James Scott and Friedrich Hayek

My review of James Scott (1998), Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed (New Haven: Yale University Press: 0300070160):

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I. Introduction

There is a lot that is excellent in James Scott's Seeing Like a State.

On one level, it is an extraordinary well-written and well-argued tour through the various forms of damage that have been done in the twentieth century by centrally-planned social-engineering projects--by what James Scott calls "high modernism" and the attempt to use high modernist principles and practices to build utopia. As such, every economist who reads it will see it as marking the final stage in the intellectual struggle that the Austrian tradition has long waged against apostles of central planning. Heaven knows that I am no Austrian--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.

This book marks the final stage because it shows the spread of what every economist would see as "Austrian ideas" into political science, sociology, and anthropology as well.

No one can finish reading Scott without believing--as Austrians have argued for three-quarters of a century--that centrally-planned social-engineering is not an appropriate mechanism for building a better society.

But on a second level, it is an act of displacement. Friedrich Hayek, after all, won the Nobel Prize in Economic Science for making many of Scott's key arguments: that the bureaucratic planner with a map does not know best, and can not move humans and their lives around the territory as if on a chessboard to create utopia; that the local, practical knowledge possessed by the person-on-the-spot is important; that the locus of decision-making must remain with those who have the craft to understand the situation; that any system that functions at all must create and maintain a space for those on the spot to use their local, practical knowledge (even if the hierarchs of the system pretend not to notice this flexibility). These key arguments are well known: they are the core of the Austrian economists' critique of central planning.

From one perspective, this is a compliment to the Austrians: their arguments are powerful and applicable, and it is striking that others looking at the same problem come up with their conclusions. From another perspective, this is odd: we all think better thoughts when we explicitly recognize and acknowledge our intellectual roots.

II. Seeing the Forest

Scott's Seeing Like a State begins with a ride through eighteenth- and nineteenth-century German forestry. In Germany, "scientific" forestry led to the planting and harvesting of large monocrop forests of Norway spruce and Scotch pine. And for the first century or so the pockets of forest-owners bulged as more and more valuable trees were harvested from the increasingly-ordered and managed forests.

But the foresters did not understand the ecological web that they were trying to manage: Clearing of underbrush to make it easier for lumberjacks to move about in the forest "greatly reduced the diversity of insect, mammal, and bird populations" (p. 20); the absence of animals and the absence of rotting wood on the forest floor greatly reduced the replenishment of the soil with nutrients. In places where all the trees are mature, of the same age and of the same species, storms can wreak catastrophe as trees knock each other over like bowling pins. Pests and parasites that attack a particular species find a bonanza and grow to epidemic proportions when they find a monocrop forest.

The result was what Germans call Waldsterben--the death of the forest, as it becomes both a pale shadow of its previous ecological richness and an inefficient source of timber for human use.

Why does Scott begin with such a tale of pseudo-scientific hubris in Germany before 1900? After all, he could have looked across the North Sea at England a century or so before, where the systematic experimentation and analysis of the agricultural revolution had led to a quite sophisticated understanding of what patterns of crop rotation, nutrient addition, and farm diversity could produce maximum sustainable and maximum economic yield. Why not tell a story about how human communities successfully managed a sustainable agriculture, rather than one about how human communities unsuccessfully created an unsustainable forestry?

Scott opens with his tale of German foresters because he argues that this type of interaction--people in rooms lined with green silk lay out complicated plans, which are then approved by the politically powerful, implemented with no regard for local conditions or local knowledge, and wind up as disasters--is typical of how states have dealt with problems and people in the twentieth century. When states--bureaucrats in offices in the capital--try to assess what is going on, they use maps: maps of territory, often with the demarcations between plots or regions made to be straight lines that meet at right angles, whether or not such lines of demarcation make any sense for those who live on the ground; maps of people--the lists of names and relationships that allow the state to track those from whom it will claim "obligations"--maps of laws, that fit human relationships of gift, exchange, and indebtedness that have both economic and emotional facets into a few well-defined categories of right and wrong.

But the map is never the territory. Scott reports that the first railroad from Paris to Strasbourg ran straight east from Paris across the plateau of Brie, far from the populated Marne, because the bureaucrat Victor Legrand drew the line so. The consequence was that the railroad was ruinously expensive because Victor Legrand forgot that to be useful a railroad has to carry goods and passengers from where they are to where they or their owners want them to go--not look like a pretty straight line on a map back in Paris (p. 76). 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.

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III. The Critique of "High Modernism"

However, these discussions of forests and maps are just the warm-up. Scott's main argument begins on page 87 as he lets twentieth-century states have it with both barrels. Scott then mounts a vicious, powerful, and effective fangs-bared critique of what he calls "high modernism": the belief that the bureaucratic planner with a map--whether Le Corbusier designing a city, Vladimir Lenin designing a planned economy after what he thought he knew of the German war economy, or Julius Nyerere "villagizing" the people of Tanzania--knows best, and can move humans and their lives around the territory as if on a chessboard, and so create utopia. Scott sees the "idea of a root-and-branch, rational engineering of entire social orders in creating realizable utopias" as a twentieth-century idea that has gone far to making this century a dystopia.

A. High Modernism in Urban Planning

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.

The consequences of the plan--as far as it could be carried out--are insane. As Scott writes of the central square of Brasilia:

...what a square! The vast, monumental Plaza of the Three Powers, flanked by the Esplanade of the Ministries, is of such a scale as to dwarf even a military parade... In comparison, [Beijing's] Tien-an-Men Square and [Moscow's] Red Square [both of which are too large a scale for the foot and vehicle traffic through them on a normal day] are positively cozy and intimate.... If one were to arrange to meet a friend there, it would be rather like trying to meet someone in the middle of the Gobi desert. And if one did meet up with one's friend, there would be nothing to do.... This plaza is a symbolic center for the state; the only activity that goes on around it is the work of the ministries... (p. 121)

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).

B. High Modernism, the Revolutionary Party, and the Planned Economy

Scott's second example of "high modernism" run amuck at enormous human cost is Lenin's attempt to design the revolution, the society, and the economy of Russia.

