Optimizing things in the USSR (2016)

http://chris-said.io/2016/05/11/optimizing-things-in-the-ussr/

by yoloswagins • 9 years ago

153 171 9 years ago

exratione• 9 years ago

There are a factions in the strong AI community whose members espouse the idea that a planned economy would become feasible given greater computational capacity and better software.

I have to think that the major objection to this is that the complexity of a socioeconomy also scales with computational capacity. Planning an economy is quite likely always beyond the capacity of any portion of entities within that economy, for the same knowledge problem.

Running up a rigorous approach to proof/disproof of that would be an interesting exercise, of course.

But it is an interesting example of the point that AI has a way of being all things to all people, when rigorous testing of ideas is not applied. For the would-be communists and socialists it is a road to a perfect planned technocracy, regardless of the fact that this looks less than feasible.

dragonwriter4• 9 years ago

There are a factions in the strong AI community whose members espouse the idea that a planned economy would become feasible given greater computational capacity and better software.

The calculation problem with central planning isn't really a calculation problem, it's a missing input problem. You can't optimize utility without a good input on utility.

Capitalism has significant problems by being forced to treat money as equivalent to utility, when it manifestly suffers decreasing marginal utility like everything else. This means people with access to more of it are likely to give up more for the same utility, which means capitalism overweights the preferences of the rich, and this gets worse the more effective capitalism is at optimizing by the one utility measure it has. But centrally-planned systems have even worse utility inputs, which no measure of computational power can correct; it's a GIGO problem.

The experiences derived from that basic problem are (one of several reasons) why market socialism is much more common in socialist circles than state socialism these days (market socialism has been competing with state socialism—which many market socialists have referred to as state capitalism on the view that, in it, the state becomes one big capitalist enterprise—the whole time, but the Bolsheviks managed to fix most popular attention on their particular form of state socialism, and capitalists found it convenient to ignore other socialist viewpoints in their attempts to demonize socialism.)

utexaspunk9• 9 years ago

The calculation problem with central planning isn't really a calculation problem, it's a missing input problem. You can't optimize utility without a good input on utility.

Historically that has been true, but couldn't technology help? Like, issuing everyone a smartphone and having them register all demand and make all purchases through it. The rest is a problem of keeping capital from aggregating at the top.

pm904• 9 years ago

Excellent post! Very well written an detailed in its analysis. Loved every part of it, especially in the end when the author speculates whether Central Planning could possibly work with the advances in technology in the future (TLDR: maybe).

This is actually pretty fascinating. If we reach a level of automation such that factories are completely automated, I wonder if the data that is gathered from all those factories, along with more powerful computers and algorithms in the future, would allow central planning to work better than no planning. Some of the problems mentioned by the author are caused simply by the data being wrong, because of lying factory managers: automated factories would eliminate that problem at least.

At the very least, I hope that in the future there will be a centrally planned economy managed by the government to provide a decent living standard to most citizens, while minimizing environmental impact. More productive or talented citizens would/could choose to opt to earn more wealth and purchase from an open market.

thehardsphere11• 9 years ago

Sorry to burst your bubble, but this idea is something that economists have already discussed to death: google "the Socialist Calculation Debate". A very brief summary of its conclusions is: central planning can only perform as well as or better than the market when the economy is completely stagnant.

Also, "centrally planned economy managed by the government" by definition leaves no space for "an open market" for "more productive or talented citizens" to "choose to earn more wealth and purchase from." Unless you're talking about a black market.

phreeza• 9 years ago

Why can planned and market economy not coexist? Some sectors of the economy are or have been state planned in most countries. Come to think of it, in a slightly more complicated planning model, the cost and benefit of nationalising or privatising certain industries could also be included.

baursak8• 9 years ago

google "the Socialist Calculation Debate"

I can't seem to find the document you're referring to and its conclusions, Wikipedia page? Is there a balanced discussion on the subject somewhere that is not from Mises Institute or some other libertarian ideologically-driven piece?

joe_the_user• 9 years ago

The "economists have settled this" refrain has become common on hn lately. It is unfortunate.

The reason that conflicting schools of economic can coexist indefinitely in economics (in the contrast to physics, say) is that very little is settled on economics since the question of how an economic system works is predicated

As other have said, your absolute pronouncements about socialism requiring a stagnant economy is coming from a rather specific ideological bent rather than a simple consensus.

petra• 9 years ago

With regards to the innovation question: considering that the soviets we're quite good at military and space innovations, and that defense organizations in general produce a lot of innovation(think DARPA), maybe central planning could work ?

Though of course the required central planning here is quite different, more about smart bets than optimizations, and focusing engineering resources at important problems, which doesn't seem that great at capitalistic economies either(think planned obsolesce, "my generation is optimizing ads", browser in-incompatibilities, etc) .

utexaspunk9• 9 years ago

A very brief summary of its conclusions is: central planning can only perform as well as or better than the market when the economy is completely stagnant.

