Tuesday, October 13, 2015

Two anecdotes on command economies

This is Joseph

Mark Evanier:
When I was a kid, one of the reasons we were taught that Communism was bad was that since there was no competition, there was no choice. The markets all sold the same kind of bread and the same kind of canned beans and the same kind of salad dressing…and if you didn't like it, too bad. You couldn't go to another store and find an alternative. For some reasons, people who think Communism is the greatest evil on the planet cheer on big companies getting bigger even though it leads us in the same direction.
A quote from an article by Gary Leff (via Marginal Revolutions):
It would have made more sense for United Airlines staff to offer a larger incentive for passengers (who did not have to be at their destination that evening) to agree to take a later flight, she adds. Virginia Shiller says the staff were only permitted to offer volunteer an amount totaling several hundred dollars, but it may not have been enough of an incentive to persuade volunteers to take a later flight. “It was totally irrational. They probably could have gotten a volunteer to take $2,700. They have these formulas. It’s like something they do in socialist countries.” 
 One of the interesting features of modern economies is that we still have command economies but they are corporations and not government bureaus.  I suspect part of the reason is transaction costs -- you cannot make everything open to constant bidding without gross inefficiency.  The other is that people like to have power. 

However, the United States seems to be an outlier on the degree of focus on corporate command economies.  I am starting to wonder if this is because the country is so large.  The smaller the country, both in geography and population, the easier it is to create effective mixed economies.  Canada has managed it by being under-populated and very decentralized.  England is geographically small, isolated from hostile neighbors and, even today, has fewer people (63 million) than the United States (325 million). 

It seems worth thinking about. 

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