To Lenin, "the party is to the working class as intelligence is to brute force, deliberation to confusion, a manager to a worker, a teacher to a student, an administrator to a subordinate, a professional to an amateur, an army to a mob, or a scientist to a layman" (p. 149): the vanguard party possesses the scientific theory--Marxism--that allows it to plan the revolution. And the transmission of information and commands must be one-way only: the only thing that the party could learn from the workers would be petty-bourgeois ideologies that would infect it as with a disease (p. 155).

After the revolution, according to Lenin, utopia will be built through use of the state. Quoting State and Revolution, Scott draws out of Lenin's ideas for economy and society the image of a gigantic ocean liner, captained by the party's politburo:

The revolution ousts the bourgeoisie from the [controlling] bridge of the "ocean liner" [of society], installs the vanguard party, and sets a new course, but the jobs of the vast crew are unchanged. Lenin's picture of the technical structure... is entirely static. The forms of production are either set or... [their] changes cannot require skills of a different order (p. 162).

Or as Lenin put it in his "Immediate Tasks of the Soviet Government:

...large-scale machine industry... the foundation of socialism... calls for absolute and strict unity of will, which directs the joint labors of hundreds, thousands, and tens of thousands of people.... But how can strict unity of will be ensured? By thousands subordinating their will to the will of one.... 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 (p. 163).

And the end of the process that Lenin sees in State and Revolution--an end that Scott calls "chillingly Orwellian"--no one will be able to move an inch from their assigned place:

Escape from this national accounting will inevitably become more difficult... and will probably be accompanied by such swift and severe punishment... that very soon the necessity of observing the simple, fundamental rules of social life in common will have become a habit (p. 163).

Scott contrasts the communism of Rosa Luxemburg and Alexandra Kollontai to that of Lenin. Luxemburg did see that when one was exploring new social territory: "only experience is capable of correcting and opening new ways. Only unobstructed, effervescing life falls into a thousand new forms and improvisations, brings to light creative force, itself corrects all mistaken attempts" (p. 174). And Luxemburg did see that Lenin's "socialism... decreed from behind a few official desks by a dozen intellectuals" was headed for complete disaster:

...with the suppression of political life in the land as a whole, life in the soviets must also become crippled. Without general elections, without unrestricted freedom of the press and assembly, without a free struggle of opinion, life dies out in every public institution.... Public life gradually falls asleep... an elite of the working class is invited to applaud the speeches of the leaders, and to approve proposed resolutions unanimously--at bottom then, a clique... a dictatorship... (p. 174).

We all know the economic and human consequences of Lenin's centrally-planned soviet vision. Scott writes that the high estimates--20 million or so--of deaths from the collectivization of agriculture have "if anything, gained more credibility as new archival evidence has become available" (p. 202). Yet he notes that from Stalin's perspective collectivization was certainly a success:

Collectivization proved a rough-and-ready instrument for the twin goals of traditional statecraft: appropriation and political control. Although the Soviet kolkhoz may have failed badly [at efficient produciton], it served well enough as a means whereby the state could determine cropping pattersn, fix real rural wages, appropriate a large share of whatever grain was produced, and politically emasculate the countryside (p. 203).

C. "Villagization" in Tanzania

Scott's third major example of destructive high modernism is Julius Nyerere's attempt from 1973 to 1976 to move all the rural inhabitants of Tanzania into villages. Five million farmers and their families were moved into newly-constructed villages set up so that the state could easily deliver social services to (and levy taxes from) the populations.

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).

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IV. Trees, Forests, and Roots

A. Deja Vu

Well before the middle of the book this non-Austrian liberal-Keynesian economist was--any economist would be--struck by a strong sense of deja vu. Scott's declarations of the importance of the detailed practical knowledge possessed by the person-on-the-spot--of how such knowledge cannot be transmitted up any hierarchy to those-in-charge in a way to do any good--of how the locus of decision-making must remain with those who have the craft to understand the situation--of how any system that functions at all must create and maintain a space in which there is sufficient flexibility for craftsmen to exercise their local, pratical knowledge (even if the hierarchs of the system pretend not to notice this flexibility)--all of these will strike any economist as very, very familiar.

All of these seem familiar to economists because they are the points made by Ludwig von Mises (1920) and Friedrich Hayek (1937) and the other Austrian economists in their pre-World War II debate with socialists over the possibility of central planning.

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."

In Hayek's view, as he wrote in "The Use of Knowledge in Society," the fundamental economic problem is:

...the fact that knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.... It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge...

All of Scott's examples are cases illustrating that the centrally-planned social-engineering that Scott calls "high modernism" is definitely not a way to solve this fundamental economic problem. The bulk of Scott's book is spent adducing evidence for the critique of centrally-planned social engineering that had been made by Friedrich Hayek back before World War II.

Yet a casual reader of the book would not find any significant pointers to the Austrian intellectual tradition--no references to works like "The Impossibility of Socialist Calculation," "The Use of Knowledge in Society," or "Competition as a Discovery Procedure" that are directly on point for Scott's critique of centrally-planned social-engineering (the only works referred to are The Road to Serfdom and the collection Studies in Philosophy, Economics, and Politics, with no references to the individual works collected in the volume).

B. Where Is Hayek?

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?

I should note that today almost every single economist--even those who (like me) are profoundly hostile to many of Hayek's arguments (that government regulation of the money supply lies at the root of the business cycle, that political attempts to reduce inequalities in the distribution of income are likely to lead to totalitarianism, that the Federal Reserve should be abolished, that the competitive market is the "natural spontaneous order" of human society)--agrees that Hayek and his company (including Scott) hit the particular nail that is Scott's central theme, the critique of high-modernist centrally-planned social-engineering, squarely on the head.

Scott's Seeing Like a State's index contains no references to Ludwig von Mises. It does contain six references to Friedrich Hayek:

• A favorable reference on page 256 to Hayek for pointing out that a "command economy, however sophisticated and flexible, cannot begin to replace the myriad, rapid, mutual adjustments of functioning markets and the price system."

