Centralised planning is when a government planner decides the source, the destination and the good without giving final power to a consumer. Amazon doesn't have the final word on what people buy (or the destination of goods for that matter) so it isn't a centrally planned system in that sense.
Hayek's basic premise was that national-scale central management was impossible. Amazon and other megacorps put paid to this.
Also - they deal in finished (consumer) goods. There is a whole lot of coordination before that stuff gets assembled and ready for Amazon or one or their marketplace suppliers to ship it.
Maybe they've integrated the demand chain logistics, but not the integration supply chain. And they don't dictate that consumers get to purchase one and only one brand of whatever product (like peanut butter).
(Although I knew about it and stand by my assertion, because...)
I still can't conceive of using that to build a (say) iPhone.
I think it's worthwhile to re-read the passage I quoted:
>Hayek[...] argued that no bureaucracy could ever match the miracle of markets, which spontaneously and efficiently aggregate the knowledge of a society.
This isn't just about physical logistics. Hayek is arguing that no centralised agent has perfect information. The author is arguing that Amazon is approaching the stage when it would have perfect information about the consumers it serves.
>Amazon doesn't have the final word on what people buy (or the destination of goods for that matter) so it isn't a centrally planned system in that sense.
Even if it doesn't have the final word, it does have quite a bit of say in the form of its recommender system.
Also, "communism" in the sense of Marx -- one of the two senses in which I was using the word -- is not necessarily a centrally planned system. Rather, it's an idealisation of what an economy would become if it achieved 100% automation, i.e. an economy operating at 100% efficiency.
You can see it in the structure of Marx's "historic materialism" argument: just as capitalism had displaced feudalism because it's more efficient, socialism would then displace capitalism, and communism would do the same for socialism. In Marx's hierarchy of efficiency:
Feudalism < capitalism < socialism < communism
So a communist economy, in Marx's sense, is also an economy in which there's perfect information. That can't possibly happen in the real world, of course, and Hayek correctly points this out about a centralised bureaucracy. But he's wrong about markets; no market is 100% efficient or operates in an environment of perfect information either.
This statement in the article is a huge misstatement.
First, Amazon only has information about the goods it sells. There are many things it doesn't sell, and many things that it can't sell. There are huge supply chains behind the products it sells that it does not see. There are also many things of value that are not exchanged with money.
Second, to the extent Amazon does have information about its customers, it has that information because of those customers' buying decisions. In other words, it has exactly the information that Hayek says a market participant has, and no more: the price at which other market participants will buy whatever quantity of one's products are sold.
>This statement in the article is a huge misstatement.
At least blame the right person: me. The above statement is a paraphrase of what I thought the author's argument was.
>First, Amazon only has information about the goods it sells.
>There are huge supply chains behind the products it sells that it does not see.
And it is in the process of acquiring more information. Amazon isn't just a retailer anymore: its main source of operating income is now AWS[0]. Also, dredmorbius has pointed out[1] that Amazon is doing vertical integration with its Amazon Business offering[2].
>There are many things it doesn't sell, and many things that it can't sell.
This is irrelevant, because these "many things" exist in a market outside of Amazon's "jurisdiction". Even in the historical centrally planned economies, these "many things" also existed.
>There are also many things of value that are not exchanged with money.
And they are getting rarer and rarer, because monetisation is now the Great Project.
>In other words, it has exactly the information that Hayek says a market participant has, and no more: the price at which other market participants will buy whatever quantity of one's products are sold.
Actually, Amazon has more information than a single market participant has. Since it is the market because it is a marketplace-as-a-service, it has exactly the information that Hayek says the sum total of all market participants have. This invalidates Hayek's argument that no centralised agent can possibly collect that much information. This point is what I believe the author of the article is trying to make.
[0] https://www.zdnet.com/article/in-2018-aws-delivered-most-of-...
Fair enough.
> Amazon has more information than a single market participant has. Since it is the market because it is a marketplace-as-a-service, it has exactly the information that Hayek says the sum total of all market participants have.
No, it doesn't. It has all the information that a large market participant has--i.e., a market participant that has a very large number of transactions with a very large number of other market participants. Hayek was perfectly well aware that such market participants existed (after all, such participants existed in his day--for example, Standard Oil).
But Amazon's information is still limited to information that a market participant can have: namely, as I said, the prices at which the various goods it sells are sold. It does not have any more information than that. It has information about a lot more transactions than most other market participants, but the information it has about each transaction is the same as what the other participant in the transaction has, no more.
And Hayek did mention monopolies or "coordinated industries" as a "halfway house" between centrally planned economies and free markets. Sure.