I'd hardly say that was either proven or agreed upon

"centrally planned economy managed by the government" by definition leaves no space for "an open market" for "more productive or talented citizens" to "choose to earn more wealth and purchase from."

I don't see this a being "by definition" either. You can have a centrally planned economy with people who are independent (or at least as independent as they are in any other economic system) in what job they choose, where they choose to work and what they choose to buy. The government could assess the demand for a product at a given price, determine the resources (material or human) necessary to produce that product as well as all other demands for those resources. When the demands exceed resource availability, you then raise the price for that resource, refactor that into the price of the final product and then assess the demand for it at that new price. You raise the price for each constraining resource until the demand drops to a level that can be fulfilled. This would include specialized labor, so if a job is in high demand and short supply, the wage for that job would go up until the supply increases and/or demand decreases to reach equilibrium.

All of this already happens in an ad-hoc way in a free market, but in a free market it can take a long time for changes in input prices to be reflected in output prices, and it can take even longer to determine how those will affect demand. I don't see why that couldn't be formalized and worked out centrally. I'm imagining an economy where everyone is issued a smartphone through which they make all of their purchases and through which they find and respond to bids for employment. Demand could then be assessed fairly accurately and instantaneously. It seems like it would be way more efficient in terms of reductions in redundancy, overproduction, costs incurred attempting to generate demand that does not exist or siphon demand from competitors' products, and price increases solely for profit-maximization in cases where demand is inelastic and supplies are sufficient (like epi-pens or insulin).

Modeling it would probably be extremely complex and might still exceed our current computational capacity, I dunno, but I don't see any reason to call it impossible.

ue_• 9 years ago

but this idea is something that economists have already discussed to death: google "the Socialist Calculation Debate"

I wouldn't say it's been "discussed to death" at all; have you read Cockshott's "Towards a New Socialism"? He tries to explain why the problem isn't really a problem at all, with his idea of computerised central planning.

Koshkin3• 9 years ago

Central Planning, as reasonable as it sounds, can only play a very limited role in a free society. The goal of production is to meet demands, and one of the goals of planning is to optimize things, but demands are easy to underestimate; the optimization then will lead to planning only for the type of production that can ensure basic survival and not much more.

The relatively high standard of living in the former socialist economies was to a large degree due to the need to compete with the capitalist economies, where standard of living, abundance and variety of products all grow naturally higher with time, rather than get "optimized" into oblivion.

baursak8• 9 years ago

Central Planning, as reasonable as it sounds, can only play a very limited role in a free society.

USA, for example, has a lot of central planning, in the private sector alone, not even considering the public sector. Any large mega-corp is an example. Walmart has a huge centrally planned operations and supply chain.

capitalist economies, where standard of living, abundance and variety of products all grow naturally higher with time

How would you explain stalled and declining standard of living in the Western capitalist economies over the past 30 years or so?

utexaspunk9• 9 years ago

but demands are easy to underestimate

Certainly during the USSR's time. But now you could issue every citizen a smartphone through which they could register their demand.

the optimization then will lead to planning only for the type of production that can ensure basic survival and not much more.

Sorry, but I'm not seeing how this follows logically.

flavio812• 9 years ago

This is one of the best articles i've read!!

The article makes me think that the failure of the planned economy system would probably not have happened if they had modern computers (and computing tools we take for granted today). The author thinks this would only be possible in about 100 years because he considers that everything needs to be considered in the model. However, one could make the case for doing central planning of a limited set of goods which are interdependent, of course.

AI being all the rage in the news these days, and pretty much in fashion, who knows, perhaps automatic optimization of a country's economy will start to be talked about as a Good Thing To Have?

tomcam2• 9 years ago

Your optimized is my nightmare.

Scea912• 9 years ago

It's much more a people problem than a technical one. Uless you eliminate people from the equation, this utopia will never work.

Pamar4• 9 years ago

This is indeed an excellent article, I just want to add that Red Plenty is an amazing example of "Scientist Fiction" (http://bactra.org/notebooks/scientist-fiction.html - see also - https://www.librarything.com/tag/scientist+fiction) and definitely deserves to be read if you have any interest in technology, data, economics.

Spufford also wrote The Backroom Boys (https://www.amazon.com/Backroom-Boys-Secret-Return-British/d...) about British tech after WWII, definitely worth a read even if Red Plenty remains unsurpassed.

I'll also add the Wayback Machine for the (now defunct) website created by the author for Red Plenty: https://web.archive.org/web/20160713031430/http://www.redple...

ryandrake• 9 years ago

It's funny how the vast majority of capitalist corporations consider capitalism as a sacrosanct principle, yet when you look at how they operate it's basically Soviet-style central planning. The senior executive [nomenklatura] who, often, are treated More Equal Than Others, centrally plan who works on what and what resources they are allocated: a bureaucratic elite picking and choosing how the wealth of the company is redistributed and used among teams, as opposed to letting a market decide which projects live and die. As Ronald Coase pointed out, companies tend to be "islands of central planning in a sea of market relationships."

