> If central planning were a good way to run an economy, the Soviet Union would not have collapsed.

The Soviet Union put the first man into space and had severe shortages of food and consumer goods at the same time. Because that's what central planning does. It causes priorities to be distorted. Whatever the central planning committee is focused on happens and everything else withers and suffocates.

On net it's a massive catastrophic loss, but the places where resources are directed, get them in abundance. (This is also why it's extremely susceptible to corruption and favoritism.)

I'd say it was a data point. There is probably more concrete lessons to be learned before giving up on (admittedly complex and fraught) central planning

Especially given the fact that we have, in theory, the order of magnitude of computing power necessary to calculate an economy. But to implement it well would certainly be the most complex and titanic project in the history of computing, and even then it might fail for some unknown reason.

Worse yet, a failure where the wrong people accumulate wealth will just look like planned corruption to the masses. Sadly one reason why central planning often is accompanied by censorship

It has often occured to me that one of the rationale to start a colony in Mars is that wealth (at least on Earth) is mainly distributed among the wrong people, which is why so many short-sighted decisions have been made collectively by us who dominate the planet. And real innovations and progressive things are super rare. And they are often accompanied by (unnecessary) tragedies or sufferings that don't have to be that way. Theatres and facades are the norms.

But I now have come to the realisation that wrong is perhaps only in the eye of the beholder.

And there will always be censorship in a society as long as you look hard enough for it. Probably a feature not a bug though.

Maybe it just demonstrates this is the best we get collectively with neural circuitries like ours.

I have lamented that a model of censorship is equivalent to free information consistently cherry-picked. In terms of censoring misinformation, there is potential benefit. It needs a system of public trust, however

Yes. You would either need massive censorship or insane levels of technical transparency. In both ways it's a huge technical challenge.

What if the USSR had machine learning-powered central planning, fed by IOT data collection across all supply chain in all industries.

Shall we try again?

It was tried in the 70s in Chile [1], but it wasn't anything the odd CIA-backed military coup couldn't put a stop to.

[1]https://en.wikipedia.org/wiki/Project_Cybersyn

Stafford Beer, the man behind it, is a fascinating fellow. Read his page and maybe a paper by him if you get the chance.

It would have failed faster?

Central planning is 100% an engineering problem. Mises didn't call it the "Calculation Problem" for nothing. As long as economic complexity grows slower than processing power, there will be a point where central planning will be doable.

Of course, there is also the problem of incentives, but in the Soviet Union the problem of incentives was really only relevant as far as higher-ups reporting data, Soviet workers worked as hard and as well as any.

That is not to say that central planning directed by a centralized Leninist state is something that I think is desirable (or even something that would be theoretically desirable), but massive computing power is a quantum shift in the possibility of centralized and decentralized planning. The fact that it worked as well as it did in the USSR through pencil and paper is stunning.

Computers can’t determine economic priorities. In a free market demand does. In a planned economy politics does.

Computers are essentially useless for a planned economy. All they can do is provide quicker orders for factories to produce the wrong things in the wrong quantities.

The free market does not determine economic priorities. People, making choices with limited resources and having to priorities, determine economic priorities. The free market is then able to compute, using billions of people making operation to optimize in exchange for profit, what is the most optimal way of organizing production, which actualizes prices, which allows consumers to actualize demand. This process is prone to massive inefficiencies such as the business cycle, and has a cost to the consumer which is profit. If one was able to reproduce it without recessions and depressions, and with a rate of profit of zero, the economy would have much higher efficiency and growth.

In a planned economy, consumers, be it governmental consumers or average workers, make choices with limited monetary resources about what should be purchased. If there is too much demand, then you end up with a shortage, until the next 5 year plan in which the central planners of the politburo look over the shortage and surplus, do some predictions, and re-allocate supply as well as actualize prices. This is an issue, because there is a 5 year updating period, and planners are prone to error as well as erroneous information.

If your planners had accurate real-time information, and were able to re-calculate the economy every day or so, then the issues of over-supply or under-supply, "orders for factories to produce the wrong things in the wrong quantities" would be fixed.

Maybe this stems from a misconception according to which, in a planned economy, there is no money or no consumer, no buyers and sellers. It is not so. Planned economies have money, they have sellers and buyers, and so on. What is being replaced is the role of the investor and capitalist, which decides where to allocate resources. Therefore, the issue is not in calculation of end-consumer demand, that is the same as in capitalism, the issue is in organization of production. A Marxist would formulate it by saying that the Soviet economy has not abolished the commodity form.

If the Soviets were able to make a 5-year plan every day, and had instant and perfectly accurate supply information, the vast majority of economic inefficiencies would have disappeared. Or, in other words, the factories would have quickly updated orders to produce the things the people want in exactly the quantity they want it.

Very intriguing! Thanks for putting these ideas in such neat words. I somehow felt enlightened reading them. It is as if what you are describing is not just economy but the whole notion of "cost structure" in the philosophical sense and how the universe and all living things come to be. Wow.

When Gorbachev took over, they realized the government actually had no mathematical model of how the economy of USSR worked. Politicians had been basically been allocating resources blind for decades. They tried to shift to a more data driven approach toward the final years of the USSR, but it was way too late to have an effect.

