Notes Oct 31 2007

October 31, 2007 § Leave a comment

Feels like the war in Iraq (Iran) is a smoke screen to hide what is going on with the economy – many with real wealth taking it out of the system and then out of the country.

Our leadership is caught wanting to take over the ship and run the same course

This prevents us from dealing with the real agenda: energy, climate, wealth distribution, population, and related enabelers, such as the proper use of technology – IT, nanotech, and biotech..

From The Economists’ Voice

Summary

Joseph E. Stiglitz presents his plan for getting the United States and the Developing World to address global warming, and argues that by failing to address this problem, the United States is implicitly subsidizing energy usage and engaging in unfair trade practices.

From Informed Comment

The Democrats have been facing the dilemma that they are blocked from doing much about Iraq. This is something they can do. Cut off funding for the embassy and force most of the diplomats home. This is the way to start ending the war.

Brad deLong is discussing Hayak. Grasping Reality with Both Hands Brad DeLong’s Semi-Daily Journal 

I am a liberal Keynesian and a social democrat–but within economics even liberal Keynesian social democrats acknowledge that the Austrians won victory in their intellectual debate with the central planners long ago.

My understanding is that Hayak was right about central planning, but failed to take on the fact that corporations become the central planners, especially as they grow in size larger than states, and create alignments with politicians in order to control. Dos Brad see this?

By page 87 the reader is well-prepared to agree with Scott that the map is never the territory, and that what the state “sees” is only a very small slice of reality.

Scott’s critique of “high modernism” as a mode of urban planning focuses on Brazil’s capital, the now more than one generation-old planned city of Brasilia. As far as they possibly could, the designers of Brasilia tried to achieve the spatial segregation of different aspects of life–housing in a different place from work, recreation, traffic, public administration in different districts as well–as high-modernist guru Le Corbusier had commanded.

And, good sentences for GardenWorld

Scott draws heavily on the excellent work of Jane Jacobs to criticize this planned, surprise-free, every-apartment-building-looks-the-same high-modernist order of pre-planned Brasilia. Jacobs argued that rigid spatial segregation of functions made for visual regularity from the bird’s-eye view of the architect but made the city damn hard to live in. By contrast, it is the mingling of residences with shopping areas and workplaces that makes an urban neighborhood interesting–and livable. And this urban diversity of uses cannot be planned by the high-modernist architect. At best it can be planned for–by the government providing a framework and infrastructure for urban development instead of specifying land use down to the last square centimeter.

As Scott argues, even planners who recognize diversity will never plan it. You cannot spend your life at the office, and bureaucratic budgets are limited. Thus:

…the logic of uniformity and regimentation is well-nigh inexorable [in comprehensive urban planning]. Cost effectiveness contributes to this tendency. Just as it saves a prison trouble and money if all prisoners wear uniforms of the same material, color, and size, every concession to diversity [in the urban plan] is likely to entail a corresponding increase in administrative time and budgetary costs…. [T]he one-size-fits-all solution is likely to prevail (pp. 141-2).

He quotes scott’s analysis of anzania, another good GW resource.

Nyerere believed that Tanzanians should live in villages–rather than scattered across the countryside where agricultural resources were to be found–because:

… unless we [live in villages] we shall not be able to provide ourselves with the things we need to develop our land and to raise our standard of living. We shall not be able to use tractors; we shall not be able to provide schools for our chldren; we shall not be able to build hospitals, or have clean drinking water; it will be quite impossible to start small village industries, and instead we shall have to go on depending on the towns for all our requirements; and if we had a plentiful supply of electric power we should never be able to connect it up to each isolated homestead (p. 230).

And what if the farmers did not want to live in villages, or did not want to grow the crops that Nyerere’s bureaucrats back in The House of Peace thought that they should grow? Then: “[i]t may be possible–and sometimes necessary–to insist on all farmers in a given area growing a certain acreage of a particular crop until they realize that this brings them a more secure living, and then do not have to be forced to grow it” (p. 231).

The consequences of Nyerere’s policies were predictable. As Scott summarizes:

Peasants were… shifted to poor soils on high ground… moved to [houses near] all-weather roads where the land was unfamiliar or unsuitable for the crops… village living placed cultivators far from their fields, thus thwarting crop watching and pest control… the concentration of livestock and people… encourag[ed] cholera and livestock epidemics… pastoralists [found that]… herding cattle to a single [village] location was an unmitigated disaster for range conservation and pastoral livelihoods…. [Bureaucratic] insistence that they had a monopoly on useful knowledge and that they impose this knowledge set the stage for disaster… (pp. 246-7).