Another parallel to the Soviets: Things like good-ol-boy networks and elite school alumni [membership in The Party] are largely what drives promotion within the higher ranks.

aqsalose• 9 years ago

Some leftists critical of the USSR described the Soviet system as "state capitalism": the state is the only capitalist in the system.

adekok4• 9 years ago

Which largely parallels one of my recent comments:

https://news.ycombinator.com/item?id=14513718

Downvoted for no apparent reason...

In short, managers often don't pay attention to how the products are created. They instead rely on checklists to "prove" that processes were followed.

Nothing beats "feet on the ground". If you know what's going on, you know how to manage it. If you're managing based on summaries of summaries of summaries... it will go badly.

See Jim Sinegal for a real-world example of this success story:

https://www.usnews.com/news/best-leaders/articles/2009/10/22...

macspoofing4• 9 years ago

You don't know what you're talking about.

Nothing beats "feet on the ground".

Except if you're managing a huge global supply chain.

wmf• 9 years ago

It's probably worth noting that centrally-planned corporations receive feedback from the market in the form of sales but the USSR's central planners didn't really have any equivalent.

coddingtonbear• 9 years ago

This might be surprising to you, but consumers still used currency to buy goods, and both surpluses and shortages were tracked. It isn't exactly the same as market feedback, but it did serve the same function.

TomMarius2• 9 years ago

The difference is that the corporations are still participating in a free market trade, no one is forced to be a customer while communist governments don't have to worry about losing a customer.

0xfeba• 9 years ago

It can be vastly more complicated than that. What with the auto industry bailouts, sub-prime lending, subsidized minimum wage jobs, etc. Corporations will take advantage of the government in ways that are very not capitalist if it suits them.

kuschku• 9 years ago

This quickly changes if some companies products become basically required, though, or if companies gain monopolies.

maxxxxx3• 9 years ago

It seems with the bailouts of 2008 and other subsidies we are forced to support companies if we like it or not.

maxxxxx3• 9 years ago

I have been thinking the same thing. From the inside a corporation is a planned economy like East Germany. Five year plans, motivational posters and speeches, huge number of bureaucrats and a huge discrepancy between what leaders proclaim and the reality that people on the ground can see.

MichaelMoser1234• 9 years ago

With a corporation you can always quit but in the eastern block you couldn't do that because of armed border guards.

Hayek says that central planning of an entire economy results in dictatorship, because conflicting interests have to be resolved by non economic means that involves the pressure of a secret police. i think he was right, it doesn't matter how many computers you have for solving planning problems, there always remain conflicting interests when the big father in the ministry has to decide who gets the stuff, central planing turns matters of distribution into political problems

trhway2• 9 years ago

as the saying, at least among Russian immigrants who saw USSR, goes - the bigger the corporation the more of socialism inside it.

In general it just follows from the main principle of Marxism described in the Das Kapital - higher entropy of ownership distribution leads to the higher degree of socialism (as the reverse of that entropy value basically being the strength of coupling between the ownership power and the execution power). From minimum entropy of ownership distribution - one 100% owner - to publicly owned companies to government run agencies and government owned properties to socialist state where nominally all the people collectively own everything. Significant change in entropy of such distribution - when say a significant stake of a public company gets concentrated in some single hand or when the whole company goes private or when some government agency gets privatized - usually leads to significant change in degree of socialism inside the company or the agency.

macspoofing4• 9 years ago

higher entropy of ownership distribution leads to the higher degree of socialism

That characterization doesn't fit at all. Capitalist/Market-based societies are far more decentralized, with a higher entropy ownership distribution, than Communist/Socialist ones. In Market-based systems hundreds of thousands of small, medium and large companies and millions (or hundreds of millions) of individuals do day-to-day business with each other without direct oversight or control of a central body.

where nominally all the people collectively own everything.

Except that's not how collective ownership works. A society of millions of citizens can't collectively manage anything - they need to create representative institutions to do that on their behalf. The bigger the collective, the less entropy the representative institution displays. So collective ownership in practice is a very very low entropy position.

pavel_lishin• 9 years ago

Didn't the CEO of Sears try the internal-capitalism approach, only to have the company basically self-implode?

realusername3• 9 years ago

It almost destroyed Sony as well. Having a balance sheet per department and letting them compete is the fastest way to crash a company.

_0w8t• 9 years ago

The scale matters and managing even not so small companies Soviet Style is quite OK. As the article point out for small number of products optimization problems are solvable in one way or another. I will not even be surprised if few rules of thumb that a good manager instinctively uses give good enough solutions in most cases that matter. But that fails as n growths.

azernik4• 9 years ago

An interesting example of this is the modern Israeli kibbutz. These are literal socialist collectives [1] that function as actors in the capitalist economy. And a lot of them are quite good at it! It may be hard to motivate innovation in a nation-size egalitarian society, but it seems to work quite well in an economic unit where everyone knows everyone else and you personally know, or at least recognize, everyone who benefits from your innovation. (And they know you and recognize your accomplishments, which is also a big motivator.)