• A critique in a footnote of Hayek's belief that the market economy is a spontaneous form of social order. Instead, Scott believes, the market economy "had to be imposed by a coercive state in the nineteenth century, as Karl Polanyi has convincingly shown."

• This is coupled with an admission that "Hayek's description of the development of common law" as "I believe, somewhat closer to the mark."

• 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).

• A supporting footnote stating that Hayek--"the darling of those opposed to postwar planning and the welfare state"--makes the same point as Michel Foucault, who said in a lecture that was then published in 1991 that: "political economy announces the unknowability for the sovereign of the totality of economic processes and, as a consequence, the impossibility of an economic sovereignty," and that this was one of the main points of liberal political economy (pp. 101-2, 381).

• And, finally, a preemptive strike against Hayek in the introduction: "Put bluntly, my bill of particulars against [the high-modernist centrally-planning social-engineering] state is by no means a case for politically unfettered market coordination as urged by Friedrich Hayek or Milton Friedman. 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).

The first two references I agree with. Hayek is right in criticizing the inflexibility of the command economy, and Scott is right in arguing that the market economy is not the "natural" form of human social order.

The third, fourth, and fifth references seem to me to miss the point: no one reading Hayek should be surprised that he is skeptical about claims to useful theoretical knowledge, the unanimity between the left and right branches growing out of the anarchist tradition is not "curious" but a result of these two branches' common roots, and the late Foucault (even though correct, and at the time of his death a serious student of liberal political economy) is not the expert of choice on liberal political economy.

The sixth reference may be the key. Scott cannot cite Edmund Burke in Seeing Like a State--and much of Scott's book consists of praise for the wisdom embodied in community practices in a Burkean vein--except as an "apologist... for... power, privilege, and property." And Scott cannot embrace Friedrich Hayek out of the fear that it will turn his book into a "case for politically-unfettered market coordination." Instead, he believes that his argument is as much a critique of "market-driven standardization" as of "bureaucratic homogeneity."

C. Rubber Tomatoes

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?

It is unclear.

Scott has a long critique of agricultural extension services and agricultural development programs in the third world, and the scorn their "experts" had for the practical knowledge of the rural peasant (pp. 270-306). But any Austrian would agree with all of it: the claims of the experts from the center that they know everything and the peasant knows nothing about how to grow crops in Ghana is ludicrous.

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.

The argument that market-driven processes are as harmful to human freedom as state-led high modernism appears suddenly at the end of a discussion of the importance of practical, local knowledge and expertise. Scott calls this practical, local knowledge "metis," taking the word from the skill traditionally attributed to Odysseus. Takes it to be a counterweight to the type of theoretical or technical knowledge held by bureaucrats, scientists, and others (pp. 309-341). Most such practical knowledge cannot be easily summarized and simple rules, and much of it remains implicit: the devil is in the details.

In the middle of this discussion of "metis" we suddenly read that:

The destruction of metis 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 when we look around at modern large-scale bureaucratic capitalism, we see what Scott calls "metis" everywhere. Everything from the flick of your wrist so that the supermarket laser-scanner reads the bar code (try it some time) to the virtual experience at flying 747's that airline pilots gain in simulators to knowing when you have lost your lecture audience and need to back up to knowing when it too risky to drive the moving van over Donner Pass--all of these are forms of metis. Attempts to design-out metis--to turn workers into efficient, pre-programmed automatons as in the imagination of Frederick W. Taylor--usually fail. They fail precisely because they do not make allowance for the importance of local, practical knowledge. And when they fail businesses that recognized the importance of their workers' skills take up the slack.

We have lost many forms of metis. But as Scott points out, many of them are well-lost:

Once matches become widely available, why... know... how to make a fire with flint and tinder. Knowing how to scrub clothes... on a stone in the river is undoubtedly an art, but one gladly abandoned.... Darning skills were similary lost, without much nostalgia, when cheap, machinemade stockings came on the market... (p. 335).

And overall local, practical knowledge does not seem to be vanishing because of large-scale bureaucratic capitalism. Indeed, the modern forms of metis whose destruction Scott mourns on pages 337-339 were the creations of (previous generations of) large-scale bureaucratic capitalism.

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V. Conclusion

The key fault of what Scott calls "high modernism" is its belief that details don't matter--that planners decree from on high, people obey, and utopia results. Note that Scott's conclusion is not just that attempts at high-modernist centrally-planned social-engineering have failed. It is--as von Mises argued 70 years ago--they are always overwhelmingly likely to fail. As Scott puts it:

... [the] larger point [is that]... [i]n each case, the necessarily thin, schematic model of social organization and production animating the planning was inadequate as a set of instructions for creating a successful social order. By themselves, the simplified rules can never generate a functioning community, city, or economy. Formal order, to be more explicit, is always and to some degree parasitic on informal processes, which the formal scheme does not recognize, without which it could not exist, and which it alone cannot create or maintain (p. 310).

Yet even as he makes his central points, Scott appears unable to make contact with his intellectual roots--thus he is unable to draw on pieces of the Austrian argument as it has been developed over the past seventy years. Just as seeing like a state means that you cannot see the local details of what is going on, so seeing like James Scott seems to me that you cannot see your intellectual predecessors.

That the conclusion is so strong where the evidence is so weak is, I think, evidence of profound subconscious anxiety: subconscious fear that recognizing that one's book is in the tradition of the Austrian critique of the twentieth century state will commit one to becoming a right-wing inequality-loving Thatcher-worshiping libertarian (even though there are intermediate positions: you can endorse the Austrian critique of central planning without rejecting the mixed economy and the social insurance state).

