Why Central Planning Fails

Central planners, whether Blue Team or Red Team, start from the assumption they can know everything. That means they can create a system that accounts for all possible variables and anticipates all possible combinations. When their preferred solution fails, they redouble their efforts believing the failure is simply due to not accounting for some variables. Once they factor those in and recompile their solution, everything will be perfect.

Alternatively, some other central planners will look at the failure and claim theirs is the correct formula and insist on it over the other team’s solution. For a century now, this has been the dynamic of American public policy. One side comes up with some new solution to a problem, a problem they most likely created, while the other side cooks up a solution, waiting for their turn. Both sides of the political class are sure they know everything or at least they can know everything.

The fact is, no person can know everything. No matter how smart or clever, they cannot possibly know or even contemplate the storehouse of knowledge generated over centuries of trial and error. This is the core argument in favor of conservatism and the primary rebuke of radicalism. When you set out to replace the traditional responses to the challenges of human society, you inevitably fall short because those institutions are the accumulated knowledge of generations of people.

An example of why this is so is this story from Florida.

A South Florida renter came home to find people living inside his house but the family illegally squatting inside said they are not leaving.

The owner of the property on SW 5th street and 49th Avenue said his friend William Ruiz has been renting the house for the past two years and recently started to move out while the house was listed for short sale.

Ruiz went on vacation for two days and said when he came back, he found the locks on the house changed and strangers living inside using his belongings.

“They’re using his bed, his dining room table…all his ornaments,” said homeowner Luis Camayd over the phone.

The man who moved in with his pregnant wife and toddler didn’t want to be identified but said he was scammed by a phony realtor.

He said a lease agreement proves he paid $3,600 to live at the home.

The man, he said, he gave the cash to is no longer returning phone calls.

“I’m really stunned because the house was set to be sold already. I can’t sell the house until we get them out of there,” said Camayd.

Normal people cannot anticipate such deviousness. It takes a special mind to think up a scam like this one. The people who sit around thinking about ways to manage their fellow humans may be sociopaths, but they are pikers compared to the guy running this scam. Confidence men have always been with us. The most famous is Victor Lustig who sold the Eiffel Tower for scrap.

Trimmers, corner cutters and confidence men are part of what evolutionary biologists refer to as the free rider problem. Religion, it is thought, evolved to help deal with this problem. Social customs are also aimed at mitigating these sorts of problems. Even with a 15,000 year head start, religion and culture struggle to keep up with the free loaders. A handful of school boys fresh from university have no chance to engineer a solution to these sorts of challenges.

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economics institute
9 years ago

I’ll admit to being partial to some central planning, provided the people doing the planning are competent . Maybe republicans make better planners than democrats.

Dutch 1960
Dutch 1960
9 years ago

Central planning fails because it is all about allocation, not efficiency. A free market is always adjusting allocations, features, quality, and price charged on the good or service, in an attempt to zero in on the moving target of what combination of costs and features is the most desired, at that particular moment. Central planning decides on features, stacks up the inventory, and then distributes it out. It has no feedback loop to make things more appropriate for the marketplace at any given moment.

9 years ago

The ONLY reason Socialism has NEVER worked is because it just hasn’t been done RIGHT yet. *sigh*
SURELY, everyone will be happy THIS time, with the RIGHT people “leading the way”.

Which brings me back to the “Punch in the face” meme.