[1] In the ideologically pure case, which is a common case but not universal or even the majority.

Animats4• 9 years ago

That's a scaling issue. Communes work well up to about 100 people. Today's larger kibbutz is more like a company with worker housing. "Differential pay was introduced into the kibbutz structure; management has become increasingly professionalized; and the community and business structures have been separated"[1]

[1] http://www.jewishvirtuallibrary.org/history-and-overview-of-...

macspoofing4• 9 years ago

yet when you look at how they operate it's basically Soviet-style central planning

What are you talking about? Big Corporations will have thousands of suppliers, thousands of partnerships and millions of customers - none of whom are directly (centrally) controlled or managed. They are also far more transparent and truthful about their production numbers and costs. They are far more nimble, far more efficient, and far less corrupt.

CharlesDodgson• 9 years ago

I too highly recommend Red Plenty, it's one of my favourite books, I'd also recommend Cultural Babbage by the same author, it's a compilation of essays on the topics of culture and technology, It's wrote in the 90s and very interesting to read, to understand the relevance and the thinking of the day.

merraksh2• 9 years ago

The USSR had about 12 million types of goods. If you cross them over about 1000 possible locations, that gives you 12 billion variables, which according to Cosma would correspond to an optimization problem that would take a thousand years to solve on a modern desktop computer.

Modern (commercial and open-source) solvers of linear programming (LP) tackle problems of millions of variables in minutes. Most of those 12 billion variables would be cleared out (e.g. fixed to their lower bound, zero) in a pre-processing step.

Problems with variables that are constrained to be integer can take much longer, but they are orders of magnitude more efficient today than a few years ago.

Scea912• 9 years ago

Problems with variables that are constrained to be integer can take much longer, but they are orders of magnitude more efficient today than a few years ago.

Yet, they are still NP-complete.

lorenzhs• 9 years ago

Doesn't mean that you can't write efficient heuristics that find close-to-optimal or even optimal solutions for a wide variety of practical instances.

merraksh2• 9 years ago

Indeed. Unless we prove P=NP, technology will only help re-define what "practically solvable" problems are.

arcbyte• 9 years ago

Very interesting article.

It is likely that many recommendations for the broader economy would have been ignored as well. For example, if a computer recommended that the price of heating oil should be doubled in the winter, how many politicians would let that happen?

The heating oil required to maintain temperatures in so many cubic feet of air space in the country, given some quantity of heaters at various levels of efficiency, themselves producable by the same giant calculation. The problem is the dimensions/variables are endless and subject to change based on the uncalculable whims of people. Stopping at any one point is arbitrary

philipkglass• 9 years ago

As described above and in Cosma Shalizi’s post, the number of steps required to solve a linear programming problem with nn products and mm constraints is proportional to (m+n)3/2n2(m+n)3/2n2. The USSR had about 12 million types of goods. If you cross them over about 1000 possible locations, that gives you 12 billion variables, which according to Cosma would correspond to an optimization problem that would take a thousand years to solve on a modern desktop computer. However, if Moore’s Law holds up, it would be possible in 100 years to solve this problem reasonably quickly.

I found Red Plenty fascinating and I enjoyed the Crooked Timber seminar that Chris Said links to, particularly Shalizi’s post. I'm still wondering: why is the compute-unit "a modern desktop computer?" Is parallel scaling poor for this kind of problem?

If parallel scaling is poor, might better speedups be available with ASICs? Or are there heuristics that run faster and produce usually-close-to-optimal solutions on this type of problem? I'm just running through some common ways to accelerate solutions for compute-intensive tasks that run slowly on a single-socket of general purpose CPUs. For all I know, none of these avenues are promising.

flavio812• 9 years ago

"In soviet union, optimization problem solves YOU!"

(The article includes a link to an article with such name, a good read for an in-depth discussion / comment trail regarding optimization in the USSR / CCCP:)

http://crookedtimber.org/2012/05/30/in-soviet-union-optimiza...

Houshalter2• 9 years ago

Another review on this book I liked http://slatestarcodex.com/2014/09/24/book-review-red-plenty/

adekok4• 9 years ago

Even local optimizations are useful:

https://books.google.ca/books?id=NLRVWaNw76MC&pg=PT28&lpg=PT...

GM updated their paint robots to "bid" on new jobs (i.e. cars). They ended up saving 1.5M a year. Not much, but multiple similar things add up.

i.e. when the price of the product accurately reflects the costs, the markets can be more efficient.

cmrdporcupine• 9 years ago

A good book on this topic (from a sympathetic, Marxian-economics POV) is http://www.palgrave.com/us/book/9780333495490

"Problems of the Planned Economy"

Houshalter2• 9 years ago

The computational complexity thing seems solvable. For one, it mentions today it would require 1,000 desktop computers to find the optimal solution. 1,000 computers is a pretty affordable thing for the benefit of managing an entire economy.