And when the chips are down, this recognition is something James Scott cannot do. At some level he wishes--no matter what his reason tells him--to take his stand on the side of the barricades with the revolutionaries and their tools to build utopia. He ends the penultimate chapter of his book with what can only be called a political pledge-of-allegiance:

Revolutionaries have had every reason to despise the feudal, poverty-stricken, inegalitarian past that they hoped to banish forever, and sometimes they have also had a reason to suspect that immediate democracy would simply bring back the old order. Postindependence leaders in the nonindustrial world (occasionally revolutionary leaders themselves) could not be faulted for hating their past of colonial domination and economic stagnation, nor could they be faulted for wasting no time or democratic sentimentality on creating a people that they could be proud of (p. 341).

But then comes the chapter's final sentence: "Understanding the history and logic of their commitment to high-modernist goals, however, does not permit us to overlook the enormous damage that their convictions entailed when combined with authoritarian state power" (p. 341).

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References

Friedrich Hayek, ed. (1935), Collectivist Economic Planning: Critical Studies on the Possibility of Socialism (London: Routledge: 0678007659).

Friedrich Hayek (1937), "Economics and Knowledge," Economica 4, pp. 33-54.

Friedrich Hayek (), "The Impossibility of Socialist Calculation,"

Friedrich Hayek (1945), "The Use of Knowledge in Society," American Economic Review 35, pp. 519-30.

Friedrich Hayek (), "Competition as a Discovery Procedure"

Jane Jacobs (1961), The Death and Life of Great American Cities (New York: Vintage).

Jane Jacobs (1965), The Economy of Cities (New York: Vintage).

Frank Knight (1936), "The Place of Marginal Economics in a Collectivist System," American Economic Review 26:2, pp. 255-6.

Abba Lerner (1934), "Economic Theory and Socialist Economy," Review of Economic Studies 2, pp. 51-61.

James Scott (1998), Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed (New Haven: Yale University Press: 0300070160).

Ludwig von Mises (1920), "Die Wirtschaftsrechnung im sozialistischen Gemeinwesen," Archiv fur Sozialwissenschaften und Sozialpolitik 47:1, pp. 86-121.

Comments

[shah8]

Oh but there are many "metis" that is quite useful to lose (and it isn't because it's obsolete). Say, binding feet or careless plowing of land, or any of those things.

Metis isn't something you can inculcate, but it is for damn sure something you can suffocate. Everything from Sati tradition to medicinal practices that involve endangered animals.

I chuckled at how little the US history is involved in the book. Traditionally, the US has had way too few busybodies interrupting the way of things. So many areas of the country were doing such extremely inefficient practices for so long, just because...

[Yatima]

Anyway: rail gauges. Vaccinations. Insurance, as you say. Scott conveniently overlooks all the infrastructural elements that are necessarily centrally planned. The devil is not (or not only) in one approach or the other, center or periphery, but in trying to strike the balance.

[downward insanity]

This is just so funny. Austrians lost their empire, got conquered by Hitler, than got conquered by Stalin and now lapsed into complete irrelevance. Surely their economic school has a lot to teach us... how not to do things.

[Scott Martens]

You speak as if "high-modernist planning" and "market-driven standardization" were antonyms. I point to the preposterous but now standard programming language known as C++, or the notoriously poorly designed Windows 3 operating system as instances of just this sort - a high-modernist sits in his office and plans market-driven standardization. To be sure, Microsoft has not - so far i know - starved millions of peasants, nor has Bjarne Stroustrup advocated or operated any gulags for LISP programmers nor liquidated villages of antiquated C users. Nonetheless, to see these things as clear opposites is a mistake, and it's as much a mistake if Scott sees them that way as if the Austrians do.

Just the same, and not to get too Derridan about it all, I note something of a false opposition in the notion of state planning and the use of local knowledge. 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.

So if you are looking for instances of market-driven standardization doing damage on the scale of Soviet collectivization, we might look to the Congo Free State. But that, of course, was also a perfect case of central planning by remote bureaucrats, and far from a utopian dream in anyone's mind. Nonetheless, the role of market forces in it is indisputable. The same might be said, albeit still somewhat speculatively, of global warming, which certainly has the potential to do as much harm as Soviet industrial policy.

And, we might look at Niagara Falls, or the Panama Canal, or the Paris Metro or any of a number of successful infrastructure projects as cases of remote central planners constructing very important resources that would have been difficult to construct in any other way.

It's not that I am opposing the Austrians' conclusions about central planning per se, or Scott's. That hubris should bring a downfall strikes me as entirely just. Rather, I am critical of the notion that these are clear black-and-white issues. Planning can take place in a context of elitist isolation from facts on the ground, and it can take place in a context of humility and hedging. And, market activities can include haughty and destructive decisions made from remote boardrooms by arrogant MBAs, as well as diverse decisions made by throughout dispersed hierarchies. The mythical central planner described by Mises and Hayek is as often a strawman and the scrappy, locally knowledgable entrepreneur offered in contrast.

[Anarcho]

of course, James Scott is aware of the genuine anarchist tradition. In his arguments with Marx, Bakunin had argued against the idea of centralising power as it would exclude the real interests of the many. As he put it, no central body could comprehend the needs of the many and so it could it be oppressive, exploitative, bureaucratic and inefficient. History proved Bakunin right.

Given that the "Austrian" economists attacks on central planning came 50 years later, it is understandably why Scott should downplay them in favour of the anarchist analysis.

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...

So, to summarise, anarchists said it first and applied it to the capitalist workplace. Little wonder Scott goes to the anarchist tradition. If delong was more aware of the history of socialism, he would have recognised this.

[tjallen]

This looks like one of those cases where too strong a conclusion is being drawn from the evidence.

To say from a series of disastrous cases of central planning, that therefore, all central planning must fail, is too strong.

Even when we say more complexly, here are cases of disastrous central planning, and all were disasters because the central planner didn't have the metis, and central planners never have the metis, and therefore central planning must always fail, is also too strong a conclusion to draw from the case evidence.

It seems to me the best we can do is draw the weaker conclusion, that there are cases where central planning is (much) less efficient than allowing disparate actors to use their local knowledge.

This leaves open the possibility that a centralized plan might work in cases where the metis is weak, or largely false, or irrelevant. For example, in a case where the metis is to use augery or random coin tosses to decide what to do, a planner's rule that every track must be made of 2 rails four feet apart, might be more efficient than random choices of dislocated actors, no matter how well these actors know their local metis...

