People in the comments are complaining that they forgot to take the railroad length in consideration. It doesn't matter they forgot it because if they would have included it, the concept was the same. If the railroad through the mountain is faster, the capitalist would estimate how big the difference is and would calculate how much gas he would safe and how much more people would be able to be transferred and then he would be able to make an informed decision based on that. Nobody is saying that not a single capitalist would make bad investments, ofc there would be bad ones. But it's about them being able to make informed decisions in the first place.
The idea that market prices are a good representation of what would benefit society the most is based on the idealistic capitalist market system where no externalities, market manipulations, anti-competative and anti-consumer practices and other perversions exist. The idea that planing can't be more effective than real world prices is based on a understanding of planing by a few people limited by their brainpower and making calculations on hand. In reality technology has solved both the knowledge and the calculation problem for planing economies just like it has done it for planing businesses.
@@ЯсенЧапкънов Not really how does technology will know what humans demands are and it is still not working just look to china still very inefficient (Have you seen there army the most soldier do not even have night vision and body armor) and millions of people in concentration dying there because they are dangerous for the power of the goverment. The rest of the argument is just laughable who is able to do market Manipulation the only legal one is the goverment and the rest who tries is going to jail. Externalies are also a bad argument because if there is a damage of somebody's property rights they will in counter it. What anticompetative and anticonsumer practices. A socialist arguing that it is bad that there is no competition but in the same sentence wants to have more central planning.If there is competition the business wants to have the best results for the costumer the competition reduce anti consumer practices and the ability of choice which you do not have in a central planned economy is the power to not let these practices take action.
Just FYI for anyone wanting to look deeper, this video is mixing the calculation problem of socialism detailed by Mises [circa 1920] with the knowledge problem of socialism detailed by Hayek. They have some similarity but really are different things.
@@carlosquinto1383 One shows that people can not obtain the needed knowledge in a central location or entity, and the other shows that even if we assume that they could magically centralize that knowledge they couldn't do meaningful and beneficial calculations with it. The calculation problem assumes the best case of having perfect knowledge of the economy's current state and only shows that it is not possible for a central power to calculate an optimal (or even good) solution. The knowledge problem shows that gathering the information needed to know the current state of the economy is not possible in the first place.
@@mytech6779 And yet, capitalists do that all the time. They take decisions, without anyone intervening, for whatever reason within their own company. There is no precise way to evaluate each decision. It can be because they want something pretty for their office, because they suddenly desire another car, or because they feel like it. There is nothing "optimal" in that. In a socialist context, all information is open (contrary to capitalism, where a lot of information is hidden), so the knowledge problem is only about whether or not we really need that railroad. In the video, the capitalist decide, arbitrarily, to start a decision process on how to build the railroad. That decision is taken first, without any "proof" or "calculation", and is not contingent to any "knowledge". Also, socialism is not centralized decision, it's holistic decision. The execution can use any management hierarchical structure needed.
This is the best educational video that's ever been produced covering this subject matter, and should be included in every economics 101 curriculum in the country!
This video has over six hundred comments. Whatever else this might mean, to me it means one thing undeniably: The topic is relevant. I've tried to read through this mountain of interaction, if only because I am curious to know what the common pulse of sentiment is in response to such a simple message. A lot of things have been said, but some things seem to get repeated often, and I find the patterns interesting. One thing that gets mentioned rather commonly in response to the video is that market prices aren't perfect. While this is true, I'm afraid it's beside the point. Detractors to the video's message will need to do more than merely cast doubt on the idea of infallible market prices, because the video isn't suggesting that market prices are infallible. For the video to be taken seriously, it isn't necessary for market prices to be infallible. All that is necessary is for market prices to be MORE efficient at allocating scarce resources which are generally perceived to be of value than if those resources were directed by a central planning board. That's the argument behind the video, and so a focus on assessing the validity of that argument should become the sole focus of all would-be counter-arguments. Going on tangents about greed (common to both approaches), corruption (common to both approaches), pollution (common to both approaches) does NOT tell us which of these two approaches will leave us with more unconsumed resources (savings) after projects are completed than the other one will. That is the central question addressed by the video, and I don't see any opponents actively explaining how central planning leaves more resources available for other projects than market prices do. This is what detractors must argue if they want to directly challenge the video. Another thing I see often is one-liner swipes using crude expletives-or the “propaganda” catch-all-to denote disapproval, as if this is expected to discredit the central message of the video in one master stroke. What this communicates to me is that a counter-argument isn't at the ready; these frustrated souls may feel a strong need to respond, yet are clearly not prepared for the debate. I am quite happy to see that this video has led to such a lively ongoing discussion. I want to express my sincere thanks to its creators, and especially to Howard Baetjer, for his commitment to addressing the concerns of as many respondents as he has found the time to engage. I was particularly impressed by his grasp of the socialist calculation problem on a deep philosophical level, and I would be proud to know anyone who cares so much about understanding these ideas so deeply and clearly. I believe the fallacies will persist, especially in this new digital age, where so much is taken for granted about the power of computers. The need to confront confusion and misunderstanding may have never been greater. The counter-claim is always the same in every new age: “The laws of economics are obsolete, and no longer apply. We can safely ignore them now, as they are only shackles that hamper our supreme vision for future society. We finally have the tools to make anything possible.” This claim is not new, but it will be more difficult to counter in an age of super-computing. The challenge will be to clearly express the knowledge problem on philosophical-not on technical-grounds, where the power to calculate more figures faster can finally be seen as irrelevant to the point at issue. Ideas have power. Better ideas have more power. In the end, the better ideas-meaning the clearer and more efficacious ones-will win out.
R-800, thanks for this very thoughtful, clear comment, and for the attention you have given Tomasz's and my video. I hope to write an article, or maybe come up with another video, that directly addresses the claim that more computation and data transmission capabilities solve the knowledge problem. I think the claim misses the point, but I'd love to spell it out clearly.
You make a good point that prices and market economics don't have to be infallible. The issue is one of efficiency: as you said, the efficient allocation of scarce resources. At this stage, I do believe both science and technology has reached a level of advancement that renders prices obsolete. (In fact, though it has been pointed out in the past and marginalized, we've been capable of moving beyond prices for sometime now.) However, what we're dealing with is a human species embedded with paleolithic emotions, archaic institutions and highly advance tech. Personally, I no longer see the necessity of prices and market economics, and advocate for a money-less society. While traditional economic thinking might suggest such a thing is impossible, there's reasonable evidence to the contrary. It's something I have studied for some time now, and the science supports the potential to do so. Although, (oversimplified) it would require we rethink not only how we produce, distribute and recycle resources, but also rethink incentive and what motivates us to be voluntarily collaborative.
Ksna Sol, my friend, it is good to hear from you again. I was afraid i had lost touch. I don't have time now, but I want to give you my reactions to the high quality video on "resource-based economics" that you recommended to me. Though it is beautifully done, I believe it is based on fundamental errors. Do you have time for a short back-and-forth?
Howard Baetjer Hey, did I miss you? Did I say the wrong thing? lol I wanted to watch the RBE video you mentioned, but when I checked back to see which video I referred you to, I wasn't able to find it. Let me know which video it was you watched if you can. Hope all is well.
Even worse, it's not even *explaining* it, we just have to take faith into the idea that prices are the perfect (and the only) indicator of the correct action to take. The entire video is based on a ridiculous dichotomy.
@Lars Magnus Samuelsson Svenssonsenn Magnussvensamuelsson Thor If you think this video is the equivalent of 1+1=2, then you might consider reattending kindergarten until you get the basics nailed down, OK?
@Liberty AboveAllElse What I meant is, they present only the two choices between full free market with magical price stabilization, or central planners who decide everything. Nothing in between. There's no details on how many planners there are. I feel like many people think that there is some sort of privileged group of a dozen people deciding absolutely everything in the country. Socialism implies democracy at large. It means anyone can contribute, not a small group of people. Managers exist under any system. Even in supposedly "free" markets, surveys and information abound and circulate a lot. But the video presents this as a problem that is unsolvable.
The health care system in the USA is largely capitalist, if not completely. Health is less profitable than disease. Governments often take the slack where the private doesn't want to go because "there is no incentive", i.e. enough profits to be made. For example, the London subway, neglected and ultimately abandonned by the private. Another example, Montréal subway, running on a deficit, but still runs because it's deemed too important for too many people. The video makes the mistake of "a miracle happens" between business owners trying to make profit, without regard for the well-being of others (the video even acknowledges that), and the state of having ressources used the most "efficiently" because there is a presumed automatic and magic adjustment of prices relative to the problem at hand. The video also assumes that the cheapest bridge is the best choice. Best choice for who? The business owner or the users? The video also assumes that the highest demand is only possible to compute using prices (lowest), which does not reflect real life in practice. At best, the price system is a broken clock. It seems to work, but it's only by coincidence. And also because we want to believe that it works. What a coincidence that the "best choice" is always in line with the rich capitalists making absurd amounts of profits. That's very convenient.
@@Simboiss Seems like your issue is with the laissez-faire nature of the argument. You're right, efficient use of resources doesn't automatically equate to positive societal gain; this is where the government, or something representing the interests of the social commons needs to enter the picture. Annoying that this video/discussion ultimately boiled down to free market capitalism vs. centralized 'communism'.
I'm consistently astounded by the vast number of commenters who don't know the first thing about economics who seem to believe they're a subject matter expert.
I think your statement applies to more than just economics comments, but basically the vast majority of opinionated peoples. As a scientist, it drives me nuts when someone claims to know the secrets of reality when they know virtually nothing on the specific subject they claim to be an expert on.
I'm astounded by the people who don't understand software who claim software can solve the knowledge problem of central planning. On and on it goes, I don't think I'll live to see the day that people stop believing in socialism.
you mean with they the video maker , right? I do not believe they are economic experts or knows what is the best for society or know even that you need scientific facts to proof that prices matter or not
You are right it also makes my angry even though i am not a scientist and so far i see they can not proof there knowledge of this subjects with real world research or situations ( personally i would not give theoraticcaly situations as a example to proof something i hope you understand that)
The answer is easy. You go through the mountain. It is the more dangerous route and more dead workers means less mouths to feed, and, in an inefficient system, less mouths to feed is a good thing. Not to mention you would just get political dissenters to engineer and build the railroad for free under the whip of a dedicated comrade. The same thing goes for the steel that you are so concerned about. You just need to force political dissenters and the socially undesirables to extract the ore and refine the steel for free. This kills two birds with one stone; you get your railroad and you eliminate a political threat. You would also want to build the railroad through the mountain because it is the shortest, and therefore quickest, route, and when you are moving people in cattle cars you want the route to be as short as possible to avoid as many escapes or other incidents as possible. Of course, once you have worked the most prominent opposition groups to death, you then will need to start cracking down on anyone who criticizes the regime in even the slightest way to ensure that you continue to have free labor. This culture of fear ensures that even the dedicated comrades will work for minimal reward without complaint or criticism of the system. And, voila, you have a system that will work, at least until the regime leaders begin pursuing liberalisation because they recognize the moral and economic superiority of the system.
I believe this vid is valuable because socialist systems that are democratic fail with resource allocations as well. A dictator cares less about being efficient though in many cases
Video notes: - without market prices, it is harder to determine the value of specific items and make decisions on how to properly allocate resources - price signals show the value of an item, the future demand/supply, and the amount of resources you should consume/make
4:46 There's one small problem with this argument that the market naturally delivers what is "best for society". This claim is true only when all people generally have the same purchasing power, otherwise it's patently false. Prices are governed by economic demand, not social need. The market therefore delivers, proportionally, what those with purchasing power want, not what is actually needed by people in general. With vast inequality and low labour prices, the masses could starve and all the resources would be used to produce luxury goods. That is, in a market economy, the needs of society as a whole may be ignored while the needs of the wealthy are closely attended to.
@@andrewj22 Except those same forces determine the value of the employees labor and therefore their wages. If a job isn't worth the money and the potential employees go somewhere else for better pay then that job doesn't get done and the business relying on them goes under or improves wages/working conditions.
@@olstar18 Does that somehow have any bearing on my point? Not all people's wealth and income is a product of selling their labour. If labour prices in general are low, that doesn't mean there aren't still extremely wealthy people with high purchasing power.
@@andrewj22 Actually it does. If you want better pay get a better job. If you think wages as a whole are dropping to much stop encouraging manufacturing to go to other countries. Its a matter of creating a problem and then holding up communism as the solution when it is just more of the same problem.
@@olstar18 I still don't see the connection. Are you saying that all working class people can become as wealthy as the billionaires? If not, then it remains true that the market doesn't deliver what's best for society. Right?
Trick question. All of the engineers have fled the Soviet Union. There are only mindless laborers left. Go with the long route using maximum resources.
...umm what? I don't want to disappoint, but russia doesn't do that bad academically. Well i would have to look it up, but it probably does better than US would without the help of immigrants.
The point might be that those in demand around the world might have better life where they get to choose how to apply themselves rather then be ordered to fulfill a role for the state at a standardized payment under threat prison if they are not compliant. Russian person can be very intelligent but Russian person probably cant tell the government to piss off like he could tell the US government to piss off after he becomes US citizen.
This is just a troll answer, soviets value resources above human lives because human lives are regenerable and expandable. Inhumane or not, if you fail to understand your enemy's logic and just preach to the choir, you manage to educate none and actually inhibit the dialectic.
Without price an item still has value. In its utility. This does not remove the problems brought up in the video but it does hold water. The more utility a decision offers the better a decision it is. Balancing these is harder without pricing but it is possible through prolonged thoughts and considerations.
I had never thought of prices like this: Prices serve to set priority. In an "ideal" society, If the price didn't exist for a finite good, it would be distributed in order of importance to serve the greatest good. So now the people that receive the goods effectively have a price associated with them. Everybody would have different prices for any given good distribution scenario making everything way more complicated than it would be in a universe with prices, but the price function basically is the optimization of this good distribution system. If your job is to determine who gets what in this ideal world, the number that would turn this arduous endeavor into a cake-walk would be the price of the good.
4:46 There's one small problem with this argument that the market naturally delivers what is "best for society". This claim is true only when all people generally have the same purchasing power, otherwise it's patently false. Prices are governed by economic demand, not social need. The market therefore delivers, proportionally, what those with purchasing power want, not what is actually needed by people in general. With vast inequality and low labour prices, the masses could starve and all the resources would be used to produce luxury goods. That is, in a market economy, the needs of society as a whole may be ignored while the needs of the wealthy are closely attended to.
Prices are a mechanism to for the efficient allocation of scarce resources to the most valuable purposes. Central control has proven to be highly detrimental to the allocation of resources, even in cases where they have some external prices for a rough reference. there is the calculation problem, the knowledge problem, and an incentive problem. That is even giving the best light; once you include the evil underbelly of socialist doctrine and the massive corruption, psychopathy, and inequality baked into the details of the theory and manifesto, the whole thing is doomed.
I read somewhere the Soviets even tried just copying prices directly from the Sears catalog which is funny because those prices were derived from the supply/ demand and available resources of a completely different society.
I've read half a dozen to a dozen books and articles about economic calculation (e.g. Hayek's Collectivist Economic Planning, Hoff's Economic Calculation in the Socialist Society, Steele's From Marx to Mises, Lavoie's NEP), and yet this is the most lucid explanation I have ever seen. Absolutely phenomenal.
@Milk Man Marxists don't deny supply and demand dumbass. Have you ever actually investigated what Marx and many others said the LTV was? It *explains* supply and demand.
@@kanehemlock290 Central planning is the exact opposite of supply and demand, where both supply and demand are set in 5 years plan and artificially redistributed.
@@kanehemlock290 Yeah, communists implemented central planning that totally negated supply and demand, that's even their central negation of capitalism. Free market (Supply and demand), Central planning (5 year plans).
@@Schazla I don't think you know how it worked guy. The government didn't plan every single thing. They literally used money and had problems specifically because they DIDN'T abandon supply and demand. They didn't get anywhere near close to what you think it was.
You missed the point. All that data is built into a free market capitalist system. Scratching your head over all the minutia is a mute point if that is preserved and in place and faithfully executed.
This is an amazing explanation of how our civilization has developed through the use of currency and marketing. It really helped me to grasp the overall picture of how supply and demand shape the course of society through money.
However, it is not "central planning" as in "a single person". There are multiple persons working on the railroad project, both in capitalism and socialism.
It is, Simboiss. It's not about the amount of people involved, it is about the flow of information created in market transtactions that is coded in market prices
The major thing that bothers me is that prices are a very limited form of information. For the decider, it's basically a number, or an aggregate of numbers. Railroads are not built using faceless numbers.
Except Socialism and central planning aren't the same thing, and Socialism doesn't ban prices/money. :V The video unironically wasted time critiquing nothing someone said.
