Hayek’s Son says:
October 2 2017 at 6:22 pm
It’s also your choice to not actually answer the question I asked, which can be distilled to; how can a planned economy (state owned monopolies) ever collect enough data to correctly match demand with supply?

Compared with, say, a market?

Hayek said it can’t, but I’m interested to hear why you know better,

Richard Murphy says:
October 2 2017 at 7:18 pm
We always, invariably, have incomplete data

But let’s be clear, the microeconomic view from the market is always more incomplete than the macro view from government because the latter takes externalities into account and the former does not, meaning the government view is invariably going to give better results than a pure market can.

Both will be suboptimal

But one is vastly better than the other, and it’s pure markets that come out badly

I am not saying there is no role for markets, by a long way. But that can only be within the constraints of a robust regulatory environment

13 thoughts on “Rilly?”

  1. How the Hell do externalities fit into the argument? Is this yet another concept he doesn’t understand? Is he saying that the apparent failure of the Venezuelan planners to match supply and demand of toilet paper is because they were considering the externalities ie they wanted the people to cut down on excrement?

  2. “the Venezuelan planners …. were considering the externalities ie they wanted the people to cut down on excrement?”

    Well, they were also planning to reduce food supplies available from the shops. So they foresaw a reduction in demand markets wouldn’t have predicted.
    Another win for the efficient Venezuelan planned economy, don’t you think?

  3. That a government is more responsive to externalities is most probably correct. However, that is all that interests it. And no ly those externalities in which it chooses to take an it erect. In other words, Government actually has no interest at all in the data that matches supply with demand. Which is just as well really, because Hayek’s point is simply unanswerable.

  4. Bloke in North Dorset

    The only externality the Venezuelan governmemt was interested in was the threat to their position of power and entitlement, like all socialists., and they have used any means stbheur disposal to maintien it.

  5. The Pentland Firth has two ferry companies that will take your car across – one subsidised by the State and one private operating without public subsidy.
    One externality from ferries is pollution. Guess which one has the least polluting vessel?

  6. Diogenes

    It’s the standard argument about regulating externalities – where the social cost or gain is different from the private cost or gain.

    On one level it is true that just markets can be sub-optimal. Which is the point of regulating stuff like pollution. This is the bit that our host agrees with. Unfortunately the Murphmeister then extrapolates from this that the State should be planning stuff. For which there is no support.

  7. ‘But let’s be clear, the microeconomic view from the market is always more incomplete than the macro view from government because the latter takes externalities into account and the former does not,…’

    And where does the Government in its dizzy macro heights get sufficient data about externalities to know how to internalise them?

  8. But let’s be clear, the microeconomic view from the market is always more incomplete than the macro view from government because the latter takes externalities into account and the former does not,…

    I wonder which system will better manage supplying the number loaves of bread required in Harlow this week, the ‘sub-optimal’ market or central government?

    And I love the “but let’s be clear” bit – the classic politician phrase indicating the lie or evasion to follow.

  9. The USSR, upon abolishing prices, had to smuggle Sears catalogues in order to absorb their prices to get their economy working. Of course this was doomed to failure, free market price signals are imperative to communicating supply and demand, and the USSR soon found itself with hangar upon hangar of shiny new tractors with no grain with which to harvest.

    Mr Murphy makes the classic mistake in assuming that the government comprises hyper intelligent, benign beings, far superior to Joe Public and his unwashed ways. The reality is that the government is often the refuge of calamitous dolts who cannot cut it in the public sector, and are therefore the last people who should have their hands on the economies levers.

    Does he believe with a straight face that simpletons like Diane Abbott and Jeremy Corbyn are capable of assessing the externalities of the sum of billions of individual transactions? The idea is laughable on its face.

  10. “the government view is invariably going to give better results than a pure market can.”

    And that, my friends, also explains why governments are invariably much better-managed than private enterprises.

  11. Mr Murphy makes the classic mistake in assuming that the government comprises hyper intelligent, benign beings, far superior to Joe Public and his unwashed ways.

    Even in the fantastical situation that the Government did comprise of the most intelligent people in Britain, the job would still be way beyond their ability.

  12. To plagiarise @Bongo, October 3, 2017 at 8:52 am

    Edinburgh has several large theatres that will offer to entertain you – one private operating without public subsidy (Playhouse) the rest subsidised by the State.

    One externality from theatres is audience. Guess which one has the largest audiences & most West End plays?

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