The only bright spots were “the Tanzanian state’s relative weaknesses… as well as the Tanzanian peasants’ tactical advantages, including flight, unofficial production and trade, smuggling, and foot dragging” which “combined to make the practice of villagization” less destructive than it might have been (p. 247).

Brad continues,

Hayek’s adversaries–Oskar Lange and company–argued that a market system had to be inferior to a centrally-planned system: at the very least, a centrally-planned economy could set up internal decision-making procedures that would mimic the market, and the central planners could also adjust things to increase social welfare and account for external effects in a way that a market system could never do.

Hayek, in response, argued that the functionaries of a central-planning board could never succeed, because they could never create both the incentives and the flexibility for the people-on-the-spot to use the immense amount of knowledge about the actual situation that only people-on-the-spot can know. As Hayek argued in his “Impossibility of Socialist Calculation,” the enormous amount of dispersed knowledge that individual producers know and act on in a market economy can never be mobilized by a central planner. That a central planner could–that he or she could ever “possess a complete inventory of the amounts and qualities of all the different materials and instruments of production” available to the manager of a single plant–is “a somewhat comic fiction.”

Still, the inability of Hayek to see that planning was moving to the corporations. Brad continues,

So how is it that Scott can see the trees and the overall forest so very very well, but does not see his own intellectual roots?

…An approving reference in a footnote to Hayek’s skepticism about the usefulness of economic theory (p. 427); a reference to the “curious unanimity” between “such right-wing critics of the command economy as Friedrich Hayek and such left-wing critics of communist authoritarianism as Price Peter Kropotkin” who call, in Albert Hirschman’s word, for “more ‘reverence for life’… less straitjacketing of the future… more allowance for the unexpected… less wishful thinking” in economic development (pp. 344-5).

and he quotes Scott,

As we shall see, the conclusions that can be drawn from the failures of modern projects of social engineering are as applicable to market-driven standardization as they are to bureaucratic homogeneity” (p. 8).

Now comes, from Brad,

How can market-driven standardization have the same consequences as the commands of architects who have never lived in the cities they design, or as the collectivization of Soviet agriculture, or as the forced “villagization” of Tanzanian peasants?

He then says,

Woven into the critique of agricultural development programs are asides about the destructiveness of DDT, the effect of sterile hybrid seeds in diminishing the autonomy of the farmer, the vulnerability of American monoculture farms to pests and epidemics, and the pre-packaged relatively-tasteless–but overwhelmingly cheap–rubber tomatoes developed to be machine-sprayed and machine-picked. However, people bought (and buy) rubber tomatoes because they are cheap–because relatively little social labor is required to produce them. Overall we have the “unparalleled agricultural productivity” of the industrial West, in which the U.S. is a major exporter of food products even though its economy now employs fewer farmers and farm laborers than gardeners and groundskeepers.

Then comes the startling quote from Scott (to which I agree but Brad?)

The destruction of metis (practical wisdom, gr.)and its replacement by standardized formulas legible only from the center is virtually inscribed in the activities of both the state and large-scale bureaucratic capitalism (p. 335).

But then , the argument is not drawn to it conclusion. It gets muddled. You have to read it.Grasping Reality with Both Hands Brad DeLong’s Semi-Daily Journal.

Then come comments: (…represent a new commentator)

You speak as if “high-modernist planning” and “market-driven standardization” were antonyms….No city in the world lays out its streets or collects its garbage without some form of state planning, and none – I imagine – would attempt it without someone actually taking a look at the lay of the land and dispersal of residents

……….Equally, as anarchists have also long argued the capitalist firm is organised like a dictatorship, and the bosses centrally plan the activities of the work force. Anarchists have stressed that this monopoly of power is not only inefficient, it produces oppression and exploitation (and so class conflict). Scott discusses this in his book, incidentally. In other words, the so-called “Austrian” critique of central planning is applicable to the capitalist firm. But, of course, those defenders of authoritarian social structures Hayek and Mises did not recognise that. Apparently, freedom stops at the workplace door…

………….I don’t have detailed knowledge and write subject to correction, but my guess that the philosophical underpinning of the New Deal agriculture programs was more like Deweyan pragmatism in a weakly democratic socialist / populist version than it was central planning. The attempt was to help small farmers stay in business, and over the decades market forces drove the smaller ones off, but IIRC the corporatization of agribusiness only began with Eisenhower and was a deliberate (though not quite open) program of his.Dewey explicitly proposed a two-way dialogue between experts and populace different than the top-down method even of Swedish social democracy, and as a democratic popular movement, New Deal Democrats couldn’t refuse to listen to small farmers — some of their core voters.

