The general problem with these plans is that they lack generality over time and space. They fail the test of universality. The following will be my random walk through some of the problems with rationalist institutional construction and the subsequent problems of central planning.

Social planning is vulnerable to real-world changes

Most people would recognize that a particular building design or architecture can become obsolete. Many would laugh if there were an actual plan to actually construct Campanella’s City of the Sun or Fourier’s phalanxes in the present day. Their reasoning would be obvious: those things were designed in an entirely different time, under different circumstances. This is not to say that those authors and many like them put forth their ideas as timeless and never requiring change (some occasionally have had the delusion of technological growth simply stopping at one point), but a large degree of universality is frequently attached to more abstract kinds of social planning.

Some examples of central design are much more concrete than others, but central planning when it involves a particular kind of physical engineering is not the only instance in which central design encounters severe problems. It can also include institutional design. For a long time, it was thought to be sound business strategy to always have a middle-man for many kinds of transactions. With changes in technology, the middle-man has frequently been cut out, and with good reason: he’s no longer needed. Yet what would happen if, in my ideal construction of a society, there were always a middle man between wholesale and retail? What if I claimed that this middle man led to the greatest well-being of my society’s members? Economics would most certainly stand against me.

Institutions are not universal

Despite that, all kinds of social manifestos, utopias, and even national constitutions establish permanent institutions as a feature of the society. It can be a ruling council of Thirteen, a Guardian class, or a president, a 480-member congress, and a 11-member judiciary. They make the mistake of integrating information available at the current time and creating a set of concrete institutions that are to be held as universal, but are not in fact universal. This is symptomatic of a general problem with leftist thought, which is that it is often too concrete-bound in its approach to society. Those contingent concretes – such as the current distribution of income and power in society – are then used as premises from which “universal principles” are derived, like: there’s always the class of the rich and the class of the poor, and the former always oppress the latter. The problem is that those supposedly universal principles only apply in narrowly contingent cases, which makes them not universal (not even considering whether the derivation of those principles is valid). They ignore changing circumstances and technology (never mind all the other fallacies, like the total fabrication of principles of justice, ignorance of actual factors that cause poverty, etc.)

The general empirical principle underlying this is that no mind or group of minds can ever gather, process, and coordinate all of the information necessary to perfectly govern complex human conduct. Even without any normative principles relating to individual autonomy, the idea of governance – especially economic governance – by few over the many is riddled with problems, in theory and as it has been demonstrated in practice. Every economic agent has a delicately unique and complex set of circumstances and preferences, and has direct access to his own set. Supposing that someone trying to make economic decisions for this person was acting totally altruistically (another very generous premise, again as demonstrated in practice), he would require a means of translating that agent’s changing circumstances and preferences (closely related to subjective experiences of pain, pleasure, etc.) into usable information which he then must process to prescribe a course of action which must be then executed correctly. Multiply this process over thousands or millions of people, and there is quite a huge problem. It is wishful thinking already that one person can make decisions for another effectively (people already have enough problems making decisions for themselves), so it must be even more wishful to think that some people can do it for many others, even suspending for a moment the selfish interests of those decision makers.

Only the free market (which is run by, precisely, nobody) is capable of coordinating the largely diffuse information spread among economic agents into forming an optimum output. This is not just an optimum regarding maximal manufacturing output for the lowest possible cost, a common straw man constructed against the free market to paint it as a cutthroat institution of total efficiency. That notion is just a Platonic hangover – as if goods are produced for the goods’ sake – which ignores why those goods are created in the first place: to enhance an individual’s well-being. The free market forms an optimum output with respect to the amount of resources available, and, more importantly, to the totality of the individual preferences of all market participants.

Weaknesses in central planning

Very closely related to the information problem of central planning is pricing or, more broadly, valuation of goods, services, or virtually everything whose control and consumption can be transferred from one individual to another. Valuation by demand is self-defining: what someone is willing to pay for something is what it’s worth. No Platonism necessary, no intrinsicism, just pure empirical fact. In a centrally planned system that prohibits free association, value must be decided; otherwise, there is no meaningful way of allocating produced goods among the members of society. Again, suspending the selfish interests of the appraisers, this leads to bizarre information problems and to the humorous possibility of the “value” contributed by producers exceeding the amount of goods and services available in an economy, resulting in people deserving more than is possible to provide.