Of course, there is a long history of using narrow gauge railways for local purposes, even when their railcars cannot run on the tracks of the centrally planned national railroads...

Bur of course, many narrow gauge railways failed...

So much evidence, so little time!

[a foreign student]

Isn't Scott's point here that while Hayek successfully critiques the command economy, the market economy is not the 'natural' state of affairs?

So he disagrees with Hayek, because "market-driven standardization" is an act of command economy. Trying to make a market where one doesn't want to work (eg. medical licensing + medical insurance) is to draw a straight line on a map in Paris.

[Slocum]

"I point to the preposterous but now standard programming language known as C++, or the notoriously poorly designed Windows 3 operating system as instances of just this sort - a high-modernist sits in his office and plans market-driven standardization."

I think you have that 180 degrees backwards. Both C++ and Windows 3.x are examples of path dependency, not high-modernist planning. C++ was an extension of the non-object oriented C language. It was cumbersome because it was an extension of C...and it was widely adopted because it was an extension of C (programs written in C could be compiled by C++ compilers and object-oriented features gradually added).

But there have been various efforts in the computing industry to start from scratch and produce a clean-sheet, elegant design. They invariable fail (google 'taligent' for example).

[John Emerson]

Agricultural extension agents (county agents) in the U.S. (New Deal and later) had a mostly positive effect, as I understand, and mostly were regarded as helpful by the working farmers. They promoted crop rotation, various sorts of anti-erosion practices, new crops (hybrids, etc.), and so on.

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.

City planning is another example. Jane Jacobs criticized hard-nosed top-down planning (Robert Moses), but completely unplanned cities ruled entirely by the market (Houston seems to be the poster child) have their own problems, some of which are quite similar to the problems of centrally planned cities.

The planners in Portland Oregon have tried to put some of Jacobs' ideas into practice to enable livable development, but it's still planning and not pure market forces. The local libertarians (the Cascade Institute) hate what's happening and do their pitiful best to monkeywrench it.

[John Emerson]

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).

A specific instance is Ludwig's development project in the interior of Brazil. Ludwig was given a free hand by the government, but understood the finance but not the soils, and he failed.

Finance moves billions of dollars and enormous businesses around the game board without necessarily paying much attention to the business specifics, much less the non-economic consequences of business practices. Now and then big finance colonized by criminal elements (Russian shock therapy, BCCI, and elsewhere), and some big players have questionable political goals (the Saudis and the Chinese state bank.)

Whenever there's a disaster, I look for sophisticated new financial innovations: Enron, LTCM, and now the housing crisis (subprime loans).

State centralism is totally dead, but now we're dealing with a different phase with different problems. Finance centralism, perhaps.

[kharris]

So I haven't read the book, but...

This is a book which, whether we call it "high modernism" or something else, is about central planning, isn't it? If so, then 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. The author is undermining his own point. Claiming such private errors are made with the compliance or encouragement of public officials doesn't mean the plan was a public sector creation. Calling planning "central" when it was undertaken by a number of private actors won't do.

The railroad example, too, has problems. Rails don't evolve. They have to be planned. Asphalt roads may follow the path laid down by foot traffic or cows, but the best a railroad can do to emulate that process is decide to follow a road that once was a cow path. Mistakes are made all the time. Given that other railroad planners have made very good choices about where rail lines should go, how does this example prove the author's point? The first of anything is likely to prove unsatisfactory. That the first rail line from Paris to Strasbourg proved unsatisfactory is no surprise.

Lenin? Yeah, sure. Brasilia? We all knew that. Planning has its problems. Unrestricted, privately-arranged urban growth also has problems. Aim to show only one side, and you surely can, but that doesn't mean you have provided an accurate or complete picture. Some things cannot exist in any useful form without a plan. Try going to war without a plan. Try building a railroad. Try competing in the auto industry, where efficient-sized plants are very large.

Reading just the review and not the book, I get the impression the author is replaying historic battles with toy soldiers. We know the outcome. Trying to impose lessons from that outcome on today's problem may be a little like generals planning to fight the last war.

Didn't Brink Lindsey already write this book?

[JRoth]

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.

I can honestly say that I did not taste a fresh, worth-eating tomato for the first 20 years of my life - _that_ is the legacy of the rubber tomato.

[Why not? Was some commissar standing over your parents waving a kalishnikov? Or did your parents just not think it was worth the extra money?]

The fact that other varieties are now available for purchase (when in season) is a much-belated correction to the centralized capitalist planners, who were not interested in creating a product for sale only 9 months of the year. Just as Germany no longer ruins its forests, supermarkets no longer force rubber tomatoes on their customers. That the bad practice has stopped is not a defence of the practice.

[reason]

John Emerson...
I'm very impressed by your contributions here. You are right and DeLong has really missed an important point,(whatever the argument may be that original book did not make it well), that there is always a tension between the NEEDS for central control (and hence benefits of scale) and decentralised (and hence more customised) decision making. It is in thinking the answer lies entirely in one or the other that we go wrong. And notice that this can be addressed entirely without referring to the somewhat overblown statism versus "free" market dichotomy.

[John Emerson]

Public transportation is an area where freemarketers and liberals very often disagree. Liberals (I'm thinking of Portland Oregon, and these are centrist business liberals) want to promote livability, higher density, and public transit. 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. It's exactly the kind of top-down imposition that Jacobs criticized. Resistance to highways comes from people who want to preserve healthy existing neighborhoods -- through governmental action. The free-marketer position looks especially bad in this case, since they're really asking to use eminent domain to take away people's homes.

[wood turtle]

German forestry may have had failures before 1900 but I am sure they probably learned from their mistakes and have a better idea what the requirements are for planning in forestry.

Just because things were tried and did not work doesn't mean that planning is always a failure as opposed to free market forces.

[kharris]

"Why not? Was some commissar standing over your parents waving a kalishnikov? Or did your parents just not think it was worth the extra money?"

