Markets
We can do better
I was quite young when I encountered Marx in the form of the saying "From each according to ability. To each according to need."
Seemed like a good idea at the time. Still does in fact.
But the idea really is too simplistic.
We need to think about how to produce what is needed and how to coordinate the work. The communists tried to eliminate markets with a planned economy. It didn't work. Planned economies need to be authoritarian which is a problem for me but not the reason they didn't work. The problem is that an economy is basically too complex to be comprehended and planned.
I had a friend who escaped Czechoslovakia in 1979. He told that in the old country everyone was guaranteed a job.
But there was a problem. "The workers would pretend to work and the factories would pretend to pay them".
(Aside: He fled and came to Canada and built a successful printing business.
I worked for him for a while. There was no pretending to work at his place. But he actually was pretty good at pretending to pay :-( )
But the problem in a planned economy is efficient distribution of resources.
If you make steel and there are thousands of people who need steel for all sorts of projects, then how do you decide how much steel goes to each project?
That is: how do you balance all the needs?
Also, each person is unique with a range of abilities - how are those abilities best employed? The complexity of the situation means that the problem can't be solved analytically I think. It certainly couldn't be solved 100 years ago with pen and paper being the main method of calculation. But I suspect the problem would be intractible even for supercomputers. (Tho quantum computers might be up to the task which would still leave the problem of the authoritarian nature of planned economies)
People have needed to solve that problem of efficiently allocating resources for a long time and the solution is ancient - markets. In a market there are many sellers and many buyers. For the sellers, if their wares sell really easily then they raise their prices. For the buyers, if the cost is too high then they stop buying. In each transaction the price the seller gets is equal to the cost the buyer pays.
This simple process done by a large group of participants tends to set a general price for things that pretty efficiently allocates resources to their best use. Markets involve a sort of evolutionary algorithm that seeks an equilibrium between price and cost. An ecosystem evolves in the space of possibilities enabled by biology. A market evolves in the space of possibilities enabled by human society. The idea here is that each society enables a possibility space for markets. We can't escape society and we can't escape markets, but the possibilities that society offers to markets can vary a lot. This is why the idea of a "free market' has always been a myth. All markets have to operate within the constraints of a society.
I'm finally getting near the end of Mariana Mazzucato's book The Value of Everything A key idea in the book is that there is a productive sphere that produces all we have and an unproductive sphere that manipulates what is produced. For instance, farmers were seen as productive but landlords were seen as manipulating what is produced. This is a hard idea to pin down precisely but it's clear that when people talk about free markets they are talking about a society where the government is defined to be outside the productive sphere.
This has always been a bit arbitrary since government has many ways of being productive but what is means is that government cannot be a participant in markets as a competitor. So, by that definition, government can pay for the research to build (say) the internet but as soon as money can be made from it the government should back off and hand the research over to private interests. (It's a bit ironic to hear electronics companies whining about the chinese appropriating intellectual property :-) These days we have the spectacle of government paying billions up front for private business to create a vaccine and produce it en masse rather than just building the resource themselves.
Mazzucato points out that these days making money is defined as being productive. Anything that makes money is within the productive sphere. So we get the strange situation where financiers who engineer financial structures that regularly collapse are seen as productive because they make a lot of money before the collapse.
Perhaps we should change our myths about markets. We can't avoid markets but we should let the state be a competitor. The state should be able to produce what it needs directly rather than pay private business to do it.
I kind of envisage a system of state operated facilities that produce primary resources; everything from steel to computer chips to wheat and sells them in a market. I think that at that primary level a planned economy is actually possible, especially now.
Beside that other actors in the market would buy those resources and do stuff with them and sell the product. In that situation, if the market doesn't serve some social need then the state can just provide that directly.
What do you think?
I present regular philosophy discussions in a virtual reality called Second Life.
I set a topic and people come as avatars and sit around a virtual table to discuss it.
Each week I write a short essay to set the topic.
I show a selection of them here.