@Algo+codehawk ```@Kane Hemlock HAHAHAH You evidently do not even know what prices are nor have you even read the original arguments at all - so entitled "Economic calculation in the socialist commonwealth" by mises mises.org/library/economic-calculation-socialist-commonwealth ``` I have. I've heard them before. I've read them before. ```Back then- the socialists even were thankful for the insight provided by mises. lol of course they were as dumb as they are today and as willfully ignorant on economics ``` Oddly Austrians were and are taken less seriously than Marxians. I can guarantee on reading the farthest you are is the communist manifesto.
@@henriconfucius5559 No, it isn't. Central Planning is a usable tenet. You do not have to plan each and every single idea. Also, the Soviets had money. My point about this video still stands. They are critiquing something that doesn't exist, and are misinterpreting what moneyless society even does for functioning. You can unironically live in Marxian Socialism and be able to create worker cooperatives which make products that they want to make
The zeitgeist group has a slightly different starting point in that they recognize that humanity needs the ability to create resources out of thin air, or at least, reuse resources perfectly. with one of those starting conditions, as unattainable as they seem, prices in any market can drop to near zero and central planning could work. however, we are still a long ways, assuming we ever figure it out, from that point so markets are our best option.
+Justin Vavak Even if resources seem near infinite, they will become more scarce as we consume more than we produce, under the RBE model. Even if that were untrue, time and Labor *Will* always be scarce, comparatively.
Theres a video, plus a pretty long page from Zeitgeist, attempting to deal with economic calculation. However Peter Joseph admits his equations need work and arent ready. But arbritary equations and inputs produce arbritary answers. It would be just simplier to admit they dont know and would have to guess. And TZM is way better than TVP who dont even want to recognise theres a problem. Yet all socialists including those who pretend theyre different by relabelling themselves RBE, say they have a solution for a utopian society, even though their systems are missing the most important thing an economy needs. No economic calculation and theyll repeat the disasters of all previous failed systems. That had people starving to death and going without.
That has a solution. The vast complex array of interconnected computers that allow access to mind boggling amounts of information, knows as the internet, can give access to the amount of resources available, and how much demand and supply there is, without the use of pricing
Vtron, I think you are mistaken. It's not the sheer amounts of resources that matters to our using them well, but their value, right? And how could we represent value except in price terms? In economics, demand and supply are quantities (demanded and supplied) at different ... prices. Right?
Howard Baetjer yes, but their value originally comes from their supply and demand. These do need a price in a free market since there is no way to allocate them to any plan (because it would be rejected), and people want to buy things without a third party controlling them. But in communism the supply and demand are separate properties that are used independently to asses where they should end up. Think about it like this, 100 karats worth of diamonds are being held at an auction. There is a rich man whom pays 100,000 dollars for the diamonds to gift his wife, while there is a laboratory whom could use those diamonds for nanotechnology that could benefit humanity as a whole, but only have 170,000 to offer. In a free market the result would be a happy wife and no nanotechnology advance, but communist(planned) economics suggests that things should go where they are most needed for the benefit of the many.
This would be spot on if, there weren't so many people that didn't know the difference between cost and value, if there wasn't overly inflated costs assigned through propitiatory actions, if the general population possessed reasonable levels of truth from a lack of market manipulation, with larger levels of competition. This being said, it's still a far cry better then socialism.
Cost is the objective price paid. Value is always subjective. Value to who? When? Cost is as close as you'll ever get to assigning an objective measure to aggregate subjective human values.
@@adamyoung4908 The Soviet Union centrally planned their economy, redistributed wealth to combat class inequalities, and removed private ownership of the means of production. In what way was the Soviet Union not a communist country?
So the first part about not being able to run surveys was funny because capitalists do run surveys. You don’t need to survey every one to get a good idea of what is popular, you just need a significant sample. Not to mention that this video seems to assume that digital surveys and data mining don’t exist. You also don’t need a market to log consumer trends, you just need to track which goods are withdrawn from the economy. Also you could replace price with estimated labor hours required for a project, and probably get similar results to market price. The real problem with this video is that it assumes there are no problems with market economy. The first problem with a profit driven society is that other concerns such as health, safety, and environmental problems fall to the wayside in the pursuit of money. I also thought it was funny that the video assumed that consumers would be willing pay higher prices for things based on perceived quality difference rather than purchasing what is cheapest the same way the capitalists were assumed to. The video also assumes that consumers are regularly rational in the marketplace, and that their tastes are always good for them. The video makes the leap that healthy food will be produced because that is what consumers want. Not only do you have to assume that healthy food was already being produced for it to be consumed in order to inform the market that more healthy food is in demand, but video already assumes that healthy food is more expensive than less healthy food making it more difficult people to consume it in the first place. The next problem is that market capitalism is prone to crisis on a regular basis. The way we buy and resell goods and stock will inflate price without producing any new value. We also regularly over produce goods that there isn’t demand, for and the economy breaks down when there isn’t enough demand in the economy to keep up with production. Oddly both of these problems contributed to the recession of 2007-2009. I mean the markets completely broke down but instead of letting them die and moving on we artificially sustained them with infusions of tax dollars.
This all focuses on allocating scarce/limited resources. People who focus on getting rid of prices/economies are (now) often focused on how to do away with the limits. I don't think these are contradictory ideas. I believe cheap robotic labor combined with artificial intelligence will drive more and more things out of the market (at the same time they destroy our jobs). But I also believe those in power will work against making anything available to us for free/without limit (even if it's available to them for free), in order to preserve their power.
+xuridun It's funny you posted this on the Internet, which is driven by and rides on FREE things. Thousands and thousands of people have contributed their free time to make the free Linux kernel, which Google built Android on top of, and which runs on so many servers around the world. Likewise, MacOS built on top of BSD. Do I need to list all the free BSD versions? BIND, OpenSSH, OpenSSL, gzip, so many audio and graphics tools, do I need to list them all or tell you how many you were dependent on to post your message? Want more free? Search for your favorite hobby - you can't STOP people from contributing free stuff. Yeah, they aren't zero cost. But they are so cheap no one can be bothered to bill you for them, and they probably wouldn't even if they could. In their basic form, these things have fallen out of the economy. They are now beneath your notice, like all the other free things you aren't thinking about.
Fun fact: In socialist Poland bread was cheaper than grain!! Guess what the pigs and farm animals ate instead of grain? Bread. Socialism simply is a technical impossibility. The Soviet Union literally had to buy the monthly wall street journal to establish prices.
Calculating by labor time solves this issue, and the calculation problem shoots itself in the foot, you’re telling me that what’s most profitable is the best thing ? What if you save lives by not making a profit ?
labor by nature is heterogeneous, not homogenous. Labor being heterogenous matters because it cannot be used as a common denominator to commensurate different factors of production. Labor hours could only be effective at solving the Problem if planners could establish some interpersonal utility function, which is, of course, impossible. Given the subjective nature of value, one would need to determine how much each subject values each service/product and compare the utility interpersonally.
If the labor theory of value had any merit to it whatsoever, it would have been formalized some time in the last 150 years in which it has been discussed by marxists, and yet nobody seems to be able to present how it would actually work. It's made up.
The first situation is implying scarcity and no technology for better of nation and surveys. If applied today or in the future this specific problem is obsolete. Also central planning is more complex. You would have like 40 people planning the rail road who work with each other, but have smaller responsibilities because work is split up. So surveys for each one of those people are better. Although I’m sure you could find another dent or flaw in central planning, but automation makes markets obsolete. By replacing your human worker with a machine you can generate more profits for your company. This results in lower prices to fight your competitors. No new jobs get created because the jobs used to build and plan the machines are taken. If demand does go up the factories are all automated and you only need a few humans for design. But is this better for society??? Not exactly because if the company’s competitors don’t automate they go out of business and all human labor is unemployed. And if they do, they fire all human labor and get machines because to reduces cost which reduces how low you can sell your items while still making he same profit. If this happens in every sector of labor then no jobs exist and no consumers exist. Now we start looking at thing like UBI. This is a terrible idea, watch bad mouse productions video on UBI.
I do not think we will get to a point where robots are doing almost absolutely everything, I think there is still going to be many humans to do things that robots just can't do
+Learn Liberty I would like to see a video on central banking particularly the Federal Reserve and how it has created more income inequality than anything else. perhaps you could also do a Segway video on how central banking destroys the free market.
+Learn Liberty I would love to see a continuation video of this topic. In Thomas Sowell's "Basic Economics", he talks about how much the lack of prices in the USSR hurt the environment. He said that because of the enormous inefficiencies, the Soviets had to produce 8x the amount of pig iron in order to manufacture the amount of steel needed for manufacturing. This is because (as I'm sure you are aware) the factories would order more than they needed (since prices weren't an issue). It also had to do with other inefficiencies which I think you guys could go over as well. The result is that a lack of prices ends up being very wasteful and therefore damaging to the environment as well as to the economy. I think taking this angle could help many on the left see the destruction their policies would bring onto something they care deeply about.
Well in the captalist side you also have to look at what will be more profitable in the long run. What will cost less to operate and which way are people willing to pay more for.
There will always be the human element of meddling. But then every facet of human existence is a victim of that at some point. We just need to be vigilant and do the right thing when that happens.
Haven't watched the video yet, but prices are the mechanism by which scarce resources are allocated to their most productive ends. No mechanism currently exists that is more effective at this, as far as I know.
Prices are the mechanism by which scarce resources are allocated to those who can pay the most for them. For example a free market for covid vaccines would have give priority to those with the most money, but national governments decided to be more productive by allocating the vaccines to those who needed them most ie those at risk and vital workers.
@@Simboiss If this is what you call "effective", I don't want to see "ineffective". Indeed you do not! 'Ineffective' means famine, war, genocide. The record of history is crystal clear.
@@YouLoveMrFriendly I don't see the solution in terms of "calculations". The world doesn't work only based on a few imaginary equations that magically solves every problem. If I had to calculate something, the answer would be "zero". Accounting zero. Production costs X give exactly price X. Anyway, the burden of proof is on the believers, those who push the ideology every day. Where is that fabled effective "calculation" done by the invisible hand every day? Are there any demonstrable math or is it only religious faith?
Funny how the soviets were able to achieve one of the fastest industrial and infrastructure development initiatives in the world but apparently we don't know what steel is worth to us?
@@DoritoWorldOrder Thats nonsense, there is bound to be problems with such fast industrialization that raised living standards by alot. The numbers ofr these "genocides" are not only over inflated but you seem to ignore the mass starvation caused by capitalism all over the world which has killed many more
@@jonasastrom7422 Their entire economies were developed with western capital, and it is intertwined with the international finance system. These countries primarily have manufacturing for the sole purpose of export to the USA or the West, which is clearly reflected in their foreign policy. The development of the USSR was independent and led to sustained increases in living standards. That independence is quite key, because they do not suffer from international finance crashes (example: Great Depression). You also have to take into account the fact that the USSR was a far larger and expansive country which had to develop from scratch, while "states" like Taiwan Province and South Korea had their industries imported. Also, these countries that you mention have not been able to sustain increased development in the productive forces, and are on the decline. This is because they cannot sustainably unleash the productive forces, which is contrasted by countries like China where there is ongoing and constant modernization. Countries like South Korea and Japan have populations AND economies which are quite literally declining, which was not even seen in apparent "disasters" like the Soviet Union which was still growing both economically and population wise until it collapsed.
I wish this video was a little longer to explain that where one might choose the more expensive option, they are, indeed, demanding more resources that society is in greater need of. But by paying the higher price, you are placing a bid saying that you need that resource more or can make better use of it. The higher price is a means of compensating society for their trust and acts as an insurance if it turns out your use of that resource didn't actually provide as much value as you expected.
Price is not only determined by how much the population is interested in a product or service, but also scarcity of a product or service (scarce iron, or scarse engineering skills), how much competition there is (is there a mining company that produces better iron for the same price?) and also unfortunately all sorts of trickery to diminish payment of labor or quality (exploitation of the lower classes because they have less options to choose to receive income and adding materials of inferior quality to alloys effectively debasing the steel while covering it up to keep the prices fixed or at least avoiding them to plummet).
That is also called "how interested the population is interested in a product or service. If there is a scarcity of iron or engineers. People are still interested in them, but not for the price demanded. The price is set based on how hard it is to get the iron or the engineers. IN the end. All prices are based on how interested someone is to pay for it.
@@Simboiss Yes, but it had a lot more failures. You can take a blind man and place him in front of a dart board and have him throw darts. Give him enough and he could score a few bulls eyes. However how would he fare against someone who isn't blind? That's the same situation here.
This is, without a doubt, the highest quality video that you've produced yet. It's accessible and covers one of the most important, yet neglected, topics in our Liberty Pantheon. Prices are a must-understand in order to realize why libertarianism isn't anti-poor or pro-self.
Precisely the opposite. Markets don't need to assume the creation of a perfect man untroubled by greed, rather they accept that we can't change human nature, and attempt to create a system where serving your own interest highly correlates with serving the interests of others. It's not without reason that proponents of free markets say that "social cooperation" is one of the most fundamentally crucial concepts in a free market economy.
I don't get why cheapest is automatically what's best. We can do lots of things for low cost, but it doesn't mean inherently it's the best decision. And considering the executive decides based on what's the lowest cost for him or his company, that seems to not take into account the many other ways he impacts society and the world as a whole.
Cory, cheapest is not automatically best. But to keep the thought experiment simple, we assume that the benefits are the same going through or going around, and we assume that using up steel and engineering are the only impacts on society. But the example generalizes to all the other impacts that have their own market prices.
You over simplified the argument to the point that it loses all merit. As I mentioned in my other post, assuming that prices reflect the actual cost/supply of the good versus the perceived value/demand for the good is naive. Even in a world of perfect information, consumers would not always make the decision that is in their best interest... I was really excited by the title of this video, until I realized your answer to "What if there were no prices?" is "We wouldn't know the value of anything"... =(
Prices don't reflect the supply, they reflect the relationship between cost and supply. If everyone wants a flubblewidget, but there are more flubblewidgets than people, they will be inexpensive. If everyone wants a flubblewidget, but there are fewer flubblewidgets than people, they will be expensive.
0:38 It states that once built, the railroad will serve equally well regardless of the route you choose. This means that quality of the services reported to the operating costs is similar. Once you know the the only question you need to ask is "what will it cost me to build it?"
But what about using a price system that have no *currency*, as modern money is not just an arbitrary quality/quontity measurement tool, but also an *object of trade* that is *linked to not so valuable* (if not completely obsolete in real engineering) material, gold. What if we use an equivalent of a KWatt/man-hour instead, measuring price directly in energy and human labour devoted to the creation of such product? An equivalent that is only dedicates a price and is NOT an object of trade?
These capitalist assholes don't want answers. Nah. They use this propaganda bullshit to make anyone leaning toward communism question it, just as pretty much all capitalist agitprop is designed to do.
this is how our 3rd world city was shaped. without an overall urban planner that will wholisticly design the city, it was up to the individual players of the market guided by their own self interest to maximize the use of their properties and at the same time decided on what was the most cost-effective methods to build their properties. Meaning, you worry about your shit and I worry about mine. The result is an incoherent city system that can't even be replicated using City Building simulation games.
Tongue in cheek my friend. Clever usage I thought. You don't want to turn off potential receivers of the message.A lot of people have been indoctrinated with socialist propaganda since early childhood. This is an effective way to saw the floor out from under the alternative narrative.
What about long term costs? The route through the mountain seems shorter, so less fuel would be needed than on the route around the mountain. I think you could just extend the calculation given in the video.
Of course, they were just being as charitable to the socialists as they could. In reality, economic decisions without prices are disastrous as the amount of variables are astronomical. Even in a very favourable scenario as described in the video it still fails. For example we just extend the economic calculation problem to the scarcity of fuel.
@@marcusaurelius45 No, it's not "astronomical". Individual businesses make decisions all the time, not always in terms of accounting numbers (actually, they often look too much at numbers only, instead of real needs of real people), and no one bats an eye, and no one says it's "astronomical".
The whole point is you're taking labor and resources from other places at the same point in time. Seeing how well either choice preforms in the long run isn't the focus. Amd it says in the beginning of the video "assume both options have the same benefit to the nation" there is no difference between the two options besides the initial cost.
@@CaleTheNail In socialism, all the required information is already accessible, that's one of the things that breaks the video's argument. You don't need to rely on abstract numbers that represent nothing in real life. The capitalist argument also breaks because there is a lot of assumptions and magical thinking. The main one is that by allowing the capitalists to take the decisions by themselves, society magically end up at the best place with optimal consumption of resources. That's a lot of assumptions that are not explained. It's also suspiciously "convenient".
nothing is free my friend. but I agree, the thought experiment should a been on free rail lines. I was imagining that passengers would get to shovel their own coal in, and take turns yelling, "all a board!" at the stops. I guess if you really wanted it, you coulda just watched snowpiercer.