But most importantly you don't need to find an optimal solution. Things like gradient descent and hillclimbing will very quickly find locally optimal solutions. That's basically what capitalism is, prices and business demands propagate and sort of do gradient descent (but often very slowly and inefficiently.) Algorithms like scatter search and novelty search can be used to explore the wider search space and find the global optimum. E.g. "what would the locally optimal solution be if we shut down this factory and built a new factory here, and would it be better?"

azernik4• 9 years ago

I also highly recommend this blog post, which this article references and links to frequently: http://crookedtimber.org/2012/05/30/in-soviet-union-optimiza...

azernik4• 9 years ago

The computational complexity seems to depend on the desire to solve all the problems at once. But how about solving just the warped incentive structures of capitalism?

Simulate perfectly rational economic actors that are only concerned with the next upstream and downstream hops in the market, have them take into account the "taxes" and "credits" of externalities without any of the pesky politics, and distribute in-simulation "purchasing power" to end consumers in whatever way you deem fit. You could even distribute this end-user power to actual consumers, in order to allow them the freedom to input their desires into the system.

Basically, remove the capitalists from the capitalist system; or, just use the computational model of capitalism without actually giving power to the computational nodes.

bcoates3• 9 years ago

But you're not getting rid of the warped incentive structures, you're just simulating them! Assuming you actually get your data and everything perfect you just get capitalism-world, warts and all.

If you just want to be able to digitally assign more symbolic purchasing power to the agents dispossessed by the current system, the government already has the power and infrastructure to do that. Adding another level of computer abstraction to the already symbolic computerized money system doesn't do anything.

tomcam2• 9 years ago

Brilliant. Now who decides what perfectly rational is?

Animats4• 9 years ago

Gosplan never had anywhere near enough compute power or good data to do that job.

The data problem could have been solved with bar-coding. That's how WalMart got tight control over their inventory. Master Control in Bentonville, Arkansas can see pallet 2345235 leaving warehouse 242 on truck 24343 headed for store 2514. If store 2514 doesn't report arrival of that pallet, questions will be asked and the pallet will be found or somebody will be in big trouble. When the pallet is found, broken down, and product placed on shelves, the items will eventually show up in cash register data. If shelf inventory minus sales is not very close to incoming shipments, the "shrinkage" security people are informed and start looking for theft.

Gosplan had an annual planning cycle and monthly reporting. WalMart has a weekly planning cycle and daily reporting. A year was far too much lag for the system to work well. Although it did for heavy industry, where things take months anyway.

The huge linear programming problem isn't insoluble. It's a sparse matrix; potato chips don't affect steel tubing much. There's probably some way to come close to an optimal solution.[1] Sparse matrix techniques were in their infancy when the USSR was active, though.

[1] http://www.gurobi.com/resources/getting-started/lp-basics

sdrothrock2• 9 years ago

The data problem could have been solved with bar-coding. That's how WalMart got tight control over their inventory. Master Control in Bentonville, Arkansas can see pallet 2345235 leaving warehouse 242 on truck 24343 headed for store 2514. If store 2514 doesn't report arrival of that pallet, questions will be asked and the pallet will be found or somebody will be in big trouble. When the pallet is found, broken down, and product placed on shelves, the items will eventually show up in cash register data. If shelf inventory minus sales is not very close to incoming shipments, the "shrinkage" security people are informed and start looking for theft.

This is really interesting -- I'd never found much on pre-SAAS/internet Wal-Mart's asset tracking system, which I assume this must be a part of. Do you have any links to articles or books I could read to learn more about this?

Animats4• 9 years ago

There's a PBS special on this: Wal-Mart and the Bar Code".[1]

Wal-Mart has achieved a level of control over suppliers that Gosplan could only dream about. They're going for even more control.[2]

[1] http://www.pbs.org/wgbh/pages/frontline/shows/walmart/secret... [2] http://www.supermarketnews.com/walmart/vendors-skeptical-wal...

Asooka3• 9 years ago

One thing I don't see mentioned here is how miserable a centrally-planned economy is for the people living in it. My parents lived during the heyday of the Soviet Union and it was pretty awful.

As an example, let's say you want to go and buy shoes. You go to the shoe store and you buy a pair in your number. You don't actually get to choose, the shoes you can buy have already been made for you, you just have to pay for them the planned price you're expected to pay for the pair of shoes. It's also planned when these will wear out and you'll need to go buy a new pair. In fact, all the pairs of shoes you'll need to buy for the next five years have been planned.

You want something else than brown shoes? Fuck you (except if you're high enough the totem pole that you get a choice between brown and black).

You want high-quality leather shoes? Fuck you.

You want to start your own shoe factory? Fuck you, the state owns all the factories.

You want to make your own shoes with leather? Fuck you, all the leather usage is planned centrally by the state using statistics.

