries an alternative to the Chinese economic system. But in place of a China strategy, we have a series of contradictory initiatives and rhetoric.”

The author continues: “History tells us that if China is indeed now the United States’ main rival for superpower status, the best way to handle such a challenge lies less in tariffs and military threats and more in revitalization at home. The United States prevailed over the Soviet Union not because it waged war in Vietnam or funded the contras in Nicaragua, but because it had a fundamentally more vibrant and productive political-economic model. The Soviet threat pushed the United States to build the interstate highway system, put a man on the moon, and lavishly fund science and technology.”

I agree on all points. But I have also pushed folks in DC to grasp the power and importance of polemics. The PRC cares supremely about the memes absorbed by its people. They rigorously control what may be viewed or browsed. And they counter simmering public resentments with deliberately stoked jingoism, justifying an aggressive international stance and predatory mercantilism with “getting even for colonialism.” 

As it happens, there is a simple polemical way to utterly neutralize that meme. Indeed, the survival of the world might depend on calming that incitement in the best way passible… with one pure and crystal fact.

== And finally... ==

An excellent and insightful essay looking back a century at 1919... as we head toward the next "double-number year"... 2020.

And a reminder of my own observation... that each of the last 4 centuries seemed to "find its theme" during the second decade. Let's hope to turn ours upward, while there's still time.