4 The “Inevitability” of Planning

The usual tactic of planners is to say, not that planning is desirable, but to say it is necessary since competition has been eliminated through technological advances. This is essentially a Marxist idea- the concentration of industry and capital would eventually lead to monopolies. While this has happened, the question is whether it was historically inevitable, or the result of policy decisions.

The basic argument is that technological advances are of such a nature that only the biggest industries can afford to keep up. This lowers their working costs and allows them to produce commodities more cheaply and efficiently than their competitors, and drives the competitors out of business until there is only one, or maybe a few, giant firm left.

This argument singles out one effect sometimes accompanying tech progress, but disregards others working the opposite way.  It also ignores that this hasn’t happened in many fields.

It should be noted that monopolies are frequently the product of other factors, such as collusion and public policies. Once those agreements are invalidated and the policies reversed, competition returns.  

Germany fostered the creation of industrial cartels by deliberate policy. It did so by the instruments of protection, but also inducements and ultimately compulsion. It did so specifically for the regulation of prices and sales, and it was undertaken in service of “planning”.

How does competition work in a complex system?

The complexity of our system is so great that no one person or small body of people can grasp it. This makes decentralization imperative. Once decentralization is necessary, coordination that leaves the agencies free to adjust their activities to the facts which only they can know and yet brings about a mutual adjustment of their respective plans. Coordination in a complex system can’t be centralized because no one can consciously balance all the considerations bearing on the decisions of so many individuals. Such coordination can only be effected by arrangements that convey to each agent the information he must possess in order to effectively adjust his decisions to those of the others. The price system is what conveys this information under competition. But the price system will do this only under competition, that is to say that the individual producer must adapt himself to the price system because he can’t control them.

The more complicated the system becomes, the more we need the impersonal mechanism of the price system for transmitting the relevant information.  

Centralized planning is clumsy, primitive, and limited in scope, and our system would never have been able to reach such a level of development if it were up to a small body of men to direct it.

There is another argument that says we can’t take advantage of certain technological advances unless a monopoly is granted. There are some instances where this might be true. It’s conceivable that the British automobile industry might supply better and cheaper autos if everyone in England were compelled to use the same type of car. The use of electricity for all purposes might be cheaper than coal or gas if everyone could be made to use only electricity. It is also conceivable that some new invention in a field would come along whose adoption could only happen through the restriction against other alternative fields. None of this renders progress only inevitable through central direction.

But why are so many technical experts on board with the idea of central planning?

Hayek believes that the ideals of any one technical expert could be realized if sufficient resources were invoked towards that goal. It is the frustration of his ambitions that makes him revolt against the existing order. He truly believes that life would be better if his goals could be realized, and he believes that he could convince the powers that be in a planned economy of the particular benefits of his goals. What he perhaps doesn’t recognize is the trade-offs inherent in the endeavors.

“The lover of the countryside who wants above all that its traditional appearance should be preserved and the blots already made by industry on its fair face should be removed, no less than the health enthusiast who wants all the picturesque but unsanitary old cottages cleared away, or the motorist who wishes the country to be cut up by big motor roads, the efficiency fanatic who desires the maximum of specialization and mechanization no less than the idealist who for the development of personality wants to preserve as many independent craftsmen as possible, all know that their aim can only be achieved by planning- and they want planning for that reason. But of course the planning they clamor for can only bring out the concealed conflict between their aims.”

This unites almost all single-minded idealists. But it also makes those men who are most anxious to plan the most dangerous if they were allowed to do so, and the most intolerant of the planning of others.  

From the saint to the single-minded idealist to the fanatic is often only a step.