Another problem with central planning is, in brief, the actual presence of human beings. Markets can’t be avoided; the free market is all about incentives. Proof in practice of markets is the responsiveness to incentives embedded in human nature, no matter what system prevails. Black markets develop in response to government prohibitions; defying the law becomes a business, where risks are taken but large profits are reaped. In totalitarian systems (especially those with distributive wealth patterns, like in communism) individuals use their positions as or connections with bureaucrats and politicians in order to gain a bigger share of the pie. Even in our purportedly “free” economy in which the government intervenes to harness the “dangers” of the free market, interest groups spend billions of dollars yearly lobbying federal, state, and local governments getting laws passed in their favor to the detriment of others and electing politicians and bureaucrats who use the force of the law to increase business profits.

(Incidentally, the few errant cases in which people’s preferences are static and minimized do not undermine this universality of the human condition, for the reason that incentives can be structured to shun accumulation of material possessions or other conventional measures of well-being. Some tribes have a social value of personal prestige over wealth, and thus individual members will often spend all of their wealth on extravagant feasts for the tribe or on constructing large memorial edifices.)

Up to this point I’ve freely switched back and forth between central institutional design and central planning. Though there is a distinction between the two, they ultimately suffer from the same problems. First, even in a static environment, central design and planning simply lack the coordination of information necessary to achieve anything close to efficiency. Gathering the information is either next to impossible or is so costly to achieve that it defeats the purpose of establishing any institutions in the first place. Then, not only must the institution measure up to the circumstances of the time, it must be resilient and adaptable to the rapidly changing and non-ergodic world. The environment changes. Technology changes. People change. If the institution itself entails an active form of intervention (such as value arbitration, as in Marxism), the central planners constantly face the problem of incomplete and changing information.

Any societal plans that establish hard-and-fixed institutions and that rely on constant governance are prone to disaster, especially when abuse of power is considered. Up to this point, I’ve neglected to address that fact, which is the most important of all: much of the preceding discussion generously takes for granted that those involved in the central planning have no interest but doing their job the best they can. For the most part, that means that I’ve ignored an even more fundamental flaw in central planning. Yet even with that, it still had problems, didn’t it?

The post The Fragility of Socialist Utopias: Some Problems of Central Planning and Rationalist Design appeared first on Rare Essays.

Let’s take a look at some of the philosophy of anti-laissez-faire, particularly in its heyday: just before the first World War. There is little doubt the explosive growth of America’s economy was the result of the great human effort, the application of knowledge to production to create technology and capital, and the vast land and natural resources at its disposal. The framework of classical liberal (in full form, laissez-faire) economics pioneered by Great Britain gave great incentive for this process. A century of liberalism arose from thousands of years before of dysfunctional human civilization, growing the population and standard of living of human beings far larger than ever before in any century.

However, following the Civil War and the Second Industrial Revolution, class divisions had grown and fresh voices bemoaned the supposedly unjust distribution of wealth in society, calling into question the validity of the free market. Though lacking true ideological conformity, changes in attitude toward laissez-faire capitalism[1] since the Founding have been generally defined by any or all of three major shifts: most importantly, the replacement of liberal political rights with economic entitlements; closely connected, a new emphasis on collective instead of individual good; and in effect, the belief in the use of government as a valuable tool for bettering those collectives.

Of course, some important qualifications must be made. Firstly, not all objections made to the state of the nation under capitalism in the late 19^th– and early 20^th– centuries were necessarily at odds with traditional liberal principles. Truly consistent advocates of laissez-faire capitalism such as William Graham Sumner believed that government obstruction of trade unions and other forms of collective bargaining[2], for example, interfered with the individual’s right to freedom of association and self-determination. Broadly speaking, the political environment that permitted wealth to buy power in government was an essential threat to traditional liberty. Furthermore, it would be disingenuous to attempt to collectivize the entire spectrum of objections to liberal society, as they can be vastly different in their moral values, justifications for their principles, and the nature and practical execution of their policies.[3] Overall, the following breakdown is only a brief approximation of the characteristics of those opposed to laissez-faire economics, with a select few of several possible examples.