Brad, this is not the snootiest thing you have every written here, but it comes close.

You might want to keep your age, location and relative privilege in mind before denigrating the experiences of others. Are you unaware of the changes in availability of food in the middle of the country over the past few decades? Hard pink tomatoes were all that was available in groceries through my teenage years. We had was no Grimaldis. There were no fine food catalogs. We lived in farm country for a while, so could grow our own, and we had to if we wanted a tomato worth eating. Urbanites weren't so lucky. Farmers' markets are, for many cities, a relatively new idea. Truck stands were as close as we came, and they only stuck around about a month and a half through the entire year. If none of this is true in your experience, it is because your experience is limited.

[Driving out to the countryside is not a new idea--when things are in season.]

[ligedog]

Brasilia is a particulary bad example because it's purpose was to provide a symbolic, modern capital city for an old and traditional country. Which the design did accomplish. It was not designed as the model for how a city should work. Also it was a new creation and therefore did not destroy an existing working city. Modern city planning has caused a lot of damage and has caused numerous problems but choosing Brasilia as the example only undercuts his point.

[downward insanity]

And the worst socialist project of all is of course US interstate highway system. If it was built in pieces by the private investors, surely it would provide the best ROI, connecting the suburbs to city centers, charging good money for road access and avoiding the places nobody wants to go to (like the whole middle of the country). Instead the Federal Government used your taxes to built that monster nobody needs. Oh, wait...

[Paul J. Reber]

I do not feel like I learned anything from the central claim ascribed to the book. The fact that central planning can and has been done badly in a wide variety of domains does not mean it is impossible to have positive and useful central policies. It was not news to me that it's hard to make good policy and that care is warranted. Obviously, we need to get better at policy design and implementation.

The fact that early attempts to build an airplane did not fly does not mean one stops trying to build an airplane. It does mean that you shouldn't announce a law requiring all people to travel by airplane when they don't work.

We have many examples of good and bad policies and a general goal of making better ones. Can reasonable people disagree about this?

However, I am very intrigued by the concept of "metis" in this context. We call this type of knowledge "implicit memory" in the memory biz (my biz and my area). I had not considered previously that non-verbalizeable knowledge contributed to the emergent wisdom of the market. And I'm not sure of it now either, I still think the efficient rapid information transmission in high-liquidity markets seems more important. But the analogy between state-planning and explicit top-down control is interesting. In general, a lot more human knowledge is implicit (nonconscious, non-verbalizeable) than people realize. Now I wonder if this misunderstanding contributed to the hubris that rational man could plan to allocate resources better than free markets do.

[piotr]

Monoculture forests are perhaps ecologically poor, but commercially, they deliver a lot of wood of the kind that is required by industry. Till today, most of the forests in central Europe are like that. Perhaps they adapt species better to local conditions, so you can have monoculture beech forests, non-Scotch pine forests etc. I think that most of the forest was private, and the monoculture forests were adopted because of profit reasons.

Something like Windows. Some people are afraid that one day a new generation of viruses and worms will do to world economy what potato blight did to Ireland.

Brasilia example is quite ironic, as the city is compared with Beijing, not exactly a city of spontaneous growth.

Actually, perhaps the problem of Brasilia is its success. Central planning is no a single entity. There were nanny states, planning neighborhoods nicely interspersed with parks, streetcar lines, shopping centers, clinics and Lutheran churches (state religion being Lutheran). And there are states that want their citizen to be impressed by their might. And this even can be the same state at different functions. Some urban neigborhoods designed by Stalinist architects were OK, they could be called Stalinist Art Deco, I guess. Ironically, it was after Stalin when truly ugly city neighborhoods were build.

[John Emerson]

Beijing was centrally planned about 700 years ago, with frequent state-central upgrades since, but the rough edges have been knocked off by history. After all, in China 1948 and 1911 are recent.

[derrida derider]

Of course planning doesn't always fail and is often necessary - I can't remember Scott ever denying that. Certainly he avoids the common anarchist idealisation of a state of noble savagery. He goes to some lengths to point to the gross inequity, as well as inefficiency, of pre-state modes of organisation.

I also agree with other posters that his intellectual antecedent is Kropotkin rather than Hayek, though the two worldviews have important commonalities.

It seems to me that Scott does goes one point further though, which Brad misses in his review. He comes to a (leftist) Foucaultian view of power rather than a (rightist) Virginia school one. The tendency is always to over- rather than under- plan simply because ***that serves the power interest of the planners***. Just as with Kropotkin vs Hayek he would probably argue that the Virginians underrate the importance of *private* abuse of power to plan.

[Roger Albin]

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. He certainly wouldn't agree with the Austrians that capitalism in the sense they use the term emerges spontaneously. Rather he sees the 'modern' institutions like individualized land tenure and resource allocation, and production for a world market, as imposed on traditional peasant societies by modernizing regimes. A further point is that in many cases, like the examples of Tanzania and Brasilia, these policies were deliberate imitations and extensions of colonial policies of the late 19th and early 20th century. He may share the Austrian contempt for centralized planning but he reached his position via a very different route.

[Barkley Rosser]

There have been plenty of planned cities that have been both beautiful (or at least parts of them) and reasonably functional besided Beijing. St. Petersburg and Washington are two examples, although they predate "high modernism," needless to say. However, there have been plenty of modern "new towns" planned that did not involve skyscrapers in empty landscapes, e.g. Reston, Virginia, with its decentralized sections with lots of trees and small lakes and, ahem, planned mixing of housing and businesses a la Jacobs.

Regarding the Austrians and Austria, it is notable that the Austrian School left Austria by WW II and did not return. The actually existing postwar Austria has been run by corporatist social democrats mostly, who have done a good job of it, not following the advice of the "Austrian School" very much at all.

[John Emerson]

I might mention that in China, private property in land and a degree of legal individualism (clans could neither protect nor discipline their members, though people could be punished for their relatives' crimes) were instituted by fiat and violence by Ch'in Shih Huang Ti around 200 B.C. Massive social engineering, no? The Pinochet of his time.