You want to raise your own cow on your own land to have your own leather? Fuck you, fuck you and fuck you - you don't get to own land, or have cows. The state owns all the land and all the cows. In fact, the state has already planned all the usage of the leather it will get from killing cows that are yet to even be born.

And shoes are just one good among many. If the state determines only 10% of the population gets to ride a bicycle, it will produce exactly that amount of bicycles. Central planning never speculatively overproduces, or even innovates, because that hinges on thinking you can sway the market this way or that. You think "hey, I bet people will really want to buy wine-red shirts, instead of white striped shirts", so you try it out and you capture part of the market. Central planning can't account for people coming up with ideas in the middle of a 5-year planning cycle.

Central planning is also a form of totalitarianism. Every single totalitarian system in history has always pivoted (if it didn't start as) to a form of serfdom, with all benefits going to the people on top. It doesn't matter if it's a king, or "The Party", C-level management always looks out for themselves first. A state with total power is a really shitty place to live in for most subjects.

That said, you could probably have some sort of rationally chosen economy just for the state's own needs, i.e. the state takes care of the roads, so it needs this much asphalt, so taking a survey of the available factories, it should order from this and that factory for maximum quality at minimum price. Something like an alternative to public bids.

But a fully centrally planned economy only works with robotic workers that never ever consume or buy anything unplanned. You want to know why corruption was so pervasive? Because people want something more than only being allowed to buy thin brown leather shoes, blue jeans and white striped shirts. Centrally planned economy is something like India's caste system on steroids.

If you still think central planning is a good idea, please talk to some people who lived in the USSR, they're about 50-60 years old today and can still tell you good stories. Some of them speak good English. Then think really hard how you'll make sure your proposed central planning system won't devolve to that level of corruption.

thehardsphere11• 9 years ago

I don't understand why this comment is downvoted. These are features of central planning of the entire economy that are not going to go away just because the planners have better computers that can do fancier math with strong artificial intelligence. The article even explicitly discusses some of these problems, which is why it's TL;DR is merely "maybe" and not "LET'S DO IT!"

Those of you who are enamored with the idea that it's all going to play out differently just because you can give everybody smartphones should at least acknowledge that you're advocating for a system that has devolved to unpleasant tyranny every time that it has been tried, and at least attempt to explain how the technology you're love is going to make those problems go away.

Asooka3• 9 years ago

I think my coarser language might have prompted the downvotes, but I didn't see another way to get the point across. It's really hard to explain how it works to people who haven't lived it themselves. A lot of people are also entirely too optimistic about politicians doing what's good for the people without any checks and balances in place, and I don't mean just people here or there, this seems universal.

Also, in fact, lots of people liked central planning. Yes, you didn't have a choice, but you had a completely guaranteed life. As long as you remained loyal to The Party and as long as enough raw resources were being mined, theoretically the entire supply chain was planned and guaranteed. You just had to do your part. UBI is talked a lot about these days and central planning is UBI on steroids. Sort of a Uniform Total Income scheme. Some people really like that idea - they just want a stable secure life. I'm sure you can think up of many more examples where people want their life to be guaranteed and are willing to give up choice for security, and they really are happy in that environment.

It almost kind of worked out in practice, if you didn't mind queuing up at 5am at the general store to be one of the first in, so you could grab one bag of milk (one allowed per family per day, bring your daily coupon if you want it), because we didn't actually manage to produce enough milk for everyone to have a bag of milk. Even though we actually have enough land and cows to do so. Because some higher ups are skimming part of the milk, because they want more than one bag per day. Sorry, I'm starting to go bitter again.

Even though I've seen the tail end of what central planning causes, I'm still up for UBI, actually. Social programs are needed for a healthy society, it's just that anything taken to extremes usually ends up badly. Mostly because you can't take it to the extreme without the use of total power. This can be the central argument against many such extremes: "If your idea requires or results in a person or group of people wielding total power over the rest of the population, then it will inevitably end up in a form of serfdom/slavery".

Years after communism ended a colleague of my mother's travelled to Spain (IIRC) wanting to see how oppressed the people in a capitalist country are. Before he left, he still believed in the central ideas of communism and central planning. After he came back he pretty much said "Fuck central planning, we didn't lose because the dirty capitalists fought us, we lost because our shit doesn't fucking work".

adekok4• 9 years ago

I don't understand why this comment is downvoted.

There is a small but significant population of HN readers who downvote things they dislike. Even if the statements are rational, and based on reality.

ordu2• 9 years ago

Isn't it an issues of particular planning method chosen by USSR?

Asooka3• 9 years ago

Those are issues of centrally planning the entire economy in 5-year cycles. I don't know of what centrally planning a part of the economy would look like, nor what planning by a democratically elected government, as opposed to a self-appointed one, would be. However, as I noted, political power always tries to grow, so the moment you place that much leverage in the hands of the government, you could expect to end up with a totalitarian system, which is my primary fear of central planning.

