Wednesday, February 3, 2010

The Superhighway to Serfdom

Hayek’s point is not a new one and did not reveal any great revelations as far as economic thought is concerned. Clearly it is easy to lose all the small pieces when we get too caught up in watching the big picture. As many have pointed out a computer and the vast networks which we have created using them could possibly both watch the availability of resources and their most efficient uses; ensuring that the economy is running at its most optimal. Making corrections when necessary. Unfortunately, those computers would still have to be programmed to know what to look for and what to do when the price of good x changes. Its programming would have to be adaptive to keep up with the changes in our very dynamic economy. It would have to be aware of every possible change in every aspect of individual choice before it was made. It would have to be aware of how many people would want a cup of coffee a year in advance to ensure that just the correct amount of coffee was grown and roasted and shipped to Fairbanks so that all those who demanded coffee tomorrow could have their wants satisfied.

Since the computer could not be given the level of precognition required to effectively manage the economy through time it would have to take on risk. Risks that it would allocate too much effort to coffee production and not enough to ranching, for example. Its programmers would have to uses statistics to try and reduce the level of risk which would be associated with these temporal decisions but each of those would have a limited level of certainty. Perhaps the computer would only be 65% certainty that 10,000 people in the interior would want a coffee in the morning. How would we tell the computer to account for that? If we are wrong we would have people angrily exclaiming their unsatisfied demands for coffee in the streets. In the Great Coffee Riots of 2023. Clearly, this computer or any organization attempting to manage the economy would have to become comfortable with the idea that it will be doing a poor job. And more than likely find that as it more tightly tried to control markets the more they did not conform to its preconceptions of their function.

It would be possible to manage the economy perfectly. But no one is willing to propose what is necessary to have that level of control. A level of control that would remove our basic freedoms and tell us (not ask) our preferences. If every aspect was controlled from the moment we were born to who we married, to how many children we could have, were we could live and what type of work we did. Then every event in the economy would no longer have to be predicted from inaccurate aggregates. It would be a known fact. Then our computer could just ensure the XY and XX got married and XY junior would be a plumber like his father. They would all drink exactly one cup of coffee in the morning or be shot. It would be the perfectly controlled economy. Innovation and anything that would be seen as advancement would have to be stamped out as the economy could not accommodate any change in the allocation of resources. You could not have an Ipod because it would kill the CD industry. In the end it is clear to see how trying to control markets puts us on the superhighway to serfdom.


  1. A system that tries to rid spontaneity is all-around scary and worrisome.

    For example for a couple years during my early elementary education I when to a very structured totalitarian school. My teacher felt that knowledge should be presented slowly in a very structured way. We would spend so many minutes on each subject and worst of all this teacher felt that no student should get ahead or behind so by default she would teach at the slowest pace ever (and her teaching it self consisted of 100% worksheets busy work). Out of boredom I started a rebellion against this lousy over controlled system and found that I would soon end up being placed in a cubical with headphones on my head every day so I would not "disturb" the other students (I was in seven and in jail). One day my father came to see me at school and saw what was going on. He placed me into home school on the spot. After I was shifted into home school I found that I could learn at my own pace (which could fluctuate day by day) and the lesser structured system proved to be one that could contribute to my learning and education.

    I understand though that each and every person is different, some love randomness and spontaneity others despise it(if you wonder where you stand take a Myers Briggs test...I felt that particular categorization made the most sense compared to the other three or four which where more iffy). Those who love order may have loved my Chinese prison camp education experience and and would have preferred it to their own.

    However reality must be factored into this equation the truth is that the world is full of order and it is full of chaos both are needed for us to function and to create working systems.

    The problem is force. Yes a balance must occur between order and spontaneity but this should by no means be forced in to a system it should come naturally. Indicators can show us how things change (whether or not the change is random or predicable) and the best thing that we can do to avoid the coffee shortages of 2023 is to let these changes happen and then respond at our own free will; as people will see opportunities and can create a multifaceted pluralistic system that drives innovation rather than crushes it as with a forced system.

    Indeed you are right this point is simple in fact its so simple that its hard for most people to understand.