Tuesday, March 20, 2007

Planned Communities and Planned Economies

I was driving past one of those new upscale planned communities the other day and noting the irony that those who buy into the planned community are likely those who most strongly oppose a planned economy. Social engineering in one milieu is seen as desirable to those in their socio-economic niche, whereas social engineering in the other is held as problematic. It made me think of Otto Neurath, the economist/sociologist/philosopher who thought very hard in the 40s about how one could restructure economies to make them more fair.

When Aspazia team-taught a class a few years back with a colleague from the economics department, she was struck by how axiomatic it was asserted by the economist (who is left-leaning in her worldview) that government interference in the marketplace would always lead to negative unintended consequences. You could make small corrections in things, but you could not interfere with the machine without screwing it up. You had to leave the market be for the good of everyone.

It is certainly true that our experiments in planned economies have met with stunning failures in that the standard of living, the ecological state of the nation, and technological advancement in the countries with non-market economies lagged behind their capitalist counterparts. My question is why. Seems like it may be one of three possibilities:

1) It can't be done: Is it that economics is a purely descriptive science and a planned economy is like a planned physics, just something that is in principle not possible? Are the laws of market immutable in a way that we have only to react to them, making it impossible to shape the economy beyond some minor tinkering around the edges without upsetting the whole apple cart?

2) They did it badly: Could it be a matter of sophistication and the immaturity of the science? When we look at the examples of planned economies in the past, should we also think "hey, all the experiments in brain surgery from the 1920s through the 1960s failed, too"? Are economies just extremely complex systems with so many intricately connected moving parts that while it would be possible in principle to plan a successful economy, it takes more knowledge than we had/have to do it in a way that the "patient" lives?

3) It is possible in theory, but not in practice: Is the impossibility of a successful planned economy not due to the complexities of the economics, but rather due to the fact that economic and political realities are inextricably linked. Even if an economy could be successfully planned in a laboratory setting, when you throw in the fact that those who would manage the economy would be under the control of people trying to seize and solidify power through accumulating personal gain, through appeasing corporate interests, or by playing to the gallery to woo portions of the electorate, you would always undermine those working to promote the needs of the economy.

So is a planned non-market economy that provides a high standard of living for its people, a fair distribution of wealth, reasonable and humane work expectations and safety, and technological advancement in principle impossible, in principle possible but technologically beyond our abilities at this point, or in principle possible but realistically impossible? Or is there another possibility here?