Mathematically it is possible to find solutions for multi-player systems that are better for everyone than what individual optimization for each player would yield. (look up Nash equilibrium). So what you are trying to argue is false, there are system-wide solutions that are better than individual solutions, and in some cases, by a larger margin. The problem is that individuals that do not understand that or do not care about it can still make choices to maximize their own local profit and if enough people do this the global good solution breaks down (in a lucky case to a less optimal commiseration, in the not so lucky case, worse). If only a few people break it, it can still work better than the individual system (see European healthcare vs US healthcare or European education vs US education). The question is finding and maintaining the globally good minimum, that indeed needs knowledge and a very strong sense of morality and adherence to the rules (this is why Soviet Russia is the worst possible example for this, as they just cut off their morality by going against the church and promoted atheism). The example you bring up with the Siberian railway and shipments is doubly wrong for a whole different reason: the Soviets kept Siberia fed and supplied even if it was not profitable or cost effective because of strategic reasons: they always wanted to have a core to fall back on in case of an invasion from mainland Europe. That is a matter of national security for them so they know they are running an unprofitable enterprise. 3:39 the interesting thing is that with the internet and AI applied to big data you can do both today: immediate survey and data mining. that would mean that centralization today is a lot more possible than it was back in the day. Again, in the praise of capitalism: you can look at the US infrastructure. The highways were built by central planning that was not local, that was not for profit. The US mail is run by the government at a loss. Profit alone will drive down the quality of the food (roundup, corn syrup in everything, hydrogenated trans fats etc), doing things to crops/animals that cause bearable levels of illness, it will drive up the cost of education and healthcare to the point that is just bearable, housing will rise to the point of having a lot of homeless, and for profit companies offshore immediately as it becomes more profitable. You need some amount of central planning and some amount of local planning, you need to put the interest of the people in front of the large corporations and the government needs to intervene for the people against the companies regulating what can and cannot be done (health, food, education etc.). It's a delicate balance you cannot go full planned communism or full free market both end up in a very bad place.
I would not use roads as an example if I were you. 1. Most roads were NOT centrally planned. STATE roads started as upgrades to local roads, many which started as PRIVATE roads built by demand of local PRIVATE businesses, and farmers. Federal interstate roads started as STATE highways. 2. I can give you thousands of examples of urban decay, businesses that went bankrupt when new freeways were built. Highways that had to be torn up, and rebuilt because they went to the wrong place, didn't meet anyone's needs, or just because long straight stretches were putting drivers to sleep with highway hypnosis. A local government has spent over a billion dollars rebuilding the same road over, and over again most of my life, it was a 10 year project 40 years ago, maybe this time they will get it right?
Nice, though it leaves out some important ideas. For one thing, the information gap isn't solved entirely by a price system either. When you buy a product, you are not aware of all of the externalities that might be involved (for instance, environmentally unfriendly practices such as pollution might reduce cost but also causes harm that the consumer doesn't factor into their decisions). A farm might use pesticide to make cheaper or better product (e.g. become more profitable) but the runoff also causes harm to someone else or the environment in general. The impact of these sorts of thing are difficult to asses and factor in as a consumer, but can be studied and remedied by a central planning entity, via regulations. In general, a price-based system is fairly efficient, but has problems, broadly referred to as "market failures." www.economicsonline.co.uk/Market_failures/Types_of_market_failure.html A government, then, is society's way of correcting for these market failures - a sort of hybrid, e.g. a regulated market. You'll find that generally for any given governmental legislation, its purpose is fundamentally to a) protect people's rights and b) correct for market failures. In this light, it is much easier to deal with the scope of government: the size/revenue of government is not important, so long as we (as citizens) are ensuring that the government is efficient and accountable. I like to look at it as a manual vs. automatic control mode scenario. Using manual mode can lead to major improvements, but you also have to be careful because in manual mode you can crash things. There is no problem with using more manual control mode, as long as you know what you're doing. This is why government is such a great responsibility (and why it sucks when people use it poorly). It also works well as an analogy to why we shouldn't do everything in manual mode, since you'd have to be a wizard to handle the full complexities of the system simultaneously.
So tell me how the government could build this railroad cheaper because that is what you argument boils down to. Whos money are they using to build it? Well that would be the tax payers which means everyone who is working. Which in turn would make their work worth less. See any problems here?
+Cooper de Ruiter And since this is a communication problem, what about the internet? This video says "information gathering is virtually impossible without using money as the communication protocol". Ask Google and Facebook about protocols, they seem to be good at... communication.
+Byllgrim and +Cooper de Ruiter It is not just a communication problem. It is also a problem of establishing the value of things "at the margin," as we say. Electronic computation of one kind or another has long been suggested as a solution to "the knowledge problem" that we pose here. There are two problems with it. The first is that data are people's preferences, which have no magnitudes until they are expressed in the prices people are willing to pay. The second is that even if all the millions of people's preferences could be quickly communicated to a central decision maker, that central decision maker would still need to weight each piece of information so as to come up with a value judgment about the relative importance--in society generally at that time and place--of each different resource--steel and engineering in our example. No planner can know how to weight them. Right?
It would just destroy it completely. Most assets are owned by big corporations, they are able to automatise first, and eliminate competition (think about automotive industry in past decades), thus people having good in strong corporations will have money, while previous workers, will go without job or money, thus there will be not enough people to buy goods. Scenario - A riots happen, and the surplus money goes to those who are willing to supress them (with violence), which will periodically reoccur, and make the life miserable for majority of people (think drug wars in mexico) Scenario - B new financial system is created.
I disagree. For many decisions that the state should make, people's personal preference is only required at the most generalized level. Take health care as an example. Whether people prefer to get one procedure vs another or one medication vs another is irrelevant. They are not the ones who should be making that decision. Studies can be done to look at the incidence rate of different diseases, etc and based on the accepted treatment methods, hospital equipment can be procured. Look at the recent issues with anti-vaxxers... This goes DIRECTLY against the greater good of the community/society. If you're evaluating whether to build a rail road from A to B or A to C, you can get information based on the hotel occupancy of cities B and C and cross reference the billing address of those staying in those cities. This, in addition to census data showing people with relatives in cities B or C (among other sources of data). We're not living in the 1950s in fear of the USSR and the cold war. We live in the era of big data.. The data exists. People don't know what they want until presented with an option/choice (as you said so yourself). Buyer's remorse tells us that said decision making on the part of the consumer isn't always correct.
Why is this assumed to be an insurmontable problem with zillion calculations? If information is already available in the form of units and apples and ingots and whatnot, you don't need to use an abstract and yet totally uninformative thing as money computations. The problem with private ownership is that this information is occulted. The word says it: private. It means "hidden". Not public. A socialist context would make the real information (money is just numbers, iron ingots are real) already available to all. Iron, wheels, seats, wood, digging tools, etc.
everyone just adds arguments for how the decision could be made but you are missing the point: how can you know, which products/resources are moatly needed by the others? the answer is you can't. but please tell me what this matters, i can't see why this should be important. if we run out of steel going around the mountain, we would just produce more steel to get to B.
prices go up when many people want it but without prices, you would figure out many people wanted it, when there's no more left.... but in both cases you just start to produce more of the certain product to balance the price....
That's because the USA (not America, that's a continent) is sitting on a freakishly big pile of gold. Figuratively. The number of acres of arable land (great Mississippi basin) combined with navigable pathways means the USA cannot lack food unless something really catastrophic happens. Compare to Russia, which have to deal with a very rough climate and a lot of soil unusable for intense agriculture.
Lars Magnus Samuelsson Svenssonsenn Magnussvensamuelsson Thor You're fooling yourself if you think Social Democracies are less corrupt. No matter the system, there will always be evil men. I guess we just gotta wait for Mankind to evolve!
For an example of a total monopoly on electric power, government controlled, look up "Hydro-Québec" in Google. People are very happy with the low prices of electricity. A monopoly with low prices, excellent expertise and good customer satisfaction.
Or, a bureaucrat paying other bureaucrats for special favors. Same thing, but I think that the bigger a system is, the more corruption is inside it (see totally corrupt USSR).
Aren't you ignoring one big piece of information that would change the answer completely? How man cities or towns could each route possibly reach. If you go through the mountains, you might only get the two on each end, but going around you could service many more towns. I know you are thinking in a market mindset, but if you are going to imagine you are a central planner, you'd have to also consider that the ten or five or one town that are around the mountain must "be equal" in service as the two on either end, even if the other towns don't yet exist.
+Benjamin Abruzzo There are only two towns in this thought experiment. Maybe A and B are very close to each other, or some deserted area with poor resource deposits. You could calculate the possible gain from opportunity to work with the new settlements, but it would require a more sophisticated approach. Overall, if you want to build a railroad you need much more than just engineers and steel, so this thought experiment is simplified anyway.
+Benjamin Abruzzo by admitting the need for additional data and making the problem more complicated, you're actually tipping the scales in favor of markets and against socialism. The makers of this video wanted to simplify the problem in order to concede as much as possible in favor of socialism.
I actually know that by thinking ahead, I am complicating the thought experiment and tipping it towards a more market approach... But I live in the Washington DC suburbs where the "thought experiment" has been a reality via both the Metro's Silver Line and the Purple Line (Silver Line: to build the train above ground as an elevated or underground; Purple Line: to build a train system or a bus system). So, I see the central planners trying to build a train for one set of purposes, then argue the cost (as explained in the video) vs who it will serve by the time it is completed. My vote always went to whichever let me drive my car more.
+Nigjig420 Protecting the environment is something that prices don't reflect. Mainly because it is intangible and owned by no one or everyone. Harming the environment produces no intrinsic cost. Even so, over time consumers have demanded that products and services account for environmental concerns. The market has responded.
+Nigjig420 Simple. When it will lose its value because people will decide they don't want to spend their money on destroying the planet, and if you are referring to oil and coal as so many people like to point out, that is literally exactly what is happening. At one point it was good, people decided it wasn't anymore and they made/are making something that will solve the problem cheaper and cleaner. Funny how capitalism sorts these problems by itself.
+Nigjig420 Property rights and incentives. Depending on what you mean by "destructive" to the environment, those who own the nearby land have rights that prevent the railroad company from doing certain things.
+Nigjig420 There is no "environment". There is air, and water, use of which are controlled by the government, and it either allows free use of either, thus helping the economy, and the worker, who generate more tax revenues, or it restricts use of either, which raises costs for businesses and reduces worker pay, but leaves them with cleaner air and water. There is land, but governments expect citizens to pay taxes on land forever, and if land gets polluted, that reduces the value of the land, to the point where nobody wants it, won't pay anything for it, and thus the landowner doesn't have to bother to pay taxes *forever*. That's only an issue for citizens if the government was counting on getting that money. There's also groundwater, which is the trickiest problem because it's so hard to observe. In fact, people didn't used to know about groundwater movement, so they felt free to dump whatever the hell into the ground, or bury 55 gallon drums containing whatever. Nobody is at fault for that, at least not until groundwater movement was understood to be a thing, at which point any new dumping becomes a huge liability.
Because it's run by the government. I rode the train from San Jose to San Francisco, the price was exorbitant yet they only operate at a loss and have never been profitable, and were consistently late, delayed, or stopped altogether.
This is the kind of video your socialist colleague does not want to watch ever-and even if he watchs it, he's probably going to deny the truth to favor his ideological point of view. Usually people think it's the right that's getting more radical, it's the left, though. The more a political group speaks of tolarance and compassion, the more skeptical we must be about it. They who praise the beatifulness of the world are the ones who slaved entire societies without hesitating only to put their ideologies into practice and terribly fail. In the aftermath, they've blamed the free market economy for their failures.
In the future when pretty much everything will be done by robots there will be no problem just getting that information. But for a free market is probably the best solution. There are several problems though, some things are more expensive just because they are better marketed and stuff like that not because society needs them more. Also, there are things that are harmful for the environment but are cheaper and while many of those are regulated nowadays however, that has not always been the case and still isn't for some problems. Slavery would not have existed had people thought that the best option is the one, which is better for everybody, and not the one, which is more profitable/cheaper.
im not a libertarian, but a communist - but libertarians say that environmental degredation as well as say moral quandaries would be externalized on everyone else. therefore, people suffer from slavery depleting free labour costs and/or industry wrecking environment - therefore they would "cost" people and can be dealt with
+Learn Liberty It would have been a nice addition to include also the price of the railroads services, by considering longer delivery times for going around the mountain and how that might affect their customers.
+furtim1 The video only compared two inputs to keep the explanation simple and effective. In the real world, there are hundreds if not thousands of inputs to any one industrial endeavor to consider. All of these inputs' prices effect the bottom line and thus instruct businessmen to make the best use of many different sorts of labor, materials, and technologies.
Of course. The video, though, only compares cost consequences, with no consideration for income consequences. Showing both ends of the deal would have made the video even more effective, I think.
If only the workers could have known that. Prior to the revolution they worked 12-14 hour shifts and received the lowest pay in Europe. Hardly makes them want to support capitalism and free markets.
+Loli21 Productivity must have been really high back then, hence cheaper products. But besides that, why work 14hrs if you don't want to? Also. what is the perfect number of hours one should work? Show your work.
+Loli21 Also Russia hadn't seen the industrial revolution until it was enforced by Stalin utilising forced labour on a large scale and at the cost of mass starvation.
+Loli21 I don't think their work were very valuable back then, nor did entepreneurs in general understood the effect that wages had on prices. Ford was revolutionary because he contradicted the notion that you need a ton of low-paid workers to maximize profits and got a big edge in productivity instead
Central planning requires something that no human being can do. Knowing exactly what someone else wants or needs. No one in this world, no matter how meditated, how much self reflection, or self understanding, can know what they truly want or need in life. Other than food, water, and shelter being in the realm of necessities. What we want or need, cannot be understood by another person as we can’t even understand ourselves.
Now imagine the 20th century with computers. Now imagine the 19th century with tractors Now imagine the 18th century with railroads Now imaging the 17th century with... Every time a disruptive technology takes hold, new and often unforeseeable jobs are created with the newly created wealth. And it is always for the better. Being afraid of the impact of robots and the like, is a sort of high order arrogance, that just because you have no entrepreneurial plans that no one else can have such either. The real problem with such change is we have a socialist education system that cannot, even if was meant to, keep up with the demands that are coming down the line, a century behind the times.
Except this completely ignores the future. How many people will want to go through the tunnel, how many would want to take the longer route and go around? How much will the engineering and steel used in the process be needed in the future and how much of a toll would this project cause? What about those that don't lower prices because people are already willing to pay that much, so instead they just make loads of profit?
Yes, I do know about them. And just looking at the cost of buying it wont tell you that. How about your pull your head out of your ass and think before opening your mouth?
Algo+codehawk Profit is the amount gained when income exceeds expenditure. e.g. if you sell something for $100 and it cost you $80 to buy it and sell it, then you have a profit of $20. If you sell 100 of these (assuming there is no reduction or gain in costs per item and no change in the sale price), then you make a profit of $2000. Loss is the amount lost when expenditure exceeds income. If you sell something for $80 but it costs you $100, then you have made a loss of $20. If you do that 100 times you have made a loss of $2000.
Algo+codehawk No. Profits are defined as financial gains. The raw materials don't factor into it, just their financial value (either how much you pay for it or how much you can sell it for). As for the rest, that isn't what the video is describing. The video is claiming that whatever costs less is better for society. It doesn't focus on the future at all. And no. Even without outside aggression, a high profit can still be using a resource poorly. It can be using plentiful resources to meet a low demand to make money.
Algo+codehawk I see you like spamming my post. I also don't think you understand my argument at all. Yes, if you put a bunch of money into something that isn't worth it, you suffer a loss, while the other company makes a profit. If a company is selling a low value good for a high value, they can make a large profit. Yes, I can tell the difference. You apparently just can't tell what people are arguing. My statement doesn't contradict itself in any way. Perhaps you can indicate (with quoting it) exactly where the contradiction is? If you use resources which are quite plentiful, and thus low in value, to meet a low demand, and thus low in value, but sell them at a high value, how do you magically end up making a loss, assuming people still buy them? Profits are either monetary or something that can be expressed as a monetary value, or alternatively, something which monetary value can be expressed as. This is because it allows you to determine the value it cost and the value you sold it for and thus the profit you obtained. How about instead of just spouting crap to dodge the issue (especially when they are filled with so many baseless insults) you actually try and address what I said?
Prices mean nothing to the client. Apples, iron ingots, being able to travel faster, etc, mean something. But "$1.29" is just a number, it means nothing. A socialist context would continually provide the information you need, because it's not "private".
