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The View from the Right

The right-wing criticism makes two main points. First, it is argued that the marketplace does a better job of allocating resources than does planning. A modern economy involves thousands of different intermediate and final goods and, every day, millions of transactions. For this vast activity to be planned would require a degree of competence and foresight that it is unrealistic to expect from any organization. Then, too, it may be argued that performing this great task of planning would, beyond the issue of technical competence, make the virtually impossible demand that the planners know the preferences and interests of all those for whom they plan. The opponent of planning will argue that the market, because it is decentralized, requires no such knowledge of either objective facts or personal preferences. He or she would also argue that the decentralization of the marketplace permits more rapid adjustment to changes than does a centralized system. Surpluses and shortages, price rises and falls send quick and unambiguous signals to suppliers of goods and services. Can anything unplanned provide both stability and easy adjustment to changed conditions? The free-market proponent would answer yes and might ask the doubter to consider an ecosystem such as a forest. No one planned it, yet it displays great stability over time, and should some external condition (say, the amount of rainfall) change, the ecosystem will change smoothly and quickly.

These arguments might be supplemented by comments on the administrative costs of central planning and the general slowness of bureaucratic decision making. Finally, the opponent of planning (the term here is used in its generic sense) might ask those who doubt his or her argument to consider the real world. Which economies seem to function smoothly, and which seem bedeviled with shortage and dislocations?

Perhaps more important to the proponent of the free market than efficiency is the view that economic and political freedom are inseparable. The conservative economist and Nobel Prize winner Milton Friedman argues:

The kind of economic organization that provides economic freedom directly, namely, competitive capitalism, also promotes political freedom because it separates economic power from political power and in this way enables one to offset the other.

Historical evidence speaks with a single voice on the relation between political freedom and a free market. I know of no example in time or place of a society that has been marked by a large measure of political freedom, and that has not also used something comparable to a free market to organize the bulk of economic activity.13

Note that Friedman's claim is a limited one. Although he states that the marketplace is necessary for political freedom, he does not state that it guarantees freedom—only that its absence guarantees the absence of freedom. Note, also, the phrase bulk of economic activity. He does not argue that all economic activity must be in the market sector for political freedom to prevail.

How might the planner of centrist political persuasion respond? One line of argument would be to grant the generality of the argument but to point to two important caveats.

  • 1. Public goods. Some goods and services must be provided outside the market because it is either impractical or impossible to create markets for them. National defense cannot be provided through market mechanisms because either everyone is defended or no one is defended. Therefore the nonpayer or "free rider" is as well served as the individual who pays. The lighthouse is often cited as a good that must be provided publicly because one is equally able to see the light whether one pays or does not pay. Since a market cannot be created, the good or service is either provided publicly or not at all. Other goods, such as city streets, could, in principle, be provided through market mechanisms. But the difficulty of doing so renders the idea impractical.
  • 2. Externalities or spillovers. If the good or service in question visits substantial effects on parties who are not represented in the transaction, the market, even though it produces optimal results when we consider only the interests of buyer and seller, will produce suboptimal results for society as a whole. As noted earlier, third-party effects related to land use are one of the principal justifications for zoning.

These ideas about public goods and externalities or spillovers are hardly radical and may be found in any standard economics text. They suggest that the market necessarily has its limits and thus that some degree of planning is inevitable. The issue, then, is not whether to plan or not to plan but rather how and how much to plan.

The planner may further argue that the conservative ought to favor timely public planning efforts on the grounds that dealing with problems early on will alleviate the pressure for radical change later.14 As we will see, some radicals have castigated planners for performing exactly that function.

With regard to the issue of political freedom, the centrist might also grant the basic conservative argument but still raise an important caveat, namely that the sort of planning described in this book is hardly comparable to the sort of centralized planning that was practiced in the former Soviet Union. The difference in degree is so great as to constitute a real difference in kind. The word planning is applied to both, but we should not be misled by that semantic similarity.

In summary, the centrist could argue that he or she can agree with the right in its general view of central planning and the relationship between economic and political freedom. Yet he or she may still argue that in a capitalist democracy like the United States, planning is a necessary and useful activity.

 
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