One more thing to consider - companies are generally fully centrally planned top-down, until they reach a certain size, after which the top only set some direction for the lesser managers, who then delegate planning to middle managers. It seems to come naturally to distribute the planning computation among independent agents.

In a perfectly honest world with perfect altruists, top-down central planning probably works. However, in that world full anarcho-capitalism also works ¯\_(ツ)_/¯.

baursak8• 9 years ago

You seem to be mixing up several things here.

Central planning, totalitarianism, and communism/socialism are not the same thing, and can't be used interchangeably, just because the USSR happened to have all three going on. Each one of those can be a thing without some or all of others.

You can have a democratically run, centrally planned economy. In fact, that's what many Western capitalist countries are in many ways. On the opposite spectrum, a truly democratic, anarchist-style "centrally" planned economy could also be possible, check out "The Dispossessed" by Ursula Le Guin for a fictional example.

As someone who also lived in the USSR and also caught the tail end of the country's life, I know of older people who would prefer Soviet-style life to what they see now unfolding in capitalist societies. And that's taking into account all the worst problems and mistakes of the USSR and not even talking about what could have been done better, or fundamentally different, while still rejecting capitalism.

USSR of the 80s was different from the USSR of the 70s, and that was different from the 60s, etc. And you'd probably get different reactions from ex-Soviets, if they only experienced the turmoil of the 80s vs the optimism of earlier decades.

So again, I agree that non-democratic or totalitarian control of the economy is indeed bad, but that has nothing to do with central planning.

AnimalMuppet5• 9 years ago

Say this is possible. Say this would even work (for some definition of "work"). I still have a nagging question: Is there any reason to suspect that this would work better than the current system? (Yes, I know, you can list all the problems produced by the current system. You can't list all the problems that would be produced by the proposed new system, though, because you haven't experienced them.)

I see comments saying that smartphones will provide the needed data to make this idea work well, but that doesn't do anything to answer the question "Will it be better?"

yorwba2• 9 years ago

If the system can be set up so that the status quo is one possible result, the risk of it getting worse is bounded by the difference between the optimization criterion and whatever you think of as better. If you are reasonably sure they are well-aligned, you can just try it out to see if things get better.

js82• 9 years ago

I suspect the main reason why central planning fails is not actually the planning part. The problem is human hubris - the idea that if the plan fails, then all you need is a "better" plan that accounts for more things.

In the real world, things break constantly for various reasons. And there is a trade-off between efficiency and robustness. If you try to make something very very efficient (i.e. optimal), then you also make it very brittle. So for instance, in the communist economies (not that they wouldn't have other problems, they were dictatorships after all), the planners would decide that it is "optimal" to have this one factory producing something, like computer chips. But then something got delayed there, and everybody who expected the thing to be delivered had to wait. These unexpected delays accumulated through this "optimal" solution.

I think main reason why capitalism works is actually because it is terribly inefficient. It duplicates a lot of work, through competition. But the robustness is much higher. And that's why it's a success and has higher overall economic throughput.

You can see this paradox in large corporations, which are, as many people noted here, centrally planned economies. They suffer from the same problem - human planners are trying to be too optimal, the robustness suffers, and the result is often spectacular internal failures.

It's like with spacecrafts. Of course it would be more efficient if the spacecraft had only one engine, one computer, and so on. But what if it breaks? Then the whole mission fails. That's why it needs backup engines, backup computers, and so on.

coin• 9 years ago

-1 for mobile hostile website that disables zoom

atemerev6• 9 years ago

Planned economy is uncompetitive for more reasons than insufficient computing power.

You can't plan innovation. It is hard to plan for knowledge economy in general (material production is increasingly a smaller part of total GDP — something that early Communist theorists failed to predict).

Capitalism is automatic, self-correcting, parallel optimization process. It is asymptotically optimal.

fetbaffe4• 9 years ago

Yes, real question to ask is, why is a good produced?

In a central planned system that is a policy decision based on the knowledge the planners have.

In a market based system that decision is decentralized to the actors in that system and therefore the rate of innovation is based on the sum of the actors distributed knowledge, that sum will always be more than that of a centralized body.

Hayek described that as the Local knowledge problem.

https://en.wikipedia.org/wiki/Local_knowledge_problem

codedokode3• 9 years ago

Capitalism has own set of problems like unfair distribution of income, unequal opportunities, patent system that prevents spreading innovation. I think it is used only because we don't have a better system at the moment and because people who benefit from it want to keep the status quo.

For example, in a capitalist economy two people that contribute equal amount of time to work can get different rewards for it. And those who get bigger reward would oppose to changes.

atemerev6• 9 years ago

Correct, but he will eventually be replaced by somebody who can produce the same output and ask for less. It makes all business sense. Opposing market pressure is unsustainable in the long term.

realusername3• 9 years ago

You mean free-market, not capitalism, they are not synonyms.

bcherny• 9 years ago

Could you elaborate? What does it mean to have non free market capitalism, or non capitalist free markets?

atemerev6• 9 years ago

Perhaps you are correct.

ernst_klim2• 9 years ago

You can't plan innovation.