>But Amazon's information is still limited to information that a market participant can have: namely, as I said, the prices at which the various goods it sells are sold. It does not have any more information than that.
Actually, Amazon does collect and process information that a market participant wouldn't normally have: consumer preferences.
Hayek argued that a central planner wouldn't be able to suck up the decentralised information embodied in every market participant. However, what Amazon is doing is mining the data it has about a consumer's purchase history, as well as the responses the consumer gave to recommendations made by its recommender engine. That is a lot more information than what most market participants would normally have access to.
Now, Hayek has outlined what he thinks is needed to construct a "rational economic order" in the beginning of "The Use of Knowledge in Society":
1) "If we possess all the relevant information",
2) "if we can start out from a given system of preferences",
3) "if we command complete knowledge of available means".
Unlike the monopolies of old, which may have 1) to some extent, Amazon also has 2), and is trying to acquire 3) with its Amazon Business offering. So its capabilities are arguably an improvement over the capabilities of the old monopolies.
This is wrong. A market participant does normally have information about the preferences of other market participants. That's precisely the information conveyed by market transactions, buying and selling certain quantities of certain goods at certain prices. The only difference between Amazon and you or I is that Amazon engages in a lot more transactions, so it makes a lot more sense for Amazon to invest significant resources in collecting and analyzing its transaction data. But that doesn't make Amazon a successful central planner; it just makes Amazon a successful large market participant.
> Unlike the monopolies of old, which may have 1) to some extent, Amazon also has 2), and is trying to acquire 3) with its Amazon Business offering
Wrong again. Amazon has none of those three, nor has any other monopolist in history. Or indeed any central planner such as the government of the Soviet Union. Nobody has all relevant information. Nobody can take an entire system of preferences as given. And nobody has complete knowledge of all available means. All three of those requirements are extremely strong, and Hayek meant them to be that way. He didn't mean them as approximations; he meant them as literal exact requirements, which no real entity can possibly fulfill. Certainly Amazon doesn't.
> its capabilities are arguably an improvement over the capabilities of the old monopolies
I think this is true, but it's a much, much weaker claim than the one you have been making.
>I think this is true, but it's a much, much weaker claim than the one you have been making.
I think you need to stop identifying me with the author of the article. My original comment was to make fun of the author for his ludicrous comment about Marxists calling it a day after nationalizing Amazon, which got some Marxists riled up:
>Perhaps we need to break up Amazon because communism? /s
The comment you replied to in starting this conversation spelled out exactly the same argument you made above:
>So a communist economy, in Marx's sense, is also an economy in which there's perfect information. That can't possibly happen in the real world, of course, and Hayek correctly points this out about a centralised bureaucracy.
So the "much, much weaker claim" is the one I have always been making.
>>> Unlike the monopolies of old, which may have 1) to some extent, Amazon also has 2), and is trying to acquire 3) with its Amazon Business offering
>Wrong again. Amazon has none of those three, nor has any other monopolist in history.
It's exhausting to have to always qualify my statements. Of course I did mean "Amazon also has 2) to some extent, and is trying to make inroads into acquiring 3) to some extent".
>> Amazon does collect and process information that a market participant wouldn't normally have: consumer preferences.
>This is wrong. A market participant does normally have information about the preferences of other market participants. That's precisely the information conveyed by market transactions, buying and selling certain quantities of certain goods at certain prices.
No, this is wrong. Amazon collects information about the preferences of market participants through non-market non-priced transactions as well. Here's a non-exhaustive list of such information collection:
- information from consumer responses to recommendations made by the recommender system
- information from consumers immediately after they've clicked on a link supplied by an Amazon associate, which then directs them to a product page.[0] Yes, there is a market transaction between Amazon and its associates, but at the time of the click, the information isn't generated from a market transaction between Amazon and the consumer.
- information supplied by consumers themselves through Amazon Lists, listing explicitly their preferences for goods and services.[1]
- information supplied by consumers themselves about their social network and preferences through Amazon Wish List.[1]
This is evidence for suggesting that "Amazon also has 2) [to some extent]", possibly to a greater extent than any monopolies of the past century has ever had.
To the extent this makes a difference, because of Amazon's efforts to monopolize various market segments by undercutting competition, it decreases the amount of information Amazon has about other market participants. A perfect monopolist, by setting monopoly prices, decreases the value of the price information it gets through transactions, because there are no other competitors offering the same goods at different prices to compare to, so the prices of the monopolist's transactions convey less information about the preferences of other market participants. That makes the market less efficient.
>To the extent this makes a difference
It does, because you're arguing as if Amazon sells stuff. It doesn't (just) do that: it's a market-maker that provides a venue for other vendors to sell stuff.