Very good point, however one of the most important resources isn't taken into account at all here. Time. The obvious answer is how much time would be saved over a prolonged period, and if it was significant enough to warrant using up other resources that may be more needed at the moment but may not in the future.
+Conall Kilroy That is the purpose of interest and speculation. Interest serves to carry the future value of something back into the present. Speculation serves to carry future prices into the present.
Simple. 1) Hire engineers from countries with excess ones. Exchange the steel you use for trucks to get more of them. 2) Build the railway, going through the mountain. 3) Use the railway to transport goods to the city, the same as the truck would.
@@memorydancer well 1. Don't shift the goalpost from communist to socialist. 2. The ECP still applies to socialist countries. 3. My argument is that capitalism is needed for communism to work per the op
You say to some detail why we cannot calculate the preferences of individuals but then say this is how we calculate our aggregate information the fact is that myriad, unpredictable, and irrational
Just saying in the Soviet Union resources have prices. It doesn’t change the fact that central planning don’t work. Incidentally Karl, Lenin, Stalin and Mao have varying opinion on the matter.
4:46 There's one small problem with this argument that the market naturally delivers what is "best for society". This claim is true only when all people generally have the same purchasing power, otherwise it's patently false. Prices are governed by economic demand, not social need. The market therefore delivers, proportionally, what those with purchasing power want, not what is actually needed by people in general. With vast inequality and low labour prices, the masses could starve and all the resources would be used to produce luxury goods. That is, in a market economy, the needs of society as a whole may be ignored while the needs of the wealthy are closely attended to.
Well in one sense you can be correct, but actually in a capitalist society almost everyone has the purchasing power. The middle class holds something like 90% of all actual wealth. So what the majority sees as the common good is served under democratic rule even. Prices are derived from supply and demand which is somewhat very minorly impacted by personal wealth. The rich owns stock in the company they run, so they cant sell them to sway the market in their favor without losing their source of income as well. But the wealthy dont need this train track any more than any other, because they have other options, helicopter, boat, airplane and cars. So they dont perceive the need of the train track to be very high. If you understood basic economics it would help you a lot but you clearly dont which is sad. Prices are controlled by supply and demand, that means the more people that demand something the price will go up. Is any millionaire 100 people? No they are not, so his demand is the demand of 1 person even if he may be able to buy 100,000 train tickets. Because he wont be throwing his money away on something he doesnt need. Why pay for 100,000 train tickets when you yourself only need one train ticket? Does that sound rational to you? Because that is exactly what you argued here.
You need people with more money than others in order for them to either risk that money in the capital goods markets for creating new companies, or in the consumer goods markets to discover the value and utility of goods. In both cases, this discovery process allows for the potental of driving down of prices so the rest of us can afford them. Did you buy the first iPhone? I waited a year and bought a better Samsung. The vanguard of price discovery are important. If we all got the same amount of money, who would begin the process of testing and then drive down prices for the rest of us?
@@daniellassander I see your point: Wealth inequality per se doesn't _necessarily_ lead to a flawed allocation of resources. The number we need to look at is "expected end consumer spending inequality", which may be radically different than the wealth inequality. That said, I question your "something like 90%" figure, and draw attention to the fact that these numbers aren't fixed. They can change from society to society and from time to time. My comment is about the bad allocation of resources in contexts of extreme inequality (now, admittedly, inequality of _expected consumer spending_ ). I'm not making any claims about to what extent the current state of affairs is problematic, just that it easily _could be_ problematic.
@@YouLoveMrFriendly What about the stock market? Can't everyone own stocks? You don't need extreme inequality for corporations to exist. Corporations can be owned by tens of thousands of people.
That was a really good illustration of the advantage of the market system in terms of practicality. Another aspect for another lesson would be the fundamental morality of the market system and the unavoidable immorality of any national command society: there is no moral basis for denying people their rightful ownership in private property (whether physical or labor or intellectual, etc.) and their corollary right to trade it with others, contractually, according to privately perceived value. A moral system allows such contracts; a command society is fundamentally immoral in its denial of private property rights and all matters that those rights imply.
Beside the fact that the system is more or less working and offers this information as a an emergent attribute of it, I highly doubt it's the only way to do it. If you teach it is, why would anybody try to look for another system (which might be better, who knows)? The information that is handled by the price could be handled by another number and each subsystem would only need to know the numbers it's directly working with and would communicate those. The decision maker for the rail track in fact doesn't need to know the information value of food, but just the information value for the steel and engineers, which would have been derived from the other numbers in the system (the same way prices do and in fact, the prices of food where completely out of the decision shown in the end of the video). In addition, with the prices we can actively manipulate the consumer and the whole chain, while if the consumer could freely choose, other aspects of the product would weigh in more. And like in the video the whole chain basically started with the decision the consumer could make in the shop for this or that product. The product was already there. How did it get there? Without someone ever having bought it, the whole price chain described in the video would fall flat again. But we didn't start from scratch. And for a new system we could convert the current prices into our information values to have a starting point. Then we adjust those values, once our new system started and instead with money flows, we communicate those new information values between the interacting parts. No money needed. No prices needed. Sure it's a nifty system, but to come back to my initial point and main complaint: It's probably far from the only way.
@@nisonatic This implies there is a *market* in which risk even exists..this only happens when material gain/loss is depending on someone else's decisions and interaction with an unknown.
@@nisonatic Yeah, risk of finances does go away. You're dissing planned economies naively. They can make the railroad efficiently. You are implying the planners don't know how much steel they would have, how many engineers they can put up. hint hint, they did know all of this during the soviet era. Also, as another comment on this video mentioned. They do not care about the short term profit, it is getting things done. The light industry of the USSR was way more profitable, but they still pushed heavy industry because they needed it more. Many times it wasn't even profitable in their heavy industry. And don't hit me with the "that's why they failed", because lack of profitability wasn't what caused them to split. Also, markets nor prices have the best system of information, huh? Prices do not reflect amounts, they reflect profitability at most. Participants in a market buy the cheapest thing to get more profit. That doesn't make it somehow better when we clearly know how much of a material we have to make something. You don't end up with a market in these places. This is an extraordinary claim that has no proof as star trek doesn't exist. Also, post-scarcity society wouldn't need a market at all, huh? This is the dumbest claim I've ever heard. If you do not have scarcity in commodity the only thing you have now is organization to do x thing. Back this up. There aren't competing plans in a planned economy. You don't do both and pick which one is better over time. While I'm at it, Capitalists are literally just local planners who are based on profit. To address the first section once more, planning gets MORE than far enough. Sorry but none of these nations were going to double life expectancy without planning. They planned for general use and production, after that it was simply used. Nothing is truly wrong with that model. Inb4 soviets had toilet paper shortages or cars or some other item they didn't produce because they unironically chose not to.
Not to specifically advocate either side here, but this video seems to right off one side (with somewhat of a strawman) with presenting only two separate options. My point being: what benefits come from a "mix" of the two systems? Like those present in a free market society with some socialist programs (Such as some in Europe). Just as the video stated, the free market helps identify the value held by resources and the government programs attempt to work entirely for the benefit of the nation.
+Jackson Clyde Thanks for offering a respectful dissent. Much appreciated! What do you have in mind when you say "a mix of the two systems"? Assuming that you are referring to mixed economies, one major downside is cronyism (which usually comes in the form of government regulations). You may be interested in this video on how cronyism affects the economy: ua-cam.com/video/gSgUENZ9O94/v-deo.html And, here is another video (from Prof. Baetjer) about how regulations in a mixed economy cause individuals harm: ua-cam.com/video/DvxT7fryE3Q/v-deo.html
+Learn Liberty you've done the same thing again with thi reply, by completely failing to consider the opposite case. cronyism also exists in capitalistic systems, and regulations are neither harmful nor helpful - good regulations protect individuals and good corporations from bad corporations, and bad regulations help bad corporations at the cost to individuals and good corporations.
+Jackson Clyde good point, though not necessarily. the value held by resources doesn't account for the future value - eg if making a tunnel is expensive, government investment in tunnel making leads to new companies, better practices, and cheaper tunnel building for everyone from that point, and investing in the cheaper process just ensures no progress is made on the difficult task. also there's the worth of value. it's faulty logic to just assume the market is always right. if as in the video everyone is building trucks with the steel, that doesn't mean building trucks is the best use of steel. rail is a much more efficient system of transport, but if the rail system isn't built yet so people have to build trucks, concluding that you shouldn't take steel away from truck production isn't only faulty logic, it's shooting yourself in the foot. we see it a lot in the modern capitalist world too. carbon fiber is much better than steel, however steel is still used because carbon fiber is more expensive. again, cheaper doesn't imply better, it's only cheaper because facilities have already been built, whereas carbon fiber still has startup costs. if investment was made in carbon fiber (say by the government) it'd become cheaper and business would use it, and we'd all have better cars. the same thing happened with solar power, we only have affordable solar panels now because the government funded development through nasa. as you've correctly identified, a mix of both systems works better than either one alone. socialist policies get things started and give more people more opportunity, while capitalism takes those benefits and runs further with them. people who don't want to believe that though just convince themselves and others by only looking at one side, as you also excellently identified!
+satoau1 Just to strengthen your point. A compleatly free market system creates a new reversed knowledge-gap. If there is a complete free market in which companies can do whatever necessery to gain as much profit as needed, they can use methods as well the customer wouldn't aprove of, for example use ingridiens in their food that are unhealty, use child or slave labor, polute the enviroment, just to give a little example. A lot of customers neither know nor are able or willing to invest time and effort to track down the history of their products, so they basically have no clue what they are really buying, just that they like it. In a completly free market envirment, in special with at will employment, it becomes dangerouse for insider to leak information to show problems in companies, and even if they do, if people are just too used to the product it will most likly not affect their behaviour for long. And that even when practices of the companies will, in the long run, affect the people and the society in general gravely. There are several issues in a free market system, just as there are in a communist central plan system, that are bound to create massive problems in the long run. And that is the part where the goverment have to take controle, make rules the free market wouldn't care about, make long-run plans to deduce risks for the society. The reversed knowledge-gap of the free market has to be filled by govermental regulation, as the knowlege-gap of the communists are solved by the pricing in the free market.
+Learn Liberty respectful dissent being not pointing out how blatantly wrong you were!? i said months before homie that this video was one sided and you had nothing to say. stop disseminating bs, have you even read the comments concerning prof baetjer himself? him and ksna sol have talked outside of the comments and its become clear prof baetjer doesn't know nor was taught about resource based economics (apparently neither have any of you). you're taking a view from a prof that was taught one way as if that's the only way to think and preaching it as if its gospel!? you're jokes and i thought you were better than that. guess the jokes on me, real talk.
As CEO of my company I don't need to pay for costly chemical disposal. I'll dump them in the hudson river for free. I'll also avoid safety research into my cars, quality control in my baby food, and pesky worker safety at my factory. I'll pay my employees $1.50hr because my friends who own the other local factories and I agreed to do the same so we all save money. We will make our employees work 12hrs a day, 7 days a week. If they get sick or injured they'll be replaced. No one can oppose me. I'm consumed by human greed. When I die, my family will continue my empire the same way. When the forests are gone, rivers undrinkable, crops blighted from toxic soil, the earth dying, I'll know God blessed me with success. I'm elated I've finished my work because my abrahamic faith believes that when the apocalypse happens, my savior will come and take me to heaven.
@@roxsy470 cool for you, actually I can even respect that, however doesn’t change the fact that most people don’t ignore Walmart or Disney because they are unethical, they are quite happy with their product
The Soviet union did have money called ruble which was not worth any thing out side the eastern block but the value of things still present in Soviet union
Yeah, but it didn't function the same way internally, either. Even if you somehow legally accumulated enough rubles to buy a factory, you couldn't buy a factory. Money /= power in socialism the same way as in capitalism. No matter how much you made in the SU, you'd still have food, clothing and shelter. Of course, employment was also guaranteed to (and expected from) every able-bodied worker!
People in the comments are complaining that they forgot to take the railroad length in consideration. It doesn't matter they forgot it because if they would have included it, the concept was the same. If the railroad through the mountain is faster, the capitalist would estimate how big the difference is and would calculate how much gas he would safe and how much more people would be able to be transferred and then he would be able to make an informed decision based on that. Nobody is saying that not a single capitalist would make bad investments, ofc there would be bad ones. But it's about them being able to make informed decisions in the first place.
They don't think like this is Soviet Russia. They just follow the great leader!
They just want to kill you. but you refuse to see it. Do they need to make clearer zombie noises?
I don't understand how people think the length wasn't taken into consideration.
That's literally why it was going to take less steel...
The idea that market prices are a good representation of what would benefit society the most is based on the idealistic capitalist market system where no externalities, market manipulations, anti-competative and anti-consumer practices and other perversions exist.
The idea that planing can't be more effective than real world prices is based on a understanding of planing by a few people limited by their brainpower and making calculations on hand. In reality technology has solved both the knowledge and the calculation problem for planing economies just like it has done it for planing businesses.
@@ЯсенЧапкънов Not really how does technology will know what humans demands are and it is still not working just look to china still very inefficient (Have you seen there army the most soldier do not even have night vision and body armor) and millions of people in concentration dying there because they are dangerous for the power of the goverment.
The rest of the argument is just laughable who is able to do market Manipulation the only legal one is the goverment and the rest who tries is going to jail.
Externalies are also a bad argument because if there is a damage of somebody's property rights they will in counter it.
What anticompetative and anticonsumer practices.
A socialist arguing that it is bad that there is no competition but in the same sentence wants to have more central planning.If there is competition the business wants to have the best results for the costumer the competition reduce anti consumer practices and the ability of choice which you do not have in a central planned economy is the power to not let these practices take action.
Just FYI for anyone wanting to look deeper, this video is mixing the calculation problem of socialism detailed by Mises [circa 1920] with the knowledge problem of socialism detailed by Hayek. They have some similarity but really are different things.
Can you elaborate on how they are different things?
@@carlosquinto1383
One shows that people can not obtain the needed knowledge in a central location or entity, and the other shows that even if we assume that they could magically centralize that knowledge they couldn't do meaningful and beneficial calculations with it.
The calculation problem assumes the best case of having perfect knowledge of the economy's current state and only shows that it is not possible for a central power to calculate an optimal (or even good) solution.
The knowledge problem shows that gathering the information needed to know the current state of the economy is not possible in the first place.
@@mytech6779 And yet, capitalists do that all the time. They take decisions, without anyone intervening, for whatever reason within their own company. There is no precise way to evaluate each decision. It can be because they want something pretty for their office, because they suddenly desire another car, or because they feel like it. There is nothing "optimal" in that.
In a socialist context, all information is open (contrary to capitalism, where a lot of information is hidden), so the knowledge problem is only about whether or not we really need that railroad. In the video, the capitalist decide, arbitrarily, to start a decision process on how to build the railroad. That decision is taken first, without any "proof" or "calculation", and is not contingent to any "knowledge". Also, socialism is not centralized decision, it's holistic decision. The execution can use any management hierarchical structure needed.
This is the best educational video that's ever been produced covering this subject matter, and should be included in every economics 101 curriculum in the country!
This video has over six hundred comments. Whatever else this might mean, to me it means one thing undeniably: The topic is relevant.
I've tried to read through this mountain of interaction, if only because I am curious to know what the common pulse of sentiment is in response to such a simple message. A lot of things have been said, but some things seem to get repeated often, and I find the patterns interesting.
One thing that gets mentioned rather commonly in response to the video is that market prices aren't perfect. While this is true, I'm afraid it's beside the point. Detractors to the video's message will need to do more than merely cast doubt on the idea of infallible market prices, because the video isn't suggesting that market prices are infallible. For the video to be taken seriously, it isn't necessary for market prices to be infallible. All that is necessary is for market prices to be MORE efficient at allocating scarce resources which are generally perceived to be of value than if those resources were directed by a central planning board. That's the argument behind the video, and so a focus on assessing the validity of that argument should become the sole focus of all would-be counter-arguments. Going on tangents about greed (common to both approaches), corruption (common to both approaches), pollution (common to both approaches) does NOT tell us which of these two approaches will leave us with more unconsumed resources (savings) after projects are completed than the other one will. That is the central question addressed by the video, and I don't see any opponents actively explaining how central planning leaves more resources available for other projects than market prices do. This is what detractors must argue if they want to directly challenge the video.
Another thing I see often is one-liner swipes using crude expletives-or the “propaganda” catch-all-to denote disapproval, as if this is expected to discredit the central message of the video in one master stroke. What this communicates to me is that a counter-argument isn't at the ready; these frustrated souls may feel a strong need to respond, yet are clearly not prepared for the debate.