This. And by the end of the century technological gap between capitalist countries and USSR was enormous.

jondubois• 9 years ago

The biggest mistake of communism is that it assumes that entrepreneurship is economically worthless. It's literally the opposite extreme of capitalism which assumes that entrepreneurship is the most important profession.

I think communism might have worked better if it had given more autonomy to managers to make decisions and used output data for the previous year to decide budgets for each factory/company.

profalseidol• 9 years ago

Really sucks that the word communism is now used to describe Lenin's legacy. Even the USSR 'communists' said that what they have is not communism.. but 'socialism'.

Prior to the rise of the Bolsheviks, there were a number of Marxists that were equally popular as Lenin such as Rosa Luxemburg. They were opposed to what the Bolsheviks were preaching.

Nowadays, now a listener of Prof. Richard Wolff and his the Democracy at Work project he started.

Pamar4• 9 years ago

Now that we are discussing Central Planned Economy I'd like to drop a link to a fascinating and mostly forgotten attempt to make it work in a more "democratic" way in Chile, during the short-lived Allende government: https://en.wikipedia.org/wiki/Project_Cybersyn

vbezhenar• 9 years ago

I'm still thinking that USSR approach to have planned economy is much better than free market economy in the long run. They just lacked proper software (and hardware) to do the proper planning and it turned out that at that time free market was better. But with today's algorithms (or may be with tomorrow's) country-scale planning should be possible and it will be much more efficient.

Other question is do we really need that efficiency? Robots are more efficient than people, so people are already losing their jobs and it'll continue. Now with planned economy there will be much more jobs to lose. May be it's better for our civilization not to be very efficient, at least at current period.

fetbaffe4• 9 years ago

Lots of people here confuses planning done in large corporations with central planning.

Even if corporations plans their entire operation it is not the same as central planning, because even if a corporation plans its production it cannot plan it sales. It can only estimate because it operates on a common market.

Estimation of sales plans hiring, production etc, however the actual real sales is a feedback loop into that process, where in a central planned system that feedback loop does not exist. Central planned system will just go on whatever the "sales".

cies• 9 years ago

it cannot plan it sales. It can only estimate because it operates on a common market.

So the USSR as a whole was not selling (exporting) on a common market?

Central planned system will just go on whatever the "sales".

I do not understand this. The "demand" of products within the USSR should not be compared to the sales of the corp, but to the corp's internal demand for stuff (e.g. office supplies).

Anyway, I'm not a proponent of central planning an economy. I see markets as a great, organic and bottom-up way of having supply and demand meet. I'm no proponent of protection-by-law of the unlimited hoarding of private property; I'm no proponent of the centralized state. Instead I'd like to see the lower level of gov't to be the most powerful. I guess I'm a mutualist.

fetbaffe4• 9 years ago

So the USSR as a whole was not selling (exporting) on a common market?

What goods was that? Military supplies? On that it operated on a market economy with the West and therefore got competition and a feedback loop and therefore produced some useful things.

https://news.ycombinator.com/item?id=14519976

Soviet exported oil & gas, but that was also part of global market, which Reagan used against the Soviet by dumping the price. Soviet was largely an oil & gas economy.

Apart from that Soviet didn't produce much consumer goods and exports of that to other communist countries was part of planned system.

but to the corp's internal demand for stuff

In a corporation you know that you need goods based on what you are producing. If you are white collar company, it is quite logical to have office supplies and if you are IT company, you need to have computers and so on.

However in a central planned system, you have to take into account the entire population what they need. But how would a planner know what to who when it does not know what you are producing. Ask every individual?

If one person wants a blue pen and another red pen, what should the central planner do with that information? Produce two black pens?

That is the Local knowledge problem I wrote about in this comment

https://news.ycombinator.com/item?id=14520025

So the central planners think you are a carpenter, but you are actually a plumber.

https://fee.org/media/10987/20150729_roadtoserfdom14.png

codedokode3• 9 years ago

I think a computer might do better planning decisions than humans do in a capitalist society. Problems like computational complexity or inprecise data apply to human managers too, and unlike them the computer doesn't make mistakes and isn't motivated to get maximum profit fot itself.

alistoriv• 9 years ago

It's worth noting that Chile under Allende was working on implementing a computer-based planning system[1], but unfortunately we don't know how it might have worked out cause of the US-backed military coup shortly after :^(

[1] https://en.wikipedia.org/wiki/Project_Cybersyn

ramgorur• 9 years ago

What about a stochastic optimization techniques like this one described here?

http://www.human-competitive.org/sites/default/files/deb-myb...

The paper describes a real parameter function optimization problem, but the Gosplan was I think more of a combinatorial one. According to the author, the method described there can also be parallelized.

Optimizing things in the USSR (2016)

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