For Hayek and the Chicago School, The State and The Market are the two players, and they support The Market. For communitarians, old conservatives, and many anarchists The Community is the third player, distinguishable from the others. Social Democrats, to a degree, merge The Community and The State. Scott's anti-Statism probably differed from Hayek's in that respect.

[IM]

Concerning forests in 19th century Germany: If the author is right and I'm not so sure, he indicts neither private nor state ownership but the new science of Forest Economy.

In the beginning of the 19th century were there three models of forest ownership and administration:

1. State forests
Already the biggest part of forests and now centrally administered for economic gain. The administrators of these forests were university educated and enforced uniformity in forest management according to scientific methods.

2. Big Private Forests
A lot of aristocratic owners had quite considerable forests. They were centrally administered for profit too, using the same university educated men as the state forests.

3. Private Parcels of forests
As a result of the separation of commons, many peasants had a small parcel of forest. These parcels were mismanaged and overused. As a result they were bouhgt up by the state.

At the end of the 19th century, forests were in the hand of big private or public owners, monocultures, but otherwise good managed (no overuse).

So state:private 1:1; big:small 1:0. Marx and Taylor would have liked the result, but I think it cannot prove the austrians point of view.

[nemo]

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?

"Planning can take place in a context of elitist isolation from facts on the ground, and it can take place in a context of humility and hedging. And, market activities can include haughty and destructive decisions made from remote boardrooms by arrogant MBAs, as well as diverse decisions made by throughout dispersed hierarchies. The mythical central planner described by Mises and Hayek is as often a strawman and the scrappy, locally knowledgable entrepreneur offered in contrast."

I once worked in a private company with no more than 70 employees that suffered from some of the worst decision making in the world because the head man, supposedly a scrappy entrepreneur, isolated himself from unwelcome news. I now work in a private company with more than 700 employees that does a relatively good job of integrating centralized and dispersed decision-making, and encouraging the flow of information.

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.

[JK]

The Lenin quotation from Immediate Tasks of the Soviet Government appears to contain an error - and one that reverses the meaning at that.

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."

i.e. the word COMBAT should be COMBINE. The text available on the web is in accordance with the printed text:

http://www.marxists.org/archive/lenin/works/1918/mar/x03.htm

Of course the Progress Publisher editions were translated and edited by Stalinists and in certain cases unreliable. In this case, however, it is much easier to see this as a misreading of the english word combat for combine.

Also, the word combine fits the entire line of argument as anyone who was reading the text in any mode other than demonological would know. Thus Scott choses not to quote from the previous page:

"The “mania for meetings” is an object of the ridicule, and still more often of the spiteful hissing of the bourgeoisie ... But without the discussions at public meetings the mass of the oppressed could never have changed from the discipline forced upon them by the exploiters to conscious, voluntary discipline. The airing of questions at public meetings is the genuine democracy of the working people, their way of unbending their backs, their awakening to a new life, their first steps along the road which they themselves have cleared of vipers (the exploiters, the imperialists, the landowners and capitalists) and which they want to learn to build themselves, in their own way, for themselves, on the principles of their own Soviet, and not alien, not aristocratic, not bourgeois rule."

Is anyone arguing that Henry Ford and the Pinkertons, let alone the Russian aristocracy were more enthusiastic about democratic participation?

In addition, no where in State and Revolution does Lenin analogise "society" to an ocean liner.

I'm quite happy to debate problems with Lenin's politics. But it would help if there was engagement with the real Lenin.

People might want to begin with "How to Organise Competition?"
http://www.marxists.org/archive/lenin/works/1917/dec/25.htm

[Tracy Lightcap]

I've always wondered about the premises of the Austrian argument. When Hayek faced off with Lange, his argument about the inability of central planners to collect and use the information necessary to run a centralized economy probably made sense. Though Lange had an answer that satisfied many at the time, Hayek proved to be closer to the mark.

But would we say the same today? You know, I suppose, that the "register" at your local Mikey D's is actually a data input terminal for a small local server that downloads records for the keystrokes to a regional server and, finally, to national databases. Those databases, updated every night, provide the reports used to make decisions about product lines and purchases of raw materials (no pun intended). All of this is becoming more and more the case for all branches of the economy. Been asked to give your zip code when you use your credit card? Had your profile on Amazon updated recently? 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?

Admittedly, much of the world and much of our own economy is still subject to the information constraints Hayek centers his criticisms around. But isn't it obvious where the future is headed? And isn't it obvious that it will systematically undermine the Austrians?

[Bruce Wilder]

"Note that Scott's conclusion is not just that attempts at high-modernist centrally-planned social-engineering have failed. It is--as von Mises argued 70 years ago--they are always overwhelmingly likely to fail."

Of course, they do not "always fail" and have not "always failed". Planning and organization seemed like a path toward utopia, precisely because of the many examples available by the end of the 19th century of the manifest successes possible from organization and planning.

A bad architect is not proof against all architectural design. That an organization designed by an anarchist might go awry should not surprise anyone. You might as well hire a miner to design an airplane.

[Lee A. Arnold]

I'm going to guess that the reason why James Scott did not much acknowledge Hayek, is that Scott has chosen a pressing problem which Hayek does not illuminate.

To begin, the old Waldsterben would NOT have been averted by individuals in a market, either. This is an ecological damage created by humans equipped with an advanced technological outlook, and hubris.

Its correct solution presupposes a system-wide ecological knowledge which was unknown and scarcely possible BEFORE the disaster started to point out the necessity, and a good deal of expert investigation followed. About the only prior operational approximation would have been a sort of religious holism.

You quote from Hayek's well-worn "Uses of Knowledge":

"...[the] knowledge of circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess...."

This is precisely false, with regard to ecological damage. And that has become one of the two or three biggest economic problems.

I don't blame Hayek. The environmental disaster, although discernable now to all students of agricultural and forestry development programs, had not quite arrived. His own investigation of systems theory went elsewhere, into an argument for an acephalous emergence (a "constitution") of rules preserving human freedom, in the face of his own historical circumstance. Well and good, but not all-encompassing.