…To go further, at the level of high-level finance, “market forces” function much like central planning. Usually they operate in collaboration with government and central banks, but this is more because finance controls government than the other way around. (I am also convinced that the control of media by finance has a lot to do with the “why oh why” questions Brad always asks. We have stupid reporters because the media market wants stupid reporters, and selling advertising and manipulating elections are important goals). Whenever there’s a disaster, I look for sophisticated new financial innovations: Enron, LTCM, and now the housing crisis (subprime loans).

…. opening an essay about the perils of central planning with an example of failed private sector planning in the forestry sector seems odd. Rather like Friedman (not Milton) using “Lexus” as an example of heroic entrepreneurial thinking in a book in which Japan is held up as an ossified hierarchical society.

…. I think that you have severely misused or even misunderstood the supermarket tomato. I know that you have a major weakness for rhapsodizing the plenty of industrial agriculture, and I would agree that a world that contains shippable tomatoes is a better one than one in which tomatoes are a 3 month/year treat for most Americans. But I would not agree that the “rubber tomato” exclusively is a preferable substitution – and thanks to centralized capitalist planning, that’s what we had in American for close to 50 years. Americans, with their metis, did not _choose_ cheap rubber tomatoes to the exclusion of local, ripe ones (which are scarcely more expensive when in season) – they had rubber tomatoes forced upon them, even in high summer.

…….. Libertarians and free-market conservatives want private automobiles, suburbs, minimal or no zoning, and more highways. But road building is state activity, and it’s planning.

……   Scott started his career as an anthropologist interested in the Southeast Asian peasantry. His best known book, and it is good, is The Moral Economy of the Peasant. Scott has been very interested in how peasants resist modernization, particularly in colonial societies. Among the things that he has seen as imposed by the center are individualized systems of land tenure and resource allocation as opposed to traditional village communal allocation of land and water resources.

My guess is that the people who drove that system were basically corporate types, or rather agents of wealth who use government or corporations depending on advantage.

If centralized planning always fails, then why are the most successful corporations in the world so damn big? And why are they so hierarchical? In the world of market competition, why don’t they run aground and fail once they get to be larger than a few hundred employees?

I would argue that they do fail, and they suboptimize.

Hayek’s arguments about dispersed information are usually dumbed down by the right to use as a knock against any form of state planning. But the same knock can be made against centralized planning in the private sector in a market economy. It’s not impossible to overcome these problems in either sector, just difficult, especially if too much power is concentrated in the center.

….Scott has Lenin say:

“We must learn to COMBAT the public-meeting democracy of the working people–turbulent, surging, overflowing its banks like a spring flood–with iron discipline while at work, unquestioning obedience to the will of a single person, the Soviet leader, while at work.”

Progress Publishers, Moscow 1970 (reprinted from Volume 27 of his collected works) p36 has him saying:

“We must learn to COMBINE the “public-meeting” democracy of the working people–turbulent, surging, overflowing its banks like a spring flood–with iron discipline while at work, unquestioning obedience to the will of a single person, the Soviet leader, while at work.”

These comments are so interesting:

The information deficit Hayek based his critique on seems to be vanishing around us as we speak. Why do we need competition to convey information when computers do it for us? Why is local knowledge necessary when so much of our productive plant is run by almost infinitely flexible robots that drawn on computerized databases to perform increasingly complex tasks?

I added the following comment –

Hayek was against state planning
Corporations have become bigger than some states
The economists continue to criticize the central planning of governments but not of business.
Business is treated as  still in the category of local, but only because its aims are so narrow.
The problem is not really markets (which however cannot plan cities), but corporations which are organized to control markets.
The dichotomy between state and market is a false one. The crucial player we need to critique is the planning dominated monopoly seeking corporation.

From Interesting Times George Packer Online Only The New Yorker

Democrats drawn to Obama’s camp project onto him the sense of politics as a higher calling that Stevenson pioneered in the early nineteen-fifties (whether there’s much substance to it in Obama isn’t completely clear). In the American liberal tradition, this means almost certain defeat. Clinton, on the other hand, appeals to those liberals who want to sleep with power and its compromises and have made their peace with it. For this reason, she will always be despised by a significant minority of people on her side of the partisan line, in addition to everyone on the other side.

And do take a look at http://www.drawger.com/stevebrodner/

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