I am quite happy to see that this video has led to such a lively ongoing discussion. I want to express my sincere thanks to its creators, and especially to Howard Baetjer, for his commitment to addressing the concerns of as many respondents as he has found the time to engage. I was particularly impressed by his grasp of the socialist calculation problem on a deep philosophical level, and I would be proud to know anyone who cares so much about understanding these ideas so deeply and clearly.
I believe the fallacies will persist, especially in this new digital age, where so much is taken for granted about the power of computers. The need to confront confusion and misunderstanding may have never been greater. The counter-claim is always the same in every new age: “The laws of economics are obsolete, and no longer apply. We can safely ignore them now, as they are only shackles that hamper our supreme vision for future society. We finally have the tools to make anything possible.” This claim is not new, but it will be more difficult to counter in an age of super-computing. The challenge will be to clearly express the knowledge problem on philosophical-not on technical-grounds, where the power to calculate more figures faster can finally be seen as irrelevant to the point at issue.
Ideas have power. Better ideas have more power. In the end, the better ideas-meaning the clearer and more efficacious ones-will win out.
R-800, thanks for this very thoughtful, clear comment, and for the attention you have given Tomasz's and my video. I hope to write an article, or maybe come up with another video, that directly addresses the claim that more computation and data transmission capabilities solve the knowledge problem. I think the claim misses the point, but I'd love to spell it out clearly.
You make a good point that prices and market economics don't have to be infallible. The issue is one of efficiency: as you said, the efficient allocation of scarce resources. At this stage, I do believe both science and technology has reached a level of advancement that renders prices obsolete. (In fact, though it has been pointed out in the past and marginalized, we've been capable of moving beyond prices for sometime now.) However, what we're dealing with is a human species embedded with paleolithic emotions, archaic institutions and highly advance tech.
Personally, I no longer see the necessity of prices and market economics, and advocate for a money-less society. While traditional economic thinking might suggest such a thing is impossible, there's reasonable evidence to the contrary. It's something I have studied for some time now, and the science supports the potential to do so. Although, (oversimplified) it would require we rethink not only how we produce, distribute and recycle resources, but also rethink incentive and what motivates us to be voluntarily collaborative.
Ksna Sol, my friend, it is good to hear from you again. I was afraid i had lost touch. I don't have time now, but I want to give you my reactions to the high quality video on "resource-based economics" that you recommended to me. Though it is beautifully done, I believe it is based on fundamental errors. Do you have time for a short back-and-forth?
Howard Baetjer
Yeah, I do. I'll have to check the video again. It's been a while, lol.
Howard Baetjer
Hey, did I miss you? Did I say the wrong thing? lol I wanted to watch the RBE video you mentioned, but when I checked back to see which video I referred you to, I wasn't able to find it. Let me know which video it was you watched if you can. Hope all is well.
One of the best video on economics I've seen in a long time
Even worse, it's not even *explaining* it, we just have to take faith into the idea that prices are the perfect (and the only) indicator of the correct action to take. The entire video is based on a ridiculous dichotomy.
@Lars Magnus Samuelsson Svenssonsenn Magnussvensamuelsson Thor If you think this video is the equivalent of 1+1=2, then you might consider reattending kindergarten until you get the basics nailed down, OK?
@Liberty AboveAllElse What I meant is, they present only the two choices between full free market with magical price stabilization, or central planners who decide everything. Nothing in between. There's no details on how many planners there are. I feel like many people think that there is some sort of privileged group of a dozen people deciding absolutely everything in the country.
Socialism implies democracy at large. It means anyone can contribute, not a small group of people. Managers exist under any system. Even in supposedly "free" markets, surveys and information abound and circulate a lot. But the video presents this as a problem that is unsolvable.
The health care system in the USA is largely capitalist, if not completely. Health is less profitable than disease. Governments often take the slack where the private doesn't want to go because "there is no incentive", i.e. enough profits to be made. For example, the London subway, neglected and ultimately abandonned by the private. Another example, Montréal subway, running on a deficit, but still runs because it's deemed too important for too many people.
The video makes the mistake of "a miracle happens" between business owners trying to make profit, without regard for the well-being of others (the video even acknowledges that), and the state of having ressources used the most "efficiently" because there is a presumed automatic and magic adjustment of prices relative to the problem at hand. The video also assumes that the cheapest bridge is the best choice. Best choice for who? The business owner or the users? The video also assumes that the highest demand is only possible to compute using prices (lowest), which does not reflect real life in practice.
At best, the price system is a broken clock. It seems to work, but it's only by coincidence. And also because we want to believe that it works. What a coincidence that the "best choice" is always in line with the rich capitalists making absurd amounts of profits. That's very convenient.
@@Simboiss Seems like your issue is with the laissez-faire nature of the argument. You're right, efficient use of resources doesn't automatically equate to positive societal gain; this is where the government, or something representing the interests of the social commons needs to enter the picture.
Annoying that this video/discussion ultimately boiled down to free market capitalism vs. centralized 'communism'.
I'm consistently astounded by the vast number of commenters who don't know the first thing about economics who seem to believe they're a subject matter expert.
I think your statement applies to more than just economics comments, but basically the vast majority of opinionated peoples.
As a scientist, it drives me nuts when someone claims to know the secrets of reality when they know virtually nothing on the specific subject they claim to be an expert on.
I'm astounded by the people who don't understand software who claim software can solve the knowledge problem of central planning. On and on it goes, I don't think I'll live to see the day that people stop believing in socialism.
you mean with they the video maker , right? I do not believe they are economic experts or knows what is the best for society or know even that you need scientific facts to proof that prices matter or not
You are right it also makes my angry even though i am not a scientist and so far i see they can not proof there knowledge of this subjects with real world research or situations ( personally i would not give theoraticcaly situations as a example to proof something i hope you understand that)
Dunning-Kruger effect.
The answer is easy. You go through the mountain. It is the more dangerous route and more dead workers means less mouths to feed, and, in an inefficient system, less mouths to feed is a good thing. Not to mention you would just get political dissenters to engineer and build the railroad for free under the whip of a dedicated comrade. The same thing goes for the steel that you are so concerned about. You just need to force political dissenters and the socially undesirables to extract the ore and refine the steel for free. This kills two birds with one stone; you get your railroad and you eliminate a political threat. You would also want to build the railroad through the mountain because it is the shortest, and therefore quickest, route, and when you are moving people in cattle cars you want the route to be as short as possible to avoid as many escapes or other incidents as possible.
Of course, once you have worked the most prominent opposition groups to death, you then will need to start cracking down on anyone who criticizes the regime in even the slightest way to ensure that you continue to have free labor. This culture of fear ensures that even the dedicated comrades will work for minimal reward without complaint or criticism of the system. And, voila, you have a system that will work, at least until the regime leaders begin pursuing liberalisation because they recognize the moral and economic superiority of the system.
+Cory Lowe You mean leaders genuinly believe in there thing and set honesty and truth free, no longer fearing it? Dont think so.
+Cory Lowe Nigga I want what you're smoking.
+Cory Lowe Well done, student. You are starting to learn liberty.
I believe this vid is valuable because socialist systems that are democratic fail with resource allocations as well. A dictator cares less about being efficient though in many cases
Or you can do as china does...
...use stick & carrot, instead of stick onyl. Google sesame points! ^^
Video notes:
- without market prices, it is harder to determine the value of specific items and make decisions on how to properly allocate resources
- price signals show the value of an item, the future demand/supply, and the amount of resources you should consume/make
4:46 There's one small problem with this argument that the market naturally delivers what is "best for society". This claim is true only when all people generally have the same purchasing power, otherwise it's patently false.
Prices are governed by economic demand, not social need. The market therefore delivers, proportionally, what those with purchasing power want, not what is actually needed by people in general. With vast inequality and low labour prices, the masses could starve and all the resources would be used to produce luxury goods. That is, in a market economy, the needs of society as a whole may be ignored while the needs of the wealthy are closely attended to.
@@andrewj22 Except those same forces determine the value of the employees labor and therefore their wages. If a job isn't worth the money and the potential employees go somewhere else for better pay then that job doesn't get done and the business relying on them goes under or improves wages/working conditions.
@@olstar18 Does that somehow have any bearing on my point?
Not all people's wealth and income is a product of selling their labour. If labour prices in general are low, that doesn't mean there aren't still extremely wealthy people with high purchasing power.
@@andrewj22 Actually it does. If you want better pay get a better job. If you think wages as a whole are dropping to much stop encouraging manufacturing to go to other countries. Its a matter of creating a problem and then holding up communism as the solution when it is just more of the same problem.
@@olstar18 I still don't see the connection. Are you saying that all working class people can become as wealthy as the billionaires? If not, then it remains true that the market doesn't deliver what's best for society. Right?
Trick question. All of the engineers have fled the Soviet Union. There are only mindless laborers left. Go with the long route using maximum resources.
...umm what?
I don't want to disappoint, but russia doesn't do that bad academically. Well i would have to look it up, but it probably does better than US would without the help of immigrants.
The point might be that those in demand around the world might have better life where they get to choose how to apply themselves rather then be ordered to fulfill a role for the state at a standardized payment under threat prison if they are not compliant. Russian person can be very intelligent but Russian person probably cant tell the government to piss off like he could tell the US government to piss off after he becomes US citizen.
This is just a troll answer, soviets value resources above human lives because human lives are regenerable and expandable. Inhumane or not, if you fail to understand your enemy's logic and just preach to the choir, you manage to educate none and actually inhibit the dialectic.
That is what happened in my country venezuela, I am one of those engineers living in another country!
>All the engineers have fled the Soviet Union
I guess you don't need engineers to be the first nation to put a man into space then, huh?
Without price an item still has value. In its utility. This does not remove the problems brought up in the video but it does hold water.
The more utility a decision offers the better a decision it is. Balancing these is harder without pricing but it is possible through prolonged thoughts and considerations.
Apart from that prices are just a signal for how much people want the utility it provides.
I had never thought of prices like this: Prices serve to set priority. In an "ideal" society, If the price didn't exist for a finite good, it would be distributed in order of importance to serve the greatest good. So now the people that receive the goods effectively have a price associated with them. Everybody would have different prices for any given good distribution scenario making everything way more complicated than it would be in a universe with prices, but the price function basically is the optimization of this good distribution system. If your job is to determine who gets what in this ideal world, the number that would turn this arduous endeavor into a cake-walk would be the price of the good.
4:46 There's one small problem with this argument that the market naturally delivers what is "best for society". This claim is true only when all people generally have the same purchasing power, otherwise it's patently false.
Prices are governed by economic demand, not social need. The market therefore delivers, proportionally, what those with purchasing power want, not what is actually needed by people in general. With vast inequality and low labour prices, the masses could starve and all the resources would be used to produce luxury goods. That is, in a market economy, the needs of society as a whole may be ignored while the needs of the wealthy are closely attended to.
Prices are a mechanism to for the efficient allocation of scarce resources to the most valuable purposes. Central control has proven to be highly detrimental to the allocation of resources, even in cases where they have some external prices for a rough reference. there is the calculation problem, the knowledge problem, and an incentive problem. That is even giving the best light; once you include the evil underbelly of socialist doctrine and the massive corruption, psychopathy, and inequality baked into the details of the theory and manifesto, the whole thing is doomed.
I read somewhere the Soviets even tried just copying prices directly from the Sears catalog which is funny because those prices were derived from the supply/ demand and available resources of a completely different society.
Was that on a truck stop toilet pilaster? LOL FOH
That was the Chinese.
I've read half a dozen to a dozen books and articles about economic calculation (e.g. Hayek's Collectivist Economic Planning, Hoff's Economic Calculation in the Socialist Society, Steele's From Marx to Mises, Lavoie's NEP), and yet this is the most lucid explanation I have ever seen. Absolutely phenomenal.
+sevendust62 Thanks!
amazing how a video about capitalism and the free market gets lost on so many making stupid comments.
@Milk Man Marxists don't deny supply and demand dumbass. Have you ever actually investigated what Marx and many others said the LTV was? It *explains* supply and demand.
@@kanehemlock290 Central planning is the exact opposite of supply and demand, where both supply and demand are set in 5 years plan and artificially redistributed.
@@Schazla That literally isn't how planning worked anywhere
@@kanehemlock290 Yeah, communists implemented central planning that totally negated supply and demand, that's even their central negation of capitalism. Free market (Supply and demand), Central planning (5 year plans).
@@Schazla I don't think you know how it worked guy. The government didn't plan every single thing. They literally used money and had problems specifically because they DIDN'T abandon supply and demand. They didn't get anywhere near close to what you think it was.
I really wish that understanding of how resource allocation worked was more common.. Maybe videos like this will help!
You missed the point. All that data is built into a free market capitalist system. Scratching your head over all the minutia is a mute point if that is preserved and in place and faithfully executed.
This is really fancy way to say “you face the economic calculation issue, comrade”
This is an amazing explanation of how our civilization has developed through the use of currency and marketing. It really helped me to grasp the overall picture of how supply and demand shape the course of society through money.
You must be really easily amazed. You ever figure out how your smelly uncle pulls a coin out of your ear yet?
@@fun_ghoul Don't keep him in suspense. Tell him how he pulls it out of yours.
I'm speechless. This info is awesome!
Solution; transform humans into a robotic hivemind.
The Cybermen did nothing wrong.
... Cybermen are the communists, and Daleks are the Nazis!!!
You will be upgraded! Delete, Delete, Delete
D3RRANG3D EXPLAIN EXPLAIN!! EXTERMINATE! EXTERMINATE!
Communism is some scooby-doo ass economics
Finally this channel produced a video worth anything.
+Spider58x if you stop stealing by evil of your system, there would have been more.
Excellent video demonstrating why central planning doesn't work and why the "invisible hand" does. In a mere 6:39 minutes.
Bravo!
However, it is not "central planning" as in "a single person". There are multiple persons working on the railroad project, both in capitalism and socialism.
It is, Simboiss. It's not about the amount of people involved, it is about the flow of information created in market transtactions that is coded in market prices
The major thing that bothers me is that prices are a very limited form of information. For the decider, it's basically a number, or an aggregate of numbers. Railroads are not built using faceless numbers.
the invisible hand of the free market gave us the 1929 and 2008 crashes
Gustavo C, mostly wrong. The government meddling in the invisible hand of the free market economy is primarily what caused the crashes you mentioned.
Excellent video! Thank you for the educational resource!!
Excellent, simplified example! Would love to hear a 'Socialist' address this logic with a countering example.
Except Socialism and central planning aren't the same thing, and Socialism doesn't ban prices/money. :V The video unironically wasted time critiquing nothing someone said.
muh roads
@@kanehemlock290 Marxist Socialism is based on central planning.
@Algo+codehawk ```@Kane Hemlock HAHAHAH You evidently do not even know what prices are nor have you even read the original arguments at all - so entitled "Economic calculation in the socialist commonwealth" by mises mises.org/library/economic-calculation-socialist-commonwealth
```
I have. I've heard them before. I've read them before.
```Back then- the socialists even were thankful for the insight provided by mises. lol of course they were as dumb as they are today and as willfully ignorant on economics
```
Oddly Austrians were and are taken less seriously than Marxians. I can guarantee on reading the farthest you are is the communist manifesto.
@@henriconfucius5559 No, it isn't. Central Planning is a usable tenet. You do not have to plan each and every single idea.
Also, the Soviets had money. My point about this video still stands. They are critiquing something that doesn't exist, and are misinterpreting what moneyless society even does for functioning.
You can unironically live in Marxian Socialism and be able to create worker cooperatives which make products that they want to make
don't show this to the Zeitgeist socialist club.
The zeitgeist group has a slightly different starting point in that they recognize that humanity needs the ability to create resources out of thin air, or at least, reuse resources perfectly. with one of those starting conditions, as unattainable as they seem, prices in any market can drop to near zero and central planning could work. however, we are still a long ways, assuming we ever figure it out, from that point so markets are our best option.
+Justin Vavak Even if resources seem near infinite, they will become more scarce as we consume more than we produce, under the RBE model. Even if that were untrue, time and Labor *Will* always be scarce, comparatively.
"time and Labor Will always be scarce"
With the tens of thousands of engineers that China alone pours out yearly?
Theres a video, plus a pretty long page from Zeitgeist, attempting to deal with economic calculation. However Peter Joseph admits his equations need work and arent ready. But arbritary equations and inputs produce arbritary answers. It would be just simplier to admit they dont know and would have to guess. And TZM is way better than TVP who dont even want to recognise theres a problem.
Yet all socialists including those who pretend theyre different by relabelling themselves RBE, say they have a solution for a utopian society, even though their systems are missing the most important thing an economy needs. No economic calculation and theyll repeat the disasters of all previous failed systems. That had people starving to death and going without.