I have not read Scott's book, only your review here... But it seems to me that he is pointing, unspoken, to the New Global Waldsterben. Those details which ought to matter are being eradicated, and it is BECAUSE local knowledge is not enough.

Both markets and governments are going to have to adjust to some sort of new institution (hopefully acephalous, hopefully freedom-loving) in which the "knowledge of circumstances of which we must make use" ONLY EXISTS in concentrated and integrated form -- as rock-hard ecological precepts. It is not very predictive, it is precautionary, and the details really don't matter that much.

[Ezra]

"Heaven knows that I am no Austrian--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."

Please explain this in more detail. If the Austrian intellectual victory is complete, why do you remain a Keynesian?

[John V]

Ezra,

I'm not an economist but I have read a lot of Austrian material and am a libertarian.

And while I've read much, much less material about Keynesianism, I can say this much:

(And perhaps the good Dr. DeLong can tell me if I'm wrong)

I see the two schools as moving in different directions. One from macro to micro, the other vice-versa. Keynesianism and now "Neo-Keynesianism" seem to be far more concerned with macro-policy whereas Austrian School is built from very micro-economic thinking. Any broad conclusion Austrian draw is deducted from axiomatic thinking that starts with the individual and "Human Action" as Mises defines it.

Keynesianism, as I understand it, is based on macro-models and macro-tendencies (as they see them forming and acting).

Simply put, Keynesians see macro-activity that can overwhelm or supercede micro-principles. Austrians do not agree and see consistent logic from micro to macro and distrust formulations that seek to prove inconsistencies therein based on theoretical foundations that they, the Austrians, find to be dubious and unsound.

Seen this way, they are not mirror opposites and there is room for Keynesians to acknowledge some assertions from the Austrian School without accepting the whole thing. Hayek's and Mises's arguments about socialism and central planning, based on the idea of knowledge and information and prices, is extremely compelling when fully understood. I think many other posters above, based on how they talk about this concept, do NOT understand it. If they are economists, I think that's embarrassing. If they are just political junkies, it's perfectly but sadly expected.

If you look, Delong has even said that he doesn't buy other Austrian arguments about business cycles and monetary policy. So I'd hardly say he's ceding TOTAL victory.

[Jon Robinson]

I have the same question as Ezra.

[John V]

Jon,

and I have the same answer that I just gave Ezra. does that answer help any?

I must add, not just to you but to many other here as well:

what's with all the subtle sneers towards the Austrian School? The fact that an unsympathetically partisan yet learned economist like Delong can acknowledge the School's contributions and speak somewhat well of it on a professional level should give liberals pause, not provocations to question DeLong's judgment. Sheesh.

Personally, I'd be curious to see DeLong's critique of the Austrian Business Cycle Theory...without misrepresenting its premises. I find it very compelling.

[Greg Ransom]

Brad -- you hate a Hayek that doesn't exist. Let's go through this one by one:

>even those who (like me) are profoundly hostile to many of Hayek's arguments>that government regulation of the money supply lies at the root of the business cycle>that political attempts to reduce inequalities in the distribution of income are likely to lead to totalitarianism>that the Federal Reserve should be abolished> that the competitive market is the "natural spontaneous order" of human society)<<

This is a false cartoon -- and I'm guessing you know it is false. Hayek talks about all sorts of intential actions in the development of modern competitive markets -- and even in historic ones.

What you've said here isn't Hayek -- and no one who's read Hayek would attempt to pass it off as Hayek.

Have you really read Hayek? If so, what?

It looks to me like you've read unreliable second-hand stuff, and you haven't in fact read much Hayek at all.

Am I right? Bet I am.

[Greg Ransom]

Brad -- you hate a Hayek that doesn't exist. Let's go through this one by one:

>even those who (like me) are profoundly hostile to many of Hayek's arguments>that government regulation of the money supply lies at the root of the business cycle>that political attempts to reduce inequalities in the distribution of income are likely to lead to totalitarianism>that the Federal Reserve should be abolished> that the competitive market is the "natural spontaneous order" of human society)<<

This is a false cartoon -- and I'm guessing you know it is false. Hayek talks about all sorts of intential actions in the development of modern competitive markets -- and even in historic ones.

What you've said here isn't Hayek -- and no one who's read Hayek would attempt to pass it off as Hayek.

Have you really read Hayek? If so, what?

It looks to me like you've read unreliable second-hand stuff, and you haven't in fact read much Hayek at all.

Am I right? Bet I am.

[Greg Ransom]

Well, you software cut off all my comments. Great.

[Greg Ransom]

Brad -- you hate a Hayek that doesn't exist. Let's go through this one by one:

>>even those who (like me) are profoundly hostile to many of Hayek's arguments>that government regulation of the money supply lies at the root of the business cycle>that political attempts to reduce inequalities in the distribution of income are likely to lead to totalitarianism>that the Federal Reserve should be abolished<<

For most of Hayek's life he opposed various Fed policies, based on poor data, but he did not advocate the abolition of the Fed or any other central bank. Only very late in life as a sort of intellectual challenge to the economics profession did he come out in favor of free banking. (If you don't know much about free banking, read some Larry White.)

[Greg Ransom]

"that government regulation of the money supply lies at the root of the business cycle"

This is NOT Hayek. Hayek argues that even without government regulation of money there would be a trade cycle. You can look it up.

[Greg Ransom]

"that political attempts to reduce inequalities in the distribution of income are likely to lead to totalitarianism"

This is NOT Hayek. Hayek allows for all sorts of efforts fo reduce inequalities, and he nowhere suggests that these will lead to totalitarianism. Read Hayek's _The Road to Serfdom_. Have you actually read it?

[tennin]

Didn't Hayek harden his positions over time, though? I remember him stating in the preface to a later edition of Road to Serfdom that if he were to rewrite it he'd be prepared to make more sweeping claims.

[Doug Carmichael]

Hayek was against state planning
Corporations have become bigger than some states
The Hayek economists continue to criticise 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.