Reply to post: Re: Inefficiency

Govt control? Hah! It's IMPOSSIBLE to have a successful command economy

I ain't Spartacus Gold badge

Re: Inefficiency

Harri Koppel,

Remember that we can't predict GDP even a quarter in advance, to any decent degree of accuracy. Most countries can't even get their GDP calcs right in the month after the quarter has ended. It's not uncommon for major, sophisticated economies to adjust their quarterly GDP data by as much as 0.3%age points - on figures that are usually less than 1% to start with.

It takes a few seconds from a Central Bank changing the base rate of interest for it to start affecting the market. Stock and bond markets first, then business and consumers' perceptions of how the economy is going. But the main effects of a change don't start to really change the real economy for around 3-6 months. And those changes can be slowly cascading through the economy for 2-3 years. All at a time when our figures on what the economy is doing are months out of date.

This is simply too complex to control. It's impossible to know what's going on in the economy now, let along what effect changes will make. And yet people think we can run a command economy?

Britain made a decent fist of it during World War II. It's the most effective example of a command economy I can think of. Most major combatants were doing the same, to various levels of success. But that was deliberately short-termist, aimed at an objective. And major nationalisations were inevitable in 1945, because so much of the capital infrastructure was worn out through over-use and under-investment. Then again, that seems to happen to most command economies, even when they're not fighting to win the biggest war ever.

Even if a command economy were desirable (which I don't believe it is), it's simply not possible. We don't have the data. Or the theory to know how to use it. Price is still the best way we've come up with to ration demand and signal what the market wants/needs.

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