So it's already an error to talk about Amazon as a monopolist, when Amazon isn't the only marketplace out there with a global reach. But you're also making a category error, because you wrote:
>A perfect monopolist, by setting monopoly prices, decreases the value of the price information it gets through transactions, because there are no other competitors offering the same goods at different prices to compare to, so the prices of the monopolist's transactions convey less information about the preferences of other market participants.
Amazon doesn't set prices per se, at least not for vendors in its marketplace that are not itself. So it doesn't do whatever you think it's doing when you were writing that paragraph. Certainly there are "other competitors offering the same goods at different prices to compare" with, because Amazon's marketplace include other vendors. But Amazon is running a marketplace, not (just) being a vendor. There's a difference in category there.
That's not what a market maker is. A market maker is a market participant that guarantees to buy or sell something if no other buyer or seller can be found.
Providing a venue for others to sell stuff is a straightforward market transaction: Amazon sells its services to others for a price. There's nothing special about it, and standard Hayekian economics accounts for it just fine.
> Amazon doesn't set prices per se
To the extent this is true (as you say, for vendors that are not itself), it just reinforces the point I made above: that what Amazon is doing as a "marketplace as a service" is just a straightforward market transaction, selling services for a price, and does not give Amazon any sort of special status.
> Amazon is running a marketplace, not (just) being a vendor.
Running a marketplace, if it does not mean being a monopolist (which you are insisting it does not), is being a vendor, a vendor of particular services.
>That's not what a market maker is. A market maker is a market participant that guarantees to buy or sell something if no other buyer or seller can be found.
Right, but the similarity between a market maker in finance, and a marketplace maker in ecommerce, is that both of them have a lot more information than an ordinary buyer or seller. It doesn't matter if Amazon doesn't really act as a counterparty: the point is about how much knowledge it has, compared to the average participant.
>Running a marketplace, if it does not mean being a monopolist (which you are insisting it does not), is being a vendor, a vendor of particular services.
I was pointing out that there are two levels we're looking at:
1. Amazon as a provider of a marketplace
2. Amazon as that marketplace and what it entails about how much knowledge it possesses.
Recall that this is in the context of Hayek's arguments in The Use of Knowledge in Society, because the article's author referenced that explicitly.
Now, when I said Amazon isn't a monopolist, this is in terms of 1. Amazon is definitely not the only provider of an ecommerce marketplace with a global reach. In that sense, it's not a monopoly.
But Amazon is a "monopoly" in the sense that Hayek alluded to in his essay, i.e. in terms of 2. Hayek wrote in that essay:
The halfway house between the two, about which many people talk but which few like when they see it, is the delegation of planning to organized industries, or, in other words, monopoly.
Technically, it is still an oligopolist, since it is not the sole provider of ecommerce in America, but "organized industries" sounds like an apt way to describe what Amazon is doing. And it's in this particular sense of Hayek's that I referred to Amazon as a "monopoly".
what if it was an ai instead?
Amazon is logistics, takeover would give the public a more extensive USPS plus digital infrastructure... it's not a revolutionary seizure of the means of production.
>it's not a revolutionary seizure of the means of production.
The revolutionary bit of Marxism was a political sideshow for Marx's anarchist supporters. The economic theory of Marx does not require a revolution, because according to that theory, the superior mode of economic production should eventually prevail.
That is why you have political movements like democratic socialism and social democracy. These are moderates who believe that Marx's theory of economic progression is correct, but who also believe in incremental change.
Because there is evidence that Marxists had tried, and failed, to do what Amazon has now succeeded. Project Cybersyn comes to mind:
https://en.wikipedia.org/wiki/Project_Cybersyn
https://www.newstatesman.com/world/2018/08/project-cybersyn-...
However, what Amazon has done is just characteristic of "organized industries", which Hayek conceded in his essay, The Use of Knowledge in Society, as being a "halfway house" between Soviet-style planning and free markets.
Marxists could not call it a day after nationalizing Amazon because the people who make the goods that Amazon sells would still be alienated from the goods they produce, and Amazon's workers would still be alienated from the products of their own labor.
I don't think the author meant that reference to Marxism as anything more than a rhetorical flourish. His target, in that context, was Hayek's argument from incredulity against central planning in The Use of Knowledge in Society.
>Marxists could not call it a day after nationalizing Amazon because the people who make the goods that Amazon sells would still be alienated from the goods they produce, and Amazon's workers would still be alienated from the products of their own labor.
As I understand it, this alienation -- as you've described it here -- seems to have its roots in the division of labour in society, which seems to me to pre-date industrial capitalism. If that's so, then the work of Marxists can never be done, because work itself would have to be totally eliminated for the division of labour to vanish.