The Rise of “Economic Freedom” As a Standard of Living

The issues of most profound significance to any attitude toward economic and legal systems are the moral concepts that underlie them. Almost universally, opponents of capitalism believed that wrong-doing necessarily occurred from its implementation, whether in its means or in its ends. Previously, most of an individual’s rights in America were defined by a Lockean theory of natural law. Freedom of contract (and a right to a fulfillment of those contracts) permitted one the ability to freely associate with others economically. However, great disparities in wealth concentration led critics of capitalism to denounce the status quo, which was allegedly caused by the consistent legal enactment of these principles. Factions such as the Populist movement, the Progressive movement, and the Socialist Party of America formed in the antebellum period as a response.[4] The introduction of a new kind of right pervaded these new alternatives to laissez-faire capitalism: the economic freedom.

Karl Marx’s famous maxim, “from each according to his ability, and to each according to his need,” was one widely accepted economic substitute for property rights. Looking Backward (1888), a novel by Edward Bellamy, details a futuristic society that has supplanted competition with economic rights and duties in line with Marx’s axiom. “The reward of any service depended not upon its difficulty, danger or hardship, for throughout the world it seems that the most perilous, severe, and repulsive labor was done by the worst paid classes…,” states Dr. Leete, a knowledgeable member of the society.[5] Indeed, this was not the case in 1887; the natural system of economic rewards resulting from liberal rights is, first and foremost, based on the mutual exchange of desired values, i.e. supply and demand. “Wage slavery” became a popular phrase to describe status of the common laborer. In The Living Wage (1906), John A. Ryan argues that the “American standard of living” is a “natural and absolute right” of citizenship. Though he argued it as a dictum of Christian values, many other leftists embraced a similar belief, and an ends-oriented theory of economic freedom gained popularity. No longer would individual autonomy provided by rights determine one’s economic freedom, but the level of wages would.[6]

Collectivism vs. Individualism

Logically entailed by the change in moral principles was an insistence that the good of the collective trumps the good of the individual. Since the notion of the fairness of market-defined wages was fully rejected, the market was replaced by newly-found social and moral considerations. Henry Demarest Lloyd, one of the foremost antagonists of Social Darwinism, placed great emphasis on collective governance and production. “Our liberties and our wealth are from the people and by the people,” he contends, “and both must be for the people.” His use of “the people” is not merely political euphemism, but imperative: “wealth, like government, is the product of the co-operation of all, and, like government, must be the property of all its creators.”[7]

Historically, a principal element of collectivization derived from stressing the importance of labor, in contrast to the capital-focused Industrial Revolutions of the 1800s. In 1914, Congress announced via the Clayton Act, “The labor of a human being is not a commodity.”[8] There is no better example of American labor-class activism than the writings of Socialist Party figurehead Eugene V. Debs. In Revolutionary Unionism (1905), Debs argues for the unity of the working class and, in Marxist form, condemns the purported separation of the worker from the rightful fruits of his labor. He repudiates the validity and effectiveness of craft unions- usually selective organizations of skilled workers- underscoring that “infinitely greater than [their] loyalty to their craft is their loyalty to the working class as a whole.”[9] He fiercely criticizes the structure that denies the struggling laborer his desires, but fervently protects “the product of [the worker’s] labor, the property of the capitalist.” Then, when the dissatisfied become agitated and unrest begins, the government arrives to silence the menace: “If you… have made more steel than your master can sell, and you are locked out and get hungry, and the soldiers are called out, it is to protect the steel and shoot you who made the steel…”[10] Debs’ arguments reflected common sentiments of outrage toward a society in which a vast majority of people, though they were a necessary part of production, toiled heavily and possessed little while a tiny group reaped gigantic rewards.

