Why Central Planning Always Fails


Jeffrey Dorfman, an economics professor at the University of Georgia, has an entertaining article at Real Clear Markets which reprises the two basic arguments against government central planning. His thoughts aren’t new but in an age in which belief in the ability to solve every problem usually goes unchallenged it’s worth noting his arguments.

For government to make a market work by exerting control it needs to know everything: the cost structure of every seller and the willingness to pay of every buyer. Without all this information, the government cannot obtain its desired result. Certainly government can try to adjust as it goes and might eventually get it right, but, unfortunately, since business costs change and people’s preferences are fickle, the government has to hit a moving target.

When you factor in not just the amount of information required but also the intelligence, the problem gets even worse. The politicians and the bureaucrats in all the government agencies think they are very smart. After all, it takes at least intellectual confidence if not arrogance to believe you know enough to legislate and regulate the economy to where you want it to go.

Unfortunately for the government, an important lesson to learn is that the people are smarter than the government.

Do read the entire article, particularly for his examples of citizens outsmarting government.

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