Also, it's widely disputed that the USSR was actually a Marxist society. I've heard it described as "State Capitalism".
Regardless, it's pretty clear that the mass murder in places like the USSR, China, and Cambodia was due to small groups of people getting massive amounts of power, abusing that power, and being completely insensitive to the suffering they cause, and not as a consequence of their economic systems.
Bloodthirsty despots come in all stripes and are happy to wear any mask as long as it helps them to gain and maintain power. A prime example is Hitler paying lip service to socialism while undermining worker's rights in favor of corporations, murdering socialists, using slave labor, and most of all strengthening his own grip on power.
Just for the record, I'm not a Marxist nor a Communist, nor do I advocate for either. But I do think you have to understand Marxism to adequately critique it, and it's pretty clear that the author of the article this HN post links to does not.
By eliminating the alienated and scaring the rest.
>> small groups of people getting massive amounts of power
In part, yes. But in part it was because in any revolution not everyone will support your kooky ideas. Those folks will fight you after you succeed. The only known way of pacifying them is by murdering them all. You see this every time.
>> you have to understand Marxism
I'd argue you're the one who needs to "understand" in this case. I lived the consequences of Marxism for the first 22 years of my life. I want no part of that shit here in the US, no matter how it's sold to me.
> By eliminating the alienated and scaring the rest.
"They make a desert and call it peace." That's not peace, and what you describe isn't a lack of alienation either. The people who survived and worked in the Soviet Union were mostly just as alienated as in capitalist societies. They just had a different boss. And the people who were murdered were not relieved of alienation but of their lives. A doctor who kills his patient has not cured him.
"I'd argue you're the one who needs to "understand" in this case. I lived the consequences of Marxism for the first 22 years of my life. I want no part of that shit here in the US, no matter how it's sold to me."
You didn't live under Marxism, but under a brutal totalitarian dictatorship, and you are confusing the two. That is not what Marx had in mind, and in fact Marx's own writings were edited and censored by the regime to put them in line with their own ideas.
Where in Marx do you find exhortations to torture and imprison millions of innocent people, create sham trials, make corruption and bribery the norm and use slave labor to achieve your utopia? Nowhere.
This was a creation of power-hungry individuals who will do whatever it takes to get and retain power. Note that after the Soviet Union fell and stopped being Communist (not that it ever was, but it stopped being Communist in name now, and became Capitalist) the abuses did not stop. Arguably, in many ways Russia is worse off now than it was even under Communist rule, as the organization formerly known as the KGB and organized crime now rule the country.
You can't radically change people's way of life without doing all of these things. So it's implicit. Western liberals especially find this very hard to acknowledge. Lenin had no such misunderstanding: dude was perfectly fine with mass murdering peasants and starving children to death. The ends, in his mind, justified the means.
Marx's writings were also descriptive, not prescriptive. He imagined how things could be if everything went perfectly, rather than gave you a concrete set of steps to get there. The problem is with the latter, not the former. It's a "sperical cow in a vacuum" kind of thinking, very black and white, not in the least suitable for the real world, and at odds with human nature.
That's different from saying that what Marx envisioned as a utopia (or even the path to get to utopia) was what the Soviet Union became. He did not foresee that nightmare and he did not want that nightmare, and I genuinely believe that most Marxists don't either. They are, if anything, a bit too well meaning and naive, and think that everything will turn out for the best once the proletariat gain control over the means of production.
I'm not sure I agree with you about human nature, but I do think an army of unscrupulous people stand ready and willing to subvert that sort of system and to use true believers to further their own welfare rather than the welfare of society as a whole.
True believers willing to kill others to build their utopia appear all throughout history, not just in ostensibly Marxist or Communist societies, but in the Inquisition, the Crusades, Nazi Germany, and many other horrific places and times, and they never end well (even if you think some ideal ends justify such bloody means).
If a true utopia is ever to arise (if that's even possible), it has to do so and be sustained through non-violent means.
>Bezos’s enterprise upends long-held precepts about the fundamental nature of capitalism—especially an idea enshrined by the great Austrian economist Friedrich Hayek[, who] argued that no bureaucracy could ever match the miracle of markets, which spontaneously and efficiently aggregate the knowledge of a society.
>Amazon, however, has acquired the God’s-eye view of the economy that Hayek never imagined any single entity could hope to achieve. [...] With its logistics business—and its growing network of trucks and planes—it has an understanding of the flow of goods around the world. In other words, if Marxist revolutionaries ever seized power in the United States, they could nationalize Amazon and call it a day.
Perhaps we need to break up Amazon because communism? /s