Simply follow computations of great robo leader lol
That has a solution. The vast complex array of interconnected computers that allow access to mind boggling amounts of information, knows as the internet, can give access to the amount of resources available, and how much demand and supply there is, without the use of pricing
Vtron, I think you are mistaken. It's not the sheer amounts of resources that matters to our using them well, but their value, right? And how could we represent value except in price terms? In economics, demand and supply are quantities (demanded and supplied) at different ... prices. Right?
Howard Baetjer yes, but their value originally comes from their supply and demand. These do need a price in a free market since there is no way to allocate them to any plan (because it would be rejected), and people want to buy things without a third party controlling them. But in communism the supply and demand are separate properties that are used independently to asses where they should end up.
Think about it like this, 100 karats worth of diamonds are being held at an auction. There is a rich man whom pays 100,000 dollars for the diamonds to gift his wife, while there is a laboratory whom could use those diamonds for nanotechnology that could benefit humanity as a whole, but only have 170,000 to offer. In a free market the result would be a happy wife and no nanotechnology advance, but communist(planned) economics suggests that things should go where they are most needed for the benefit of the many.
This would be spot on if, there weren't so many people that didn't know the difference between cost and value, if there wasn't overly inflated costs assigned through propitiatory actions, if the general population possessed reasonable levels of truth from a lack of market manipulation, with larger levels of competition. This being said, it's still a far cry better then socialism.
Cost is the objective price paid. Value is always subjective. Value to who? When? Cost is as close as you'll ever get to assigning an objective measure to aggregate subjective human values.
Sad to see Former Soviet Union has become a test case for many economics lessons.
It's a simple fact of life- you learn more from failure than from success.
@@rcgunner7086 soviet union wasn’t communist
@@adamyoung4908 The Soviet Union centrally planned their economy, redistributed wealth to combat class inequalities, and removed private ownership of the means of production. In what way was the Soviet Union not a communist country?
@@88michaelandersen u thought u ate bye😂
@@88michaelandersen Do you know what Socialism is?
So the first part about not being able to run surveys was funny because capitalists do run surveys. You don’t need to survey every one to get a good idea of what is popular, you just need a significant sample. Not to mention that this video seems to assume that digital surveys and data mining don’t exist.
You also don’t need a market to log consumer trends, you just need to track which goods are withdrawn from the economy. Also you could replace price with estimated labor hours required for a project, and probably get similar results to market price.
The real problem with this video is that it assumes there are no problems with market economy. The first problem with a profit driven society is that other concerns such as health, safety, and environmental problems fall to the wayside in the pursuit of money.
I also thought it was funny that the video assumed that consumers would be willing pay higher prices for things based on perceived quality difference rather than purchasing what is cheapest the same way the capitalists were assumed to.
The video also assumes that consumers are regularly rational in the marketplace, and that their tastes are always good for them. The video makes the leap that healthy food will be produced because that is what consumers want. Not only do you have to assume that healthy food was already being produced for it to be consumed in order to inform the market that more healthy food is in demand, but video already assumes that healthy food is more expensive than less healthy food making it more difficult people to consume it in the first place.
The next problem is that market capitalism is prone to crisis on a regular basis. The way we buy and resell goods and stock will inflate price without producing any new value. We also regularly over produce goods that there isn’t demand, for and the economy breaks down when there isn’t enough demand in the economy to keep up with production.
Oddly both of these problems contributed to the recession of 2007-2009. I mean the markets completely broke down but instead of letting them die and moving on we artificially sustained them with infusions of tax dollars.
Hit all my issues with the video.
You just said everything I was about to say, these are some very good points!!!
Six words: *diminishing marginal utility of purchasing power*
Best video on this channel in ages! really usefull to share!
+Roeland Creve That's great to hear! Thanks.
This all focuses on allocating scarce/limited resources. People who focus on getting rid of prices/economies are (now) often focused on how to do away with the limits. I don't think these are contradictory ideas. I believe cheap robotic labor combined with artificial intelligence will drive more and more things out of the market (at the same time they destroy our jobs).
But I also believe those in power will work against making anything available to us for free/without limit (even if it's available to them for free), in order to preserve their power.
+sd4dfg2 control you by controlling production.
+xuridun It's funny you posted this on the Internet, which is driven by and rides on FREE things. Thousands and thousands of people have contributed their free time to make the free Linux kernel, which Google built Android on top of, and which runs on so many servers around the world. Likewise, MacOS built on top of BSD. Do I need to list all the free BSD versions? BIND, OpenSSH, OpenSSL, gzip, so many audio and graphics tools, do I need to list them all or tell you how many you were dependent on to post your message? Want more free? Search for your favorite hobby - you can't STOP people from contributing free stuff.
Yeah, they aren't zero cost. But they are so cheap no one can be bothered to bill you for them, and they probably wouldn't even if they could. In their basic form, these things have fallen out of the economy. They are now beneath your notice, like all the other free things you aren't thinking about.
Fun fact: In socialist Poland bread was cheaper than grain!! Guess what the pigs and farm animals ate instead of grain? Bread. Socialism simply is a technical impossibility.
The Soviet Union literally had to buy the monthly wall street journal to establish prices.
Yes, and they also looked at the prices on the black market to find out the value of their goods.
Calculating by labor time solves this issue, and the calculation problem shoots itself in the foot, you’re telling me that what’s most profitable is the best thing ? What if you save lives by not making a profit ?
But how do you calculate labour time? How would you factor in the difficulty of the work, the skill of the work?
Because as we all know, there is literally no other factor that goes into the cost of goods other than labour.
labor by nature is heterogeneous, not homogenous. Labor being heterogenous matters because it cannot be used as a common denominator to commensurate different factors of production. Labor hours could only be effective at solving the Problem if planners could establish some interpersonal utility function, which is, of course, impossible. Given the subjective nature of value, one would need to determine how much each subject values each service/product and compare the utility interpersonally.
It doesn't because you can't value two different things that cost the amount of labour hours the same.
If the labor theory of value had any merit to it whatsoever, it would have been formalized some time in the last 150 years in which it has been discussed by marxists, and yet nobody seems to be able to present how it would actually work. It's made up.
The first situation is implying scarcity and no technology for better of nation and surveys. If applied today or in the future this specific problem is obsolete. Also central planning is more complex. You would have like 40 people planning the rail road who work with each other, but have smaller responsibilities because work is split up. So surveys for each one of those people are better. Although I’m sure you could find another dent or flaw in central planning, but automation makes markets obsolete. By replacing your human worker with a machine you can generate more profits for your company. This results in lower prices to fight your competitors. No new jobs get created because the jobs used to build and plan the machines are taken. If demand does go up the factories are all automated and you only need a few humans for design. But is this better for society??? Not exactly because if the company’s competitors don’t automate they go out of business and all human labor is unemployed. And if they do, they fire all human labor and get machines because to reduces cost which reduces how low you can sell your items while still making he same profit. If this happens in every sector of labor then no jobs exist and no consumers exist. Now we start looking at thing like UBI. This is a terrible idea, watch bad mouse productions video on UBI.
They used to say 100years ago about machine killing jobs.
I do not think we will get to a point where robots are doing almost absolutely everything, I think there is still going to be many humans to do things that robots just can't do
@@ChannelFish279 You say this 6 years later??? Like dawg we have chat gpt and living in the machine learning revolution and you hold this opinion?
And now we see why state meddling, minimum wage, regulation, subsidisation, and taxation absolutely destroys the economy every single time.
amazing! I love this channel!
This video is genius!! So simple to understand (by rationally-thinking people)! Thank you!
And this is why we're all rich today ! Oh wait...
Are we not? A poor person today lives in a house that would look like a palace 200 years ago.
@@carecup809 That is quite possibly the most completely and utterly moronic thing I have ever heard.
@@robertgoldstein7623 That's not an argument.
@@carecup809 You comment is so completely and obviously wrong that it doesn't warrant a response.
@@robertgoldstein7623 And yet you did. Twice now. And both times you failed to provide a counter argument.
This is an excellent video!
+Brandon Lyons Thanks, Brandon! What are some topics or issues you would like to see Learn Liberty cover?
--The Learn Liberty team
+Learn Liberty I would like to see a video on central banking particularly the Federal Reserve and how it has created more income inequality than anything else. perhaps you could also do a Segway video on how central banking destroys the free market.
+Learn Liberty
I would love to see a continuation video of this topic. In Thomas Sowell's "Basic Economics", he talks about how much the lack of prices in the USSR hurt the environment. He said that because of the enormous inefficiencies, the Soviets had to produce 8x the amount of pig iron in order to manufacture the amount of steel needed for manufacturing. This is because (as I'm sure you are aware) the factories would order more than they needed (since prices weren't an issue). It also had to do with other inefficiencies which I think you guys could go over as well.
The result is that a lack of prices ends up being very wasteful and therefore damaging to the environment as well as to the economy. I think taking this angle could help many on the left see the destruction their policies would bring onto something they care deeply about.
Your'e dumb, Brandon.
"But muh linear programming"
lmao
@@baseddepartment8338 you think this video is good
Well in the captalist side you also have to look at what will be more profitable in the long run. What will cost less to operate and which way are people willing to pay more for.
the price of the rail line is just one piece, cost of operating on the longer or shorter distance needs to be accounted for
The one thing left out is artificial inflation.
There will always be the human element of meddling. But then every facet of human existence is a victim of that at some point. We just need to be vigilant and do the right thing when that happens.
Haven't watched the video yet, but prices are the mechanism by which scarce resources are allocated to their most productive ends. No mechanism currently exists that is more effective at this, as far as I know.
If this is what you call "effective", I don't want to see "ineffective".
Prices are the mechanism by which scarce resources are allocated to those who can pay the most for them. For example a free market for covid vaccines would have give priority to those with the most money, but national governments decided to be more productive by allocating the vaccines to those who needed them most ie those at risk and vital workers.
@@Simboiss If this is what you call "effective", I don't want to see "ineffective".
Indeed you do not! 'Ineffective' means famine, war, genocide. The record of history is crystal clear.
@@Simboiss Let's see YOUR calculations, Comrade.
@@YouLoveMrFriendly I don't see the solution in terms of "calculations". The world doesn't work only based on a few imaginary equations that magically solves every problem.
If I had to calculate something, the answer would be "zero". Accounting zero. Production costs X give exactly price X.
Anyway, the burden of proof is on the believers, those who push the ideology every day. Where is that fabled effective "calculation" done by the invisible hand every day? Are there any demonstrable math or is it only religious faith?
Definitely subscribing. Finally, a view that is unapologetic and straight to logical reference.
Funny how the soviets were able to achieve one of the fastest industrial and infrastructure development initiatives in the world but apparently we don't know what steel is worth to us?
Not really a fantastic achievement in the midst of mass starvation and privation from basic daily goods.
@@DoritoWorldOrder Thats nonsense, there is bound to be problems with such fast industrialization that raised living standards by alot. The numbers ofr these "genocides" are not only over inflated but you seem to ignore the mass starvation caused by capitalism all over the world which has killed many more
Actually it wasn't, plenty of countries in asia and europe developed at far faster rates than the USSR
@@jonasastrom7422 Their entire economies were developed with western capital, and it is intertwined with the international finance system. These countries primarily have manufacturing for the sole purpose of export to the USA or the West, which is clearly reflected in their foreign policy. The development of the USSR was independent and led to sustained increases in living standards. That independence is quite key, because they do not suffer from international finance crashes (example: Great Depression). You also have to take into account the fact that the USSR was a far larger and expansive country which had to develop from scratch, while "states" like Taiwan Province and South Korea had their industries imported.
Also, these countries that you mention have not been able to sustain increased development in the productive forces, and are on the decline. This is because they cannot sustainably unleash the productive forces, which is contrasted by countries like China where there is ongoing and constant modernization. Countries like South Korea and Japan have populations AND economies which are quite literally declining, which was not even seen in apparent "disasters" like the Soviet Union which was still growing both economically and population wise until it collapsed.
I wish this video was a little longer to explain that where one might choose the more expensive option, they are, indeed, demanding more resources that society is in greater need of. But by paying the higher price, you are placing a bid saying that you need that resource more or can make better use of it. The higher price is a means of compensating society for their trust and acts as an insurance if it turns out your use of that resource didn't actually provide as much value as you expected.
Amazing video, also explaining why Communism and Socialism is bound to fail 🍃
Price is not only determined by how much the population is interested in a product or service, but also scarcity of a product or service (scarce iron, or scarse engineering skills), how much competition there is (is there a mining company that produces better iron for the same price?) and also unfortunately all sorts of trickery to diminish payment of labor or quality (exploitation of the lower classes because they have less options to choose to receive income and adding materials of inferior quality to alloys effectively debasing the steel while covering it up to keep the prices fixed or at least avoiding them to plummet).
That is also called "how interested the population is interested in a product or service.
If there is a scarcity of iron or engineers. People are still interested in them, but not for the price demanded. The price is set based on how hard it is to get the iron or the engineers. IN the end. All prices are based on how interested someone is to pay for it.
Superb, the best explanation of why you need money and central planning failure!
+iuliuspro Thanks!
If it's USSR that comes to mind, it had many successes.
@@Simboiss Yes, but it had a lot more failures. You can take a blind man and place him in front of a dart board and have him throw darts. Give him enough and he could score a few bulls eyes. However how would he fare against someone who isn't blind? That's the same situation here.
This is, without a doubt, the highest quality video that you've produced yet. It's accessible and covers one of the most important, yet neglected, topics in our Liberty Pantheon. Prices are a must-understand in order to realize why libertarianism isn't anti-poor or pro-self.
Craaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaackhead.
Precisely the opposite. Markets don't need to assume the creation of a perfect man untroubled by greed, rather they accept that we can't change human nature, and attempt to create a system where serving your own interest highly correlates with serving the interests of others.
It's not without reason that proponents of free markets say that "social cooperation" is one of the most fundamentally crucial concepts in a free market economy.
I don't get why cheapest is automatically what's best. We can do lots of things for low cost, but it doesn't mean inherently it's the best decision. And considering the executive decides based on what's the lowest cost for him or his company, that seems to not take into account the many other ways he impacts society and the world as a whole.
Cory, cheapest is not automatically best. But to keep the thought experiment simple, we assume that the benefits are the same going through or going around, and we assume that using up steel and engineering are the only impacts on society. But the example generalizes to all the other impacts that have their own market prices.
You over simplified the argument to the point that it loses all merit. As I mentioned in my other post, assuming that prices reflect the actual cost/supply of the good versus the perceived value/demand for the good is naive. Even in a world of perfect information, consumers would not always make the decision that is in their best interest... I was really excited by the title of this video, until I realized your answer to "What if there were no prices?" is "We wouldn't know the value of anything"... =(
+TheOneSpam 99.9% of consumers make decisions for their best interest. Those who don't are either insane or made a mistake.
Prices don't reflect the supply, they reflect the relationship between cost and supply. If everyone wants a flubblewidget, but there are more flubblewidgets than people, they will be inexpensive. If everyone wants a flubblewidget, but there are fewer flubblewidgets than people, they will be expensive.
0:38 It states that once built, the railroad will serve equally well regardless of the route you choose. This means that quality of the services reported to the operating costs is similar.
Once you know the the only question you need to ask is "what will it cost me to build it?"
But what about using a price system that have no *currency*, as modern money is not just an arbitrary quality/quontity measurement tool, but also an *object of trade* that is *linked to not so valuable* (if not completely obsolete in real engineering) material, gold.
What if we use an equivalent of a KWatt/man-hour instead, measuring price directly in energy and human labour devoted to the creation of such product? An equivalent that is only dedicates a price and is NOT an object of trade?
These capitalist assholes don't want answers. Nah. They use this propaganda bullshit to make anyone leaning toward communism question it, just as pretty much all capitalist agitprop is designed to do.
Which route has the nicer scenery?
this is how our 3rd world city was shaped. without an overall urban planner that will wholisticly design the city, it was up to the individual players of the market guided by their own self interest to maximize the use of their properties and at the same time decided on what was the most cost-effective methods to build their properties. Meaning, you worry about your shit and I worry about mine. The result is an incoherent city system that can't even be replicated using City Building simulation games.
Passionate Communists, how rich! Oh, I guess not.
Tongue in cheek my friend. Clever usage I thought. You don't want to turn off potential receivers of the message.A lot of people have been indoctrinated with socialist propaganda since early childhood. This is an effective way to saw the floor out from under the alternative narrative.
What about long term costs? The route through the mountain seems shorter, so less fuel would be needed than on the route around the mountain. I think you could just extend the calculation given in the video.
Of course, they were just being as charitable to the socialists as they could. In reality, economic decisions without prices are disastrous as the amount of variables are astronomical. Even in a very favourable scenario as described in the video it still fails. For example we just extend the economic calculation problem to the scarcity of fuel.
