Friday, February 01, 2019

Central planning in Star Trek

In my previous post, I talked about how Rick Webb, in his essay, The Economics of Star Trek: The Proto-Post Scarcity Economy, doesn't understand market economics. In addition, Webb also doesn't understand central planning.

Webb believes that the presence of individual choice decisively disproves central planning. He concludes, "The Federation is clearly not a centrally planned economy"* presumably because "[i]ndividual freedom of choice is very obvious." Webb claims to know that individuals have freedom of choice because "[e]veryone chooses their careers." Well, everyone, that is, who has made it in the glamorous and dangerous world of interstellar exploration. Gene Roddenberry et al. are not going to show us all the people who wanted to be starship captains but didn't get into Starfleet Academy.

*Italics omitted

(One hilarious irony is that in Star Trek, like every other military, even in the most fanatical market economy, the United States, Starfleet is most probably a centrally-planned organization. As far as I know, no one has managed a military organization with market economics: the 1st Infantry Division is not a profit-maximizing economic actor. If Webb can see a market economy in a military, he can see a market in anything.)

We cannot conclude that the Federation lacks elements of central planning. Not just because the Federation is a fictional society and has no underlying economic organization at all, but also because we don't know the the actual contingent problems a proto-post scarcity society would have to solve, and we don't know the historical context, i.e. the existing political and economic power relations, they have to solve them under. Even if we were to assume the present-day United States leads the way to a proto-post scarcity society, we cannot reliably project more than a some few tens of years; we definitely cannot predict what would happen three centuries from now.

Still, it's important to be more definite about what we mean by "central planning". There is at least a grain of truth underneath Webb's idea. It's logically impossible to run a market economy without some households making some choices, and it is logically possible to run a centrally planned economy with households having no choices at all. But just because it's logically possible doesn't mean it's necessary or even desirable to run a centrally planned economy exclusively by pointing guns at people's heads and telling them what to do.

How much economic choice people have is dependent first on the wealth of a society. Until the middle of the 20th century, the vast majority of people in the United States were farmers. A person could choose their occupation, so long as almost all of them chose to be farmers. And if we look at the beginnings of our capitalist market economy, most of these farmers had to be rather violently pushed into selling their labor on the market (see, e.g., The Invention of Capitalism by Michael Perelman.) Not having a lot of choices doesn't mean we're not in a market economy. Similarly with the Soviet Union and mid-20th century China. Both were extremely poor societies — immediately after the revolution, Russia was running its entire productive capacity and railway transportation on firewood — so there were just not a lot of choices to be had, regardless of economic organization.

On the other side, in a very rich society, at least some people will have a lot of choices, regardless of economic organization. And rich or poor, people in high status and high demand jobs will be those who want those jobs. Regardless of organization, it's pointless and stupid to force a person to be a doctor if there are 10 other people, just as intelligent and hard-working who want to be doctors. We really can't tell the form of economic organization just by looking at a few people in a high status jobs.

Just as Webb doesn't understand market economics, he doesn't understand central planning. His ignorance is perhaps more understandable: there have been only two societies — the Soviet Union until 1980 and the People's Republic of China until the 1970s — that have engaged in central planning in a big way, and both of them were not only poor, but fighting cold and proxy wars against the United States, so information about their economies is hard to come by, and propaganda about our "enemies" easy to obtain. Still, a little common sense can go a long way.

There are two basic types of central planning: command economics and state ownership. A society can combine these two types and can combine them with a market economy. Central planning and markets are not logically exclusive.

The first type of central planning is a command economy. In a command economy, the government just tells people what to produce and where to distribute it. The precise form of a command economy depends on the specific technology of production and economic problems to be solved. In a very poor mostly subsistence economy, the government will decide they need more tractors, round up a bunch of farmers, tell them to build and operate more tractor factories, and give the tractors to those who are still farmers. If Ivan or Chen doesn't want to leave his farm and build tractors, well, too bad: do it or go to jail. (Note that most modern "market" economies kicked off industrialization just as coercively. They simply dispossessed a bunch of farmers or expropriated the commons necessary for their subsistence viability, and said, "Hey, if y'all want to get money for food, come build and work at this factory over here." Sure, they had a choice: work or starve.) In a richer country, the commanders have a wider range of options, and their actions will depend on the actual problems to be solved.

A country usually employs a mostly command economy when it is fighting a "big" war. i.e. a war that requires the country to employ almost all of its surplus to fight the war. Every country, Allies and Axis, the capitalist United States and the communist Soviet Union, ran the Second Imperialist War as a command economy. This type of command economy works directly at the firm level: the central planners look at the existing productive capacity of firms, and tell each firm, "You produce this many tanks, you produce this many planes, you produce this many bullets, bombs, and shells, etc." There's no point in the central planners telling each individual where to work: each person works at one of the local factories, or they starve or go to jail. Even though there's usually a severe labor shortage in wartime, workers do not engage in market competition for wages. They take the pay and/or rations set by the government. This kind of economic organization appears very desirable. As I note above, every country — capitalist and communist — in a "big" war has employed command economics to a significant degree.

Modern corporations and military organizations have an internal command economy. Although corporations compete with each other in a market economy, internally, almost every corporation in every country is a centrally planned command economy. The employees do what the central planners, i.e. the board of directors and the senior management, tells them to do, and they use the resources the central planners give them to do it. Again, a corporation that tries to structure its internal organization along market lines risks failing as spectacularly as Sears. There are employee- and employee/customer-owned corporations, but that just means the employees (and customers) choose the commanders: these corporations are still internally centrally planned command economies.

The second form of central planning is one where the state owns and operates firms and/or controls a substantial amount of financial capital. One example is Norway, with both state ownership of significant firms and a large sovereign wealth fund.

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