Basically USSR collapsed for trying to match USA by overspending. Do you realized that is going on with China as well. Given their wastage is several magnitude higher than most western countries, go check what is happening to their reserve in the last 3 years. Also, seems like mother nature is compounding those wastage as well. Maybe we get to see Chernobyl 2 and Agfhan like what happened to USSR?

People keep getting better his wrong. The USSR stagnated. It did not collapse. The collapse was actually caused by going too capitalist.

China isn’t going too capitalist too fast. Nor is it stagnating.

And let us not forget that when the USSR stagnated it has had decades of success in science, education, space exploration etc.

It never had decades of economic success. It’s economic growth was slow, it’s living standards poor.

Sure the central planners prioritized some gaudy projects like a space program, but at the expense of its poor population.

Perhaps that has something to do with having lost millions during WW1, revolution and WW2. Eastern Europe and China were hit the hardest during WW2 and didn't have the massive US economy (which was unharmed in both WW1 and WW2) to help the rebuild (marshal plan). The young people who died during WW2 would otherwise have contributed to the economy during the 50s, 60s and 70s. In fact, you can still see the damage of WW2 in the Russian demographics today.

Of course it didn't help that the soviet politicians constantly mismanaged the economy at the same time. Also interestingly, Mao was constantly screwing up the economy with his uneducated policies that he was hugely unpopular internally with the CCP. However Mao was hugely popular with the common people that the CCP had to just put up with and put out the fires he starts. (reminds me of Trump today...)

That's super false. They went from a backwards agricultural society with actual serfs to an industrialized world power in 3-4 decades despite a nazi invasion killing 20 million russians.

That sounds like decades of economic success to me.

You forgot the tens of millions killed deliberately by the USSR itself, fir one example.

https://en.wikipedia.org/wiki/Holodomor

Every first world country went from a backwards agricultural society to a far more advanced one during that century. Look up the dust bowl or even better the state of US agriculture during the early 20s.

Without central planning, the people’s of the Soviet republics would not just have been free, they would have grown wealthier

> You forgot the tens of millions killed deliberately by the USSR itself, fir one example.

Please keep in mind that the current, mainstream political Western discourse is seriously contemplating whether or not we should re-open, sacrificing a few million people on the altar of economic growth.

This really put the discourse in perspective for me, but I suppose we've made decisions like this every so often in the course of governance for a few decades now. I hope we continue to pursue all fundamental rights described by "Life, Liberty, and the Pursuit of Happiness".

Russia has an economy the size of New York state. In a country of over 140 million people, that is no one's definition of success. Soviets didn't leave them much beyond a decaying nuclear arsenal and bunch of ugly buildings.

>> Russia has an economy the size of New York state.

According to Wikipedia it is 2.6 times more than New York state:

- New York's gross state product in 2018 was $1.7 trillion.

- Russia has a GDP of $4.519 trillion in 2020

>> In a country of over 140 million people, that is no one's definition of success.

It's half GDP per capita of USA, but USA has half of GDP per capita of Macau or Qatar. Ireland or Norway have a better GDP per capita than US. And if there was no wealth transfer between "rich" US states and "poor" US states, those would be much poorer, and would become comparable to Russia.

You're taking PPP figures instead of nominal figures. That's not necessarily wrong but it should be mentioned and explained. Based on nominal figures both new york state and russia are around 1.6-1.7 trillion.

PPP is incredibly misleading and is often useless as a comparison mechanism. The same car in the USA isn’t somehow cheaper in China (quite the opposite, Russia also), a lot of adjustments made in PPP are straight out differences in quality of life expectations.

Russia's economy today is smaller than during the USSR (adjusted for inflation), by quite a bit. Not comparable at all.

Compared to 1917 Russia? Huge success.

From 1917 until the 60s or so they vastly improved the lives of average Russians.

From the 70s until 1989, not so much, and then after 89 you can't really put it on the USSR since it didn't exist anymore.

Introducing modern technology into an economy can do that. Look at all the East Asian nations such as Korea. On the whole, Russia's communism seems to have been a big drag on progress.

Lots of countries have developed. South Korea went from bombed-out wreck to one of the richest countries of the world. There's nothing impressive about Soviet development.

Let's assume USSR stagnated.

When everyone else moves forward and you 'stagnate', for all practical purposes you are moving backward from where you could have been.

I can't believe that in 2020 there are still people defending a regime that murdered over 50 million people and ultimately collapsed due to an inherently flawed economic philosophy. And the argument is that the USSR was "too capitalist", and that's why it failed.

I get trying to move the Overton window, but this is too much. I'm hoping this is sarcasm on overdrive and I just missed it.

I'm talking about resource allocation, not central planning.

If Pooh Bear decides tomorrow that China will learn how to build pool floats then China will learn how to build pool floats. Everyone falls in line. If the leader of a western democracy wants to do something similar they have to convince people to want to do it and that takes time, policy carrots/sticks and propaganda/indoctrination.

The US military budget for 2020 is 720 billion dollars. That doesn't even include DHS. Most of it's going to bullshit, like Abrams tanks that the army doesn't even want.

Our problem isn't that we're too free and liberal, our problem is that we're too crooked and stagnant.

Granted...my cynical side is tempted to say, this is a backhanded way to get proper economic stimulus injected into the economy from fiscal conservatives...but graft is graft and in general is less efficient that a proper stimulus.