Don’t Plan on Living in St. Petersburg…
GENEVA, Switzerland – When we left you last week, we were describing why neither democracy nor planning works on a large scale. Austrian School economist Friedrich Hayek described the problem with great thoroughness in his book The Fatal Conceit.
The Fatal Conceit: central economic planning is literally impossible – there can be no centrally planned rational economy. Individual planning is distinct from central planning, in that the many individual plans pursued by self-interested individuals mesh and create a spontaneous order. This order is far superior to anything that a central planning agency can ever hope to achieve – in fact, as Mises has shown, central planning is even doomed to failure ifthe planners hypothetically had perfect knowledge of all facets of the economy at a given time. However, this hypothetical situation can can never be realized anyway, as knowledge is widely distributed and as Hayek argues, is often tacit and therefore not directly communicable. It only expresses itself in human action.
Planning is a necessary feature of life. We have to plan our day… our year… our business, our vacations, our budgets – we plan for everything in our lives. And generally speaking, the better we are at planning and at following through on our plans, the better things go.
Naturally, we assume that this sort of planning will be helpful at all levels – from our personal schedules to an agenda for the entire nation. But there’s a problem: Planning requires detailed knowledge of our goals and resources.
If you’re going to build a factory, for example, you need a lot of information. You need to know where, when, how, and why, covering a vast range of issues. How much will it cost? How long will it take? What will it make? How will the goods be delivered? Where will employees come from? How much will they earn? Etc., etc.
You do that planning as best you can – sometimes right, sometimes wrong – and always knowing that you’ll have to live with the results. But then, along come the feds. And they’ve got their own plans.
‘You can’t build a factory there,’ they say.
‘We’re raising the minimum wage,’ they add.
‘You’ll have to get a license… a permit… clearance from the FDA, EPA, FBI, TSA, NSA, DOJ, SEC, NLRB…
‘And, oh yes, your product must be sold at the price we set…’
This post was published at Acting-Man on May 17, 2016.