@@marcusaurelius45 No, it's not "astronomical". Individual businesses make decisions all the time, not always in terms of accounting numbers (actually, they often look too much at numbers only, instead of real needs of real people), and no one bats an eye, and no one says it's "astronomical".
The whole point is you're taking labor and resources from other places at the same point in time. Seeing how well either choice preforms in the long run isn't the focus. Amd it says in the beginning of the video "assume both options have the same benefit to the nation" there is no difference between the two options besides the initial cost.
@@CaleTheNail In socialism, all the required information is already accessible, that's one of the things that breaks the video's argument. You don't need to rely on abstract numbers that represent nothing in real life.
The capitalist argument also breaks because there is a lot of assumptions and magical thinking. The main one is that by allowing the capitalists to take the decisions by themselves, society magically end up at the best place with optimal consumption of resources. That's a lot of assumptions that are not explained. It's also suspiciously "convenient".
@@Simboiss yep, can't argue with omniscient commissar.
Oh, i thought the video would be a thought experiment about what would happen if train tickets were for free xD
That would have been a better video.
nothing is free my friend.
but I agree, the thought experiment should a been on free rail lines. I was imagining that passengers would get to shovel their own coal in, and take turns yelling, "all a board!" at the stops.
I guess if you really wanted it, you coulda just watched snowpiercer.
Hayek was masters of prices
I hope to read more his works on prices
Prices provide us liberty
Yes, I would like to buy 1 engineering please.
This is, essentially, the hiring process.
Mathematically it is possible to find solutions for multi-player systems that are better for everyone than what individual optimization for each player would yield. (look up Nash equilibrium). So what you are trying to argue is false, there are system-wide solutions that are better than individual solutions, and in some cases, by a larger margin. The problem is that individuals that do not understand that or do not care about it can still make choices to maximize their own local profit and if enough people do this the global good solution breaks down (in a lucky case to a less optimal commiseration, in the not so lucky case, worse). If only a few people break it, it can still work better than the individual system (see European healthcare vs US healthcare or European education vs US education). The question is finding and maintaining the globally good minimum, that indeed needs knowledge and a very strong sense of morality and adherence to the rules (this is why Soviet Russia is the worst possible example for this, as they just cut off their morality by going against the church and promoted atheism). The example you bring up with the Siberian railway and shipments is doubly wrong for a whole different reason: the Soviets kept Siberia fed and supplied even if it was not profitable or cost effective because of strategic reasons: they always wanted to have a core to fall back on in case of an invasion from mainland Europe. That is a matter of national security for them so they know they are running an unprofitable enterprise.
3:39 the interesting thing is that with the internet and AI applied to big data you can do both today: immediate survey and data mining.
that would mean that centralization today is a lot more possible than it was back in the day.
Again, in the praise of capitalism: you can look at the US infrastructure. The highways were built by central planning that was not local, that was not for profit. The US mail is run by the government at a loss. Profit alone will drive down the quality of the food (roundup, corn syrup in everything, hydrogenated trans fats etc), doing things to crops/animals that cause bearable levels of illness, it will drive up the cost of education and healthcare to the point that is just bearable, housing will rise to the point of having a lot of homeless, and for profit companies offshore immediately as it becomes more profitable. You need some amount of central planning and some amount of local planning, you need to put the interest of the people in front of the large corporations and the government needs to intervene for the people against the companies regulating what can and cannot be done (health, food, education etc.). It's a delicate balance you cannot go full planned communism or full free market both end up in a very bad place.
I would not use roads as an example if I were you.
1. Most roads were NOT centrally planned. STATE roads started as upgrades to local roads, many which started as PRIVATE roads built by demand of local PRIVATE businesses, and farmers. Federal interstate roads started as STATE highways.
2. I can give you thousands of examples of urban decay, businesses that went bankrupt when new freeways were built. Highways that had to be torn up, and rebuilt because they went to the wrong place, didn't meet anyone's needs, or just because long straight stretches were putting drivers to sleep with highway hypnosis.
A local government has spent over a billion dollars rebuilding the same road over, and over again most of my life, it was a 10 year project 40 years ago, maybe this time they will get it right?
Nice, though it leaves out some important ideas. For one thing, the information gap isn't solved entirely by a price system either. When you buy a product, you are not aware of all of the externalities that might be involved (for instance, environmentally unfriendly practices such as pollution might reduce cost but also causes harm that the consumer doesn't factor into their decisions).
A farm might use pesticide to make cheaper or better product (e.g. become more profitable) but the runoff also causes harm to someone else or the environment in general. The impact of these sorts of thing are difficult to asses and factor in as a consumer, but can be studied and remedied by a central planning entity, via regulations.
In general, a price-based system is fairly efficient, but has problems, broadly referred to as "market failures."
www.economicsonline.co.uk/Market_failures/Types_of_market_failure.html
A government, then, is society's way of correcting for these market failures - a sort of hybrid, e.g. a regulated market. You'll find that generally for any given governmental legislation, its purpose is fundamentally to a) protect people's rights and b) correct for market failures. In this light, it is much easier to deal with the scope of government: the size/revenue of government is not important, so long as we (as citizens) are ensuring that the government is efficient and accountable.
I like to look at it as a manual vs. automatic control mode scenario. Using manual mode can lead to major improvements, but you also have to be careful because in manual mode you can crash things. There is no problem with using more manual control mode, as long as you know what you're doing. This is why government is such a great responsibility (and why it sucks when people use it poorly). It also works well as an analogy to why we shouldn't do everything in manual mode, since you'd have to be a wizard to handle the full complexities of the system simultaneously.
+Keith Coffman Which is an awesome idea, except that it doesn't account for government failures.
Markets are driven by humans, as are governments.
Soviet Union didn't care about pollution either, much of the old Soviet territories are ruined by pollution.
They address that in this video: ua-cam.com/video/zcPRmh5AIrI/v-deo.html
So tell me how the government could build this railroad cheaper because that is what you argument boils down to. Whos money are they using to build it? Well that would be the tax payers which means everyone who is working. Which in turn would make their work worth less. See any problems here?
So, how would automation of work and deep learning (computing) affect this thought experiment?
+Cooper de Ruiter And since this is a communication problem, what about the internet? This video says "information gathering is virtually impossible without using money as the communication protocol". Ask Google and Facebook about protocols, they seem to be good at... communication.
+Byllgrim and +Cooper de Ruiter It is not just a communication problem. It is also a problem of establishing the value of things "at the margin," as we say. Electronic computation of one kind or another has long been suggested as a solution to "the knowledge problem" that we pose here. There are two problems with it. The first is that data are people's preferences, which have no magnitudes until they are expressed in the prices people are willing to pay. The second is that even if all the millions of people's preferences could be quickly communicated to a central decision maker, that central decision maker would still need to weight each piece of information so as to come up with a value judgment about the relative importance--in society generally at that time and place--of each different resource--steel and engineering in our example. No planner can know how to weight them. Right?
It would just destroy it completely.
Most assets are owned by big corporations, they are able to automatise first, and eliminate competition (think about automotive industry in past decades), thus people having good in strong corporations will have money, while previous workers, will go without job or money, thus there will be not enough people to buy goods.
Scenario - A riots happen, and the surplus money goes to those who are willing to supress them (with violence), which will periodically reoccur, and make the life miserable for majority of people (think drug wars in mexico)
Scenario - B new financial system is created.
I disagree. For many decisions that the state should make, people's personal preference is only required at the most generalized level. Take health care as an example. Whether people prefer to get one procedure vs another or one medication vs another is irrelevant. They are not the ones who should be making that decision. Studies can be done to look at the incidence rate of different diseases, etc and based on the accepted treatment methods, hospital equipment can be procured. Look at the recent issues with anti-vaxxers... This goes DIRECTLY against the greater good of the community/society.
If you're evaluating whether to build a rail road from A to B or A to C, you can get information based on the hotel occupancy of cities B and C and cross reference the billing address of those staying in those cities. This, in addition to census data showing people with relatives in cities B or C (among other sources of data). We're not living in the 1950s in fear of the USSR and the cold war. We live in the era of big data.. The data exists. People don't know what they want until presented with an option/choice (as you said so yourself). Buyer's remorse tells us that said decision making on the part of the consumer isn't always correct.
Why is this assumed to be an insurmontable problem with zillion calculations? If information is already available in the form of units and apples and ingots and whatnot, you don't need to use an abstract and yet totally uninformative thing as money computations. The problem with private ownership is that this information is occulted. The word says it: private. It means "hidden". Not public.
A socialist context would make the real information (money is just numbers, iron ingots are real) already available to all. Iron, wheels, seats, wood, digging tools, etc.
This is exactly what’s going on with California’s high speed rail project: NO ONE ASKED FOR IT!!
Agenda 2030 did
Funny how monopolies only tend to happen more often when there is MORE government planning/involvement, and not less.
Thank you, excellent video...
+Ammo08 Thanks!
everyone just adds arguments for how the decision could be made but you are missing the point:
how can you know, which products/resources are moatly needed by the others?
the answer is you can't.
but please tell me what this matters, i can't see why this should be important. if we run out of steel going around the mountain, we would just produce more steel to get to B.
prices go up when many people want it but without prices, you would figure out many people wanted it, when there's no more left....
but in both cases you just start to produce more of the certain product to balance the price....
Can it be decided democratically? Instead of "market-price-ly"?
That's because the USA (not America, that's a continent) is sitting on a freakishly big pile of gold. Figuratively. The number of acres of arable land (great Mississippi basin) combined with navigable pathways means the USA cannot lack food unless something really catastrophic happens. Compare to Russia, which have to deal with a very rough climate and a lot of soil unusable for intense agriculture.
They forgot the part about the railroad company paying off politicians for special favors.
I'm assuming in this scenario, the government is small and restrained enough to prevent "picking winners".
Lars Magnus Samuelsson Svenssonsenn Magnussvensamuelsson Thor
You're fooling yourself if you think Social Democracies are less corrupt. No matter the system, there will always be evil men.
I guess we just gotta wait for Mankind to evolve!
For an example of a total monopoly on electric power, government controlled, look up "Hydro-Québec" in Google. People are very happy with the low prices of electricity. A monopoly with low prices, excellent expertise and good customer satisfaction.
Or, a bureaucrat paying other bureaucrats for special favors. Same thing, but I think that the bigger a system is, the more corruption is inside it (see totally corrupt USSR).
Not if the Clintons have any influence.
Aren't you ignoring one big piece of information that would change the answer completely? How man cities or towns could each route possibly reach. If you go through the mountains, you might only get the two on each end, but going around you could service many more towns.
I know you are thinking in a market mindset, but if you are going to imagine you are a central planner, you'd have to also consider that the ten or five or one town that are around the mountain must "be equal" in service as the two on either end, even if the other towns don't yet exist.
+Benjamin Abruzzo
There are only two towns in this thought experiment. Maybe A and B are very close to each other, or some deserted area with poor resource deposits. You could calculate the possible gain from opportunity to work with the new settlements, but it would require a more sophisticated approach. Overall, if you want to build a railroad you need much more than just engineers and steel, so this thought experiment is simplified anyway.
+Benjamin Abruzzo by admitting the need for additional data and making the problem more complicated, you're actually tipping the scales in favor of markets and against socialism. The makers of this video wanted to simplify the problem in order to concede as much as possible in favor of socialism.
I actually know that by thinking ahead, I am complicating the thought experiment and tipping it towards a more market approach...
But I live in the Washington DC suburbs where the "thought experiment" has been a reality via both the Metro's Silver Line and the Purple Line (Silver Line: to build the train above ground as an elevated or underground; Purple Line: to build a train system or a bus system). So, I see the central planners trying to build a train for one set of purposes, then argue the cost (as explained in the video) vs who it will serve by the time it is completed.
My vote always went to whichever let me drive my car more.
What if the cheapest way is a way that's far more destructive to the enviroment than the other?
+Nigjig420 Protecting the environment is something that prices don't reflect. Mainly because it is intangible and owned by no one or everyone. Harming the environment produces no intrinsic cost. Even so, over time consumers have demanded that products and services account for environmental concerns. The market has responded.
+Nigjig420 Simple. When it will lose its value because people will decide they don't want to spend their money on destroying the planet, and if you are referring to oil and coal as so many people like to point out, that is literally exactly what is happening. At one point it was good, people decided it wasn't anymore and they made/are making something that will solve the problem cheaper and cleaner. Funny how capitalism sorts these problems by itself.
+Nigjig420 then it isnt the cheapest, and this would have played a part in your economic calculation if the project was done in private lands.
+Nigjig420 Property rights and incentives. Depending on what you mean by "destructive" to the environment, those who own the nearby land have rights that prevent the railroad company from doing certain things.
+Nigjig420 There is no "environment".
There is air, and water, use of which are controlled by the government, and it either allows free use of either, thus helping the economy, and the worker, who generate more tax revenues, or it restricts use of either, which raises costs for businesses and reduces worker pay, but leaves them with cleaner air and water.
There is land, but governments expect citizens to pay taxes on land forever, and if land gets polluted, that reduces the value of the land, to the point where nobody wants it, won't pay anything for it, and thus the landowner doesn't have to bother to pay taxes *forever*. That's only an issue for citizens if the government was counting on getting that money.
There's also groundwater, which is the trickiest problem because it's so hard to observe. In fact, people didn't used to know about groundwater movement, so they felt free to dump whatever the hell into the ground, or bury 55 gallon drums containing whatever. Nobody is at fault for that, at least not until groundwater movement was understood to be a thing, at which point any new dumping becomes a huge liability.
If this is so true, why does the railway system in the US suck?
Capitalism.
Because it's run by the government. I rode the train from San Jose to San Francisco, the price was exorbitant yet they only operate at a loss and have never been profitable, and were consistently late, delayed, or stopped altogether.
No one cares.
With central planning the reaction to inevitable mistakes causes the problems to compound and then spiral out of control.
See this seams so simple and yet I think much of the modern world does not understand it
You're simple.
@@fun_ghoul You are the simplest
@@fs1541 Oooh, burn! And so creative!
This is the kind of video your socialist colleague does not want to watch ever-and even if he watchs it, he's probably going to deny the truth to favor his ideological point of view.
Usually people think it's the right that's getting more radical, it's the left, though. The more a political group speaks of tolarance and compassion, the more skeptical we must be about it. They who praise the beatifulness of the world are the ones who slaved entire societies without hesitating only to put their ideologies into practice and terribly fail. In the aftermath, they've blamed the free market economy for their failures.
Top tier comment.
In the future when pretty much everything will be done by robots there will be no problem just getting that information. But for a free market is probably the best solution. There are several problems though, some things are more expensive just because they are better marketed and stuff like that not because society needs them more. Also, there are things that are harmful for the environment but are cheaper and while many of those are regulated nowadays however, that has not always been the case and still isn't for some problems. Slavery would not have existed had people thought that the best option is the one, which is better for everybody, and not the one, which is more profitable/cheaper.
im not a libertarian, but a communist - but libertarians say that environmental degredation as well as say moral quandaries would be externalized on everyone else. therefore, people suffer from slavery depleting free labour costs and/or industry wrecking environment - therefore they would "cost" people and can be dealt with
Awesome explanation. Only Learn Liberty and take economic concepts down to a simple level and keep it interesting for everyone.
+Ethan Glover Thanks, Ethan!
+Learn Liberty It would have been a nice addition to include also the price of the railroads services, by considering longer delivery times for going around the mountain and how that might affect their customers.
+furtim1 The video only compared two inputs to keep the explanation simple and effective. In the real world, there are hundreds if not thousands of inputs to any one industrial endeavor to consider. All of these inputs' prices effect the bottom line and thus instruct businessmen to make the best use of many different sorts of labor, materials, and technologies.
Of course. The video, though, only compares cost consequences, with no consideration for income consequences. Showing both ends of the deal would have made the video even more effective, I think.
If only the workers could have known that. Prior to the revolution they worked 12-14 hour shifts and received the lowest pay in Europe. Hardly makes them want to support capitalism and free markets.
+Loli21 Productivity must have been really high back then, hence cheaper products. But besides that, why work 14hrs if you don't want to?
Also. what is the perfect number of hours one should work? Show your work.
+Loli21 Also Russia hadn't seen the industrial revolution until it was enforced by Stalin utilising forced labour on a large scale and at the cost of mass starvation.
+Loli21 What? Unions are good as long as its not enforced or outlawed by government.
+Loli21 I don't think their work were very valuable back then, nor did entepreneurs in general understood the effect that wages had on prices. Ford was revolutionary because he contradicted the notion that you need a ton of low-paid workers to maximize profits and got a big edge in productivity instead
Central planning requires something that no human being can do. Knowing exactly what someone else wants or needs. No one in this world, no matter how meditated, how much self reflection, or self understanding, can know what they truly want or need in life. Other than food, water, and shelter being in the realm of necessities. What we want or need, cannot be understood by another person as we can’t even understand ourselves.