A different form of collectivism, nationalism- in the spirit of the times- also was a popular source of ideological opposition to the free market. Similar opinions had already a large presence during the Founding in the form of the Federalist Party and Alexander Hamilton, who argued for state intervention as a means of furthering the nation’s economic goals. Bellamy’s Looking Backward, which cued a short-lived but large nationalist movement, extolled the replacement of self-interest with a higher cause: “Now that industry of whatever sort is no longer self service, but service of the nation, patriotism, passion for humanity, impel the worker as in your day they did the soldier,” says Dr. Leete. Another thinker, Herbert Croly, believed nationalism belonged hand-in-hand with democracy, stating “the first duty of a good democrat would be that of rendering to his country loyal patriotic service.”

The Role of the State in the Capitalist Economy

Government would be the primary tool in executing these policies, with force as the only way to guarantee Americans their social and economic rights. As German sociologist Max Weber explained, “The rise of modern freedom presupposed unique constellations which will never repeat themselves.” These “unique constellations” likely refer to the vast expanses of land and resources in North America, among other contingent facts, which gave rise to the harmony provided by decentralization. Otherwise, freedom must be centrally planned to be had beyond its occurrence through plain luck. Bellamy comments that Americans in the nineteenth century possessed a “galling personal dependence upon others as to the very means of life.”[11] The founder of the American Economic Association, leader of an organization created to battle laissez-faire economics, wrote “we regard the state as an educational and ethical agency whose positive assistance is one of the indispensable conditions of human progress.”[12]

Woodrow Wilson, in fulfillment of many of Herbert Croly’s ideas, advocated a “New Freedom.” In The Meaning of Democracy (1912), he claims that while laissez-faire Jeffersonian ideals furnished “a government of free citizens and of equal opportunity,” the contemporary physical characteristics of the nation were suited to it; families each lived in separate households, employers were closer to their employees, and so forth (arguments very much similar to Weber’s “unique constellations”). Using Glasgow as an example, Wilson draws a metaphorical parallel between the Scottish city’s common hallways in residential buildings being defined as public streets and the “corridors” of large corporations being regulated as part of the public domain. In this, he claims he is fighting against “monopolistic control,” and in turn “fighting for the liberty of every man in America, and fighting for the liberty of American industry.” [13]  Not coincidentally, the Wilson administration heralded the introduction of the discretionary federal income tax through the Sixteenth Amendment in 1913.

Is true capitalism dead?

Clearly, attitudes toward laissez-faire capitalism have turned significantly against it since the Founding. This is not to suggest that there was unanimity over the issue during America’s formative years, but major policy battles accompanied by successful movements have led to aggregate changes in economic viewpoints. The prominent influences of the postbellum period, such as the Progressives, have nearly eradicated belief in the functionality and morality of absolute laissez-faire­ governance. Likewise, the public institutions established in the wake of those movements have furthermore ingrained the permanent, expanded role of government in the national consciousness (euphemistically speaking). Even “right-wing” politicians who profess the values of capitalism take their cues from business interests in exchange for financial and political support. Few candidates can plausibly survive electorally on a genuine non-interventionist policy platform. For America, the unabridged free market is dead.

[1] To clarify, any mention of “capitalism” alone still is referring to unlimited, absolute laissez-faire capitalism with the proper host of necessary political rights. Likewise, “liberal” refers to the host of values associated with it.

[2] This is, obviously, supposing that these trade unions are behaving by legitimate and economic means. In the “Forgotten Man,” Sumner attacks unions which restrict the free flow of labor, by limiting the pool of tradesmen in order to artificially raise wages.

[3] Some thinkers were nationalistic, like Bellamy; others were religious, like Ryan; and so forth.

[4] For space considerations, this analysis will not go past the Wilson administration.

[5] Edward Bellamy. “Looking Backwards.” In American Political Thought, ed. Kenneth Dolbeare and Michael S. Cummings, 293 (Washington, D.C.: CQ Press, 2004).

[6] Eric Foner, The Story of American Freedom, 144 (New York: W.W. Norton & Company, Inc., 2004.)

[7] Henry Demarest Lloyd. “Revolution: The Evolution of Socialism.” In APT, 304-305.

[8] Foner, 144.

[9] Debs, “Revolutionary Unionism.” In APT, 359.

[10] Eugene V. Debs, “Revolutionary Unionism.” In APT, 355.

[11] Foner, 129.

[12] Foner, 130.

[13] Wilson, Woodrow. “The Meaning of Democracy.” In APT, 393-395.

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