This video hints at the answer. Nice
You forgot to account for how much of the steel and engineering talent is needed for weapons production, above all else.
No stability, no markets.
So... ok. Now, how knowing all this can help us getting people out of the streets? Just asking.
yes
Love the art in this vid
And the clarity of the message!
id never thought about all this. thank you!!!
Think again, dumbass.
Nice video. Now imagine it in 21st century, with robots, drones, A.I.
Now imagine the 20th century with computers.
Now imagine the 19th century with tractors
Now imagine the 18th century with railroads
Now imaging the 17th century with...
Every time a disruptive technology takes hold, new and often unforeseeable jobs are created with the newly created wealth. And it is always for the better. Being afraid of the impact of robots and the like, is a sort of high order arrogance, that just because you have no entrepreneurial plans that no one else can have such either. The real problem with such change is we have a socialist education system that cannot, even if was meant to, keep up with the demands that are coming down the line, a century behind the times.
for what purpose?
@@nustada Precision: "newly created wealth" *for the rich*
@@Simboiss The rich is a relative term. To the troglodytes any form of betterment is "the rich".
Except this completely ignores the future.
How many people will want to go through the tunnel, how many would want to take the longer route and go around?
How much will the engineering and steel used in the process be needed in the future and how much of a toll would this project cause?
What about those that don't lower prices because people are already willing to pay that much, so instead they just make loads of profit?
Yes, I do know about them.
And just looking at the cost of buying it wont tell you that.
How about your pull your head out of your ass and think before opening your mouth?
Algo+codehawk Profit is the amount gained when income exceeds expenditure. e.g. if you sell something for $100 and it cost you $80 to buy it and sell it, then you have a profit of $20.
If you sell 100 of these (assuming there is no reduction or gain in costs per item and no change in the sale price), then you make a profit of $2000.
Loss is the amount lost when expenditure exceeds income.
If you sell something for $80 but it costs you $100, then you have made a loss of $20. If you do that 100 times you have made a loss of $2000.
Algo+codehawk No. Profits are defined as financial gains. The raw materials don't factor into it, just their financial value (either how much you pay for it or how much you can sell it for).
As for the rest, that isn't what the video is describing. The video is claiming that whatever costs less is better for society. It doesn't focus on the future at all.
And no. Even without outside aggression, a high profit can still be using a resource poorly. It can be using plentiful resources to meet a low demand to make money.
Algo+codehawk I see you like spamming my post.
I also don't think you understand my argument at all.
Yes, if you put a bunch of money into something that isn't worth it, you suffer a loss, while the other company makes a profit.
If a company is selling a low value good for a high value, they can make a large profit.
Yes, I can tell the difference. You apparently just can't tell what people are arguing.
My statement doesn't contradict itself in any way. Perhaps you can indicate (with quoting it) exactly where the contradiction is?
If you use resources which are quite plentiful, and thus low in value, to meet a low demand, and thus low in value, but sell them at a high value, how do you magically end up making a loss, assuming people still buy them?
Profits are either monetary or something that can be expressed as a monetary value, or alternatively, something which monetary value can be expressed as. This is because it allows you to determine the value it cost and the value you sold it for and thus the profit you obtained.
How about instead of just spouting crap to dodge the issue (especially when they are filled with so many baseless insults) you actually try and address what I said?
Until you come up with a rational argument, kindly fuck off.
There was another video about why AI wouldn't help in a centrally planned economy and why we would still need prices.
Cool, but knowing exact production and having an information economy unironically disproves that.
Kane Hemlock no
Prices mean nothing to the client. Apples, iron ingots, being able to travel faster, etc, mean something. But "$1.29" is just a number, it means nothing. A socialist context would continually provide the information you need, because it's not "private".
Very good point, however one of the most important resources isn't taken into account at all here. Time. The obvious answer is how much time would be saved over a prolonged period, and if it was significant enough to warrant using up other resources that may be more needed at the moment but may not in the future.
+Conall Kilroy That is the purpose of interest and speculation. Interest serves to carry the future value of something back into the present. Speculation serves to carry future prices into the present.
You're missing the point: The video is showing a trade off between two simple variables. You can add a multitude atop these.
Simple. 1) Hire engineers from countries with excess ones. Exchange the steel you use for trucks to get more of them.
2) Build the railway, going through the mountain.
3) Use the railway to transport goods to the city, the same as the truck would.
So the communist society can only work if a capitalist society also exists for the communist society to use?
You still don't know if that's optimal as much as you would in a free market.
@@memorydancer ok? So you need capitalism? So your philosophy can't work on its own?
@@memorydancer well 1. Don't shift the goalpost from communist to socialist.
2. The ECP still applies to socialist countries.
3. My argument is that capitalism is needed for communism to work per the op
Beautifully explained
You say to some detail why we cannot calculate the preferences of individuals but then say this is how we calculate our aggregate information the fact is that myriad, unpredictable, and irrational
Just saying in the Soviet Union resources have prices. It doesn’t change the fact that central planning don’t work. Incidentally Karl, Lenin, Stalin and Mao have varying opinion on the matter.
4:46 There's one small problem with this argument that the market naturally delivers what is "best for society". This claim is true only when all people generally have the same purchasing power, otherwise it's patently false.
Prices are governed by economic demand, not social need. The market therefore delivers, proportionally, what those with purchasing power want, not what is actually needed by people in general. With vast inequality and low labour prices, the masses could starve and all the resources would be used to produce luxury goods. That is, in a market economy, the needs of society as a whole may be ignored while the needs of the wealthy are closely attended to.
Well in one sense you can be correct, but actually in a capitalist society almost everyone has the purchasing power. The middle class holds something like 90% of all actual wealth. So what the majority sees as the common good is served under democratic rule even. Prices are derived from supply and demand which is somewhat very minorly impacted by personal wealth.
The rich owns stock in the company they run, so they cant sell them to sway the market in their favor without losing their source of income as well.
But the wealthy dont need this train track any more than any other, because they have other options, helicopter, boat, airplane and cars. So they dont perceive the need of the train track to be very high. If you understood basic economics it would help you a lot but you clearly dont which is sad.
Prices are controlled by supply and demand, that means the more people that demand something the price will go up. Is any millionaire 100 people? No they are not, so his demand is the demand of 1 person even if he may be able to buy 100,000 train tickets. Because he wont be throwing his money away on something he doesnt need. Why pay for 100,000 train tickets when you yourself only need one train ticket? Does that sound rational to you? Because that is exactly what you argued here.
You need people with more money than others in order for them to either risk that money in the capital goods markets for creating new companies, or in the consumer goods markets to discover the value and utility of goods. In both cases, this discovery process allows for the potental of driving down of prices so the rest of us can afford them. Did you buy the first iPhone? I waited a year and bought a better Samsung.
The vanguard of price discovery are important. If we all got the same amount of money, who would begin the process of testing and then drive down prices for the rest of us?
And how do you own wealth on the free market?
@@daniellassander I see your point: Wealth inequality per se doesn't _necessarily_ lead to a flawed allocation of resources. The number we need to look at is "expected end consumer spending inequality", which may be radically different than the wealth inequality.
That said, I question your "something like 90%" figure, and draw attention to the fact that these numbers aren't fixed. They can change from society to society and from time to time. My comment is about the bad allocation of resources in contexts of extreme inequality (now, admittedly, inequality of _expected consumer spending_ ). I'm not making any claims about to what extent the current state of affairs is problematic, just that it easily _could be_ problematic.
@@YouLoveMrFriendly What about the stock market? Can't everyone own stocks? You don't need extreme inequality for corporations to exist. Corporations can be owned by tens of thousands of people.
That was a really good illustration of the advantage of the market system in terms of practicality. Another aspect for another lesson would be the fundamental morality of the market system and the unavoidable immorality of any national command society: there is no moral basis for denying people their rightful ownership in private property (whether physical or labor or intellectual, etc.) and their corollary right to trade it with others, contractually, according to privately perceived value. A moral system allows such contracts; a command society is fundamentally immoral in its denial of private property rights and all matters that those rights imply.
Beside the fact that the system is more or less working and offers this information as a an emergent attribute of it, I highly doubt it's the only way to do it.
If you teach it is, why would anybody try to look for another system (which might be better, who knows)?
The information that is handled by the price could be handled by another number and each subsystem would only need to know the numbers it's directly working with and would communicate those.
The decision maker for the rail track in fact doesn't need to know the information value of food, but just the information value for the steel and engineers, which would have been derived from the other numbers in the system (the same way prices do and in fact, the prices of food where completely out of the decision shown in the end of the video).
In addition, with the prices we can actively manipulate the consumer and the whole chain, while if the consumer could freely choose, other aspects of the product would weigh in more.
And like in the video the whole chain basically started with the decision the consumer could make in the shop for this or that product. The product was already there. How did it get there? Without someone ever having bought it, the whole price chain described in the video would fall flat again.
But we didn't start from scratch. And for a new system we could convert the current prices into our information values to have a starting point. Then we adjust those values, once our new system started and instead with money flows, we communicate those new information values between the interacting parts.
No money needed. No prices needed.
Sure it's a nifty system, but to come back to my initial point and main complaint: It's probably far from the only way.
@@nisonatic This implies there is a *market* in which risk even exists..this only happens when material gain/loss is depending on someone else's decisions and interaction with an unknown.
@@nisonatic Yeah, risk of finances does go away. You're dissing planned economies naively. They can make the railroad efficiently. You are implying the planners don't know how much steel they would have, how many engineers they can put up.
hint hint, they did know all of this during the soviet era. Also, as another comment on this video mentioned. They do not care about the short term profit, it is getting things done. The light industry of the USSR was way more profitable, but they still pushed heavy industry because they needed it more. Many times it wasn't even profitable in their heavy industry. And don't hit me with the "that's why they failed", because lack of profitability wasn't what caused them to split.
Also, markets nor prices have the best system of information, huh? Prices do not reflect amounts, they reflect profitability at most. Participants in a market buy the cheapest thing to get more profit. That doesn't make it somehow better when we clearly know how much of a material we have to make something.
You don't end up with a market in these places. This is an extraordinary claim that has no proof as star trek doesn't exist. Also, post-scarcity society wouldn't need a market at all, huh? This is the dumbest claim I've ever heard. If you do not have scarcity in commodity the only thing you have now is organization to do x thing. Back this up.
There aren't competing plans in a planned economy. You don't do both and pick which one is better over time. While I'm at it, Capitalists are literally just local planners who are based on profit.
To address the first section once more, planning gets MORE than far enough. Sorry but none of these nations were going to double life expectancy without planning. They planned for general use and production, after that it was simply used. Nothing is truly wrong with that model. Inb4 soviets had toilet paper shortages or cars or some other item they didn't produce because they unironically chose not to.
Yep....capitalism always is honest and never inflates prices out of selfish reasons and for capricious desires
Lol, what a straw man
@@kalamay you're a straw man with a certain organic substance for brains that fosters plant growth
@@frankhenry587 EVERYONE inflates prices that's the point of a marketplace... you only trade with the honest and let the others go bankrupt ...
Not to specifically advocate either side here, but this video seems to right off one side (with somewhat of a strawman) with presenting only two separate options. My point being: what benefits come from a "mix" of the two systems? Like those present in a free market society with some socialist programs (Such as some in Europe). Just as the video stated, the free market helps identify the value held by resources and the government programs attempt to work entirely for the benefit of the nation.
+Jackson Clyde Thanks for offering a respectful dissent. Much appreciated! What do you have in mind when you say "a mix of the two systems"?
Assuming that you are referring to mixed economies, one major downside is cronyism (which usually comes in the form of government regulations). You may be interested in this video on how cronyism affects the economy: ua-cam.com/video/gSgUENZ9O94/v-deo.html
And, here is another video (from Prof. Baetjer) about how regulations in a mixed economy cause individuals harm: ua-cam.com/video/DvxT7fryE3Q/v-deo.html
+Learn Liberty you've done the same thing again with thi reply, by completely failing to consider the opposite case. cronyism also exists in capitalistic systems, and regulations are neither harmful nor helpful - good regulations protect individuals and good corporations from bad corporations, and bad regulations help bad corporations at the cost to individuals and good corporations.
+Jackson Clyde good point, though not necessarily. the value held by resources doesn't account for the future value - eg if making a tunnel is expensive, government investment in tunnel making leads to new companies, better practices, and cheaper tunnel building for everyone from that point, and investing in the cheaper process just ensures no progress is made on the difficult task. also there's the worth of value. it's faulty logic to just assume the market is always right. if as in the video everyone is building trucks with the steel, that doesn't mean building trucks is the best use of steel. rail is a much more efficient system of transport, but if the rail system isn't built yet so people have to build trucks, concluding that you shouldn't take steel away from truck production isn't only faulty logic, it's shooting yourself in the foot. we see it a lot in the modern capitalist world too. carbon fiber is much better than steel, however steel is still used because carbon fiber is more expensive. again, cheaper doesn't imply better, it's only cheaper because facilities have already been built, whereas carbon fiber still has startup costs. if investment was made in carbon fiber (say by the government) it'd become cheaper and business would use it, and we'd all have better cars. the same thing happened with solar power, we only have affordable solar panels now because the government funded development through nasa.
as you've correctly identified, a mix of both systems works better than either one alone. socialist policies get things started and give more people more opportunity, while capitalism takes those benefits and runs further with them. people who don't want to believe that though just convince themselves and others by only looking at one side, as you also excellently identified!
+satoau1 Just to strengthen your point.
A compleatly free market system creates a new reversed knowledge-gap. If there is a complete free market in which companies can do whatever necessery to gain as much profit as needed, they can use methods as well the customer wouldn't aprove of, for example use ingridiens in their food that are unhealty, use child or slave labor, polute the enviroment, just to give a little example. A lot of customers neither know nor are able or willing to invest time and effort to track down the history of their products, so they basically have no clue what they are really buying, just that they like it. In a completly free market envirment, in special with at will employment, it becomes dangerouse for insider to leak information to show problems in companies, and even if they do, if people are just too used to the product it will most likly not affect their behaviour for long. And that even when practices of the companies will, in the long run, affect the people and the society in general gravely.
There are several issues in a free market system, just as there are in a communist central plan system, that are bound to create massive problems in the long run. And that is the part where the goverment have to take controle, make rules the free market wouldn't care about, make long-run plans to deduce risks for the society. The reversed knowledge-gap of the free market has to be filled by govermental regulation, as the knowlege-gap of the communists are solved by the pricing in the free market.
+Learn Liberty respectful dissent being not pointing out how blatantly wrong you were!? i said months before homie that this video was one sided and you had nothing to say. stop disseminating bs, have you even read the comments concerning prof baetjer himself? him and ksna sol have talked outside of the comments and its become clear prof baetjer doesn't know nor was taught about resource based economics (apparently neither have any of you). you're taking a view from a prof that was taught one way as if that's the only way to think and preaching it as if its gospel!? you're jokes and i thought you were better than that. guess the jokes on me, real talk.
As CEO of my company I don't need to pay for costly chemical disposal. I'll dump them in the hudson river for free. I'll also avoid safety research into my cars, quality control in my baby food, and pesky worker safety at my factory. I'll pay my employees $1.50hr because my friends who own the other local factories and I agreed to do the same so we all save money. We will make our employees work 12hrs a day, 7 days a week. If they get sick or injured they'll be replaced. No one can oppose me. I'm consumed by human greed. When I die, my family will continue my empire the same way. When the forests are gone, rivers undrinkable, crops blighted from toxic soil, the earth dying, I'll know God blessed me with success. I'm elated I've finished my work because my abrahamic faith believes that when the apocalypse happens, my savior will come and take me to heaven.
Then I wount buy from you, as I value safe cars and moral businesses.
@@roxsy470 you don’t do you even today, be honest
@@zedderr_391 There is a reason I don't watch Disney anymore. Walmart hasn't seen me for that last 3 years. Exedra.
@@roxsy470 cool for you, actually I can even respect that, however doesn’t change the fact that most people don’t ignore Walmart or Disney because they are unethical, they are quite happy with their product
@@zedderr_391 True, people are lazy with this kind of thing, that's why they ask the government to do it for them, and look were that has gotten us.
You must understand that exactly such a railroad manager has lived in the soviet union at that time. Is seems like he did his job well.
Then move there you commie
The Soviet union did have money called ruble which was not worth any thing out side the eastern block but the value of things still present in Soviet union
Yeah, but it didn't function the same way internally, either. Even if you somehow legally accumulated enough rubles to buy a factory, you couldn't buy a factory. Money /= power in socialism the same way as in capitalism. No matter how much you made in the SU, you'd still have food, clothing and shelter. Of course, employment was also guaranteed to (and expected from) every able-bodied worker!