“The Dictatorship Complex”

The Mises blog links to a post which is supposedly refuting Mises’ economic calculation argument against socialism. Nothing of that sort is happening, but as a commentator noted in a different context, the post is “revealing.”

I don’t like utilitarian defenses of any position. I do engage in them myself, most times without realizing that I am doing so, but I don’t like them. And that is the problem with using the Misesian argument. He believed economics is a “value free” science. It cannot make moral value judgments, but can only comment on whether a particular program accomplishes what it was meant to. I have read about this in a few articles and books, but he clarifies this in the preface to his “Omnipotent Government.”

In dealing with the problems of social and economic policies, the social sciences consider only one question: whether the measures suggested are really suited to bringing about the effects sought by their authors, or whether they result in a state of affairs which—from the viewpoint of their supporters—is even more undesirable than the previous state which it was intended to alter. The economist does not substitute his own judgment about the desirability of ultimate ends for that of his fellow citizens. He merely asks whether the ends sought by nations, governments, political parties, and pressure groups can indeed be attained by the methods actually chosen for their realization.

The problem with utilitarianism is, it works on the cost-benefit principle. It is true, if we live in a sane universe, that what is good according to natural rights ethics will be proved good under utilitarianism; a theory that is impracticable is no theory at all. But it still does not address the problem of morality. What is the point in saying that central planning cannot be made to work because rational pricing is impossible when the central planning is bad regardless of whether it works or not? It must be conceded though that no argument will convince a person who wants central planning regardless of what it does to human beings. For that is the principle behind socialism. The socialist does not care if a system can work rationally. He only cares about planning.

The post title is from a section in a chapter on planning from the above-mentioned book. In it, Mises writes-

Man is born an asocial and antisocial being. The newborn child is a savage. Egoism is his nature. Only the experience of life and the teachings of his parents, his brothers, sisters, playmates, and later of other people force him to acknowledge the advantages of social cooperation and accordingly to change his behavior. The savage thus turns toward civilization and citizenship. He learns that his will is not almighty, that he has to accommodate himself to others and adjust his actions to his social environment, and that the aims and the actions of other people are facts with which he must reckon.

The neurotic lacks this ability to adapt himself to his environment. He is asocial; he never arrives at an adjustment with the facts. But whether he likes it or not, reality has its own way. It is beyond the neurotic’s power to eliminate the will and the actions of his fellowmen and to sweep everything before him. Thus he escapes into daydreams. The weakling, lacking the strength to get on with life and reality, indulges in reveries on dictatorship and on the power to subdue everybody else. The land of his dreams is the land in which his will alone decides; it is the realm in which he alone gives orders and all others obey. In this paradise only that happens which he wants to happen. Everything is sound and reasonable, i.e., everything corresponds exactly to his ideas and wishes, is reasonable from the viewpoint of his reason.

In the secrecy of these daydreams the neurotic assigns to himself the role of the dictator; he himself is Caesar. When addressing his fellow citizens he must be more modest. He depicts a dictatorship operated by somebody else. But this dictator is only his substitute and handyman; he acts only as the neurotic wants him to act. A day-dreamer who refrained from this cautious restriction and proposed himself for the post of the dictator, would risk being considered and treated as a lunatic. The psychiatrists would call his insanity megalomania.

Nobody ever recommended a dictatorship aiming at ends other than those he himself approved. He who advocates dictatorship always advocates the unrestricted rule of his own will, although operated by an intermediary, an amanuensis. He wants a dictator made in his own image.

Now we may grasp the causes of the popularity of planning. Everything that men do has to be planned, is the realization of plans. In this sense all economic activity means planning. But those disparaging anarchic production and advocating planned economy are eager to eliminate the plans of everybody else. One will alone should have the right to will, one plan alone should be realized, namely, the plan which the neurotic approves, the reasonable plan, the only plan. All obstacles should be removed, all other people’s power should be broken, nothing should prevent the wretched neurotic from arranging the world according to his whims. Every means is right if it helps to raise the daydreamer’s reason to the throne.

The unanimous approval of planning by our contemporaries is only apparent. The supporters of planning disagree with regard to their plans. They agree only in the refutation of the plans brought forward by other people.

Many popular fallacies concerning socialism are due to the mistaken belief that all friends of socialism advocate the same system. On the contrary, every socialist wants his own socialism, not the other fellow’s. He disputes the other socialists’ right to call themselves socialists. In the eyes of Stalin the Mensheviks and the Trotskyists are not socialists but traitors, and vice versa. The Marxians call the Nazis supporters of capitalism; the Nazis call the Marxians supporters of Jewish capital. If a man says socialism, or planning; he always has in view his own brand of socialism, his own plan. Thus planning does not in fact mean preparedness to cooperate peacefully. It means conflict.

The “planner”

Frank Chodorov writes in “The Rise and Fall of Society”-

The essence of value is the human capacity of measuring intensity of desire. When the two frontiersmen bartered their respective abundances, their desires were limited to the necessaries. As increasing population makes for a greater subdivision of labor, and therefore for a greater variety of goods and services, this problem of evaluating desires and of exerting one’s will in favor of this or that satisfaction becomes correspondingly more intricate. When the choice lay between a bear skin and going naked, the problem of raiment was readily resolved. But now the matter involves a choice between a two-button and a three-button suit, between blue and gray, to say nothing of the quality of workmanship or correctness of size; also, population has brought a new influence to bear upon the evaluation, that of public opinion, and style becomes a consideration. Antecedent to the clothing problem, moreover, a decision must be made between clothing and a harness for the horse or a set of books for the children. The desires are many. What constriction, in the nature of things, compels a decision in favor of one gratification over another? What is the true measure of intensity of desire? The answer that man gives to this question is a ratio between variables: that gratification which, taking into consideration all the factors of inclination, environment, and necessity, will yield him the most satisfaction, according to his lights, in return for the least amount of effort that must be given up to acquire it. For it is written in the book of life that the cost of every “good” is that undesirable thing called effort.

Thus labor, in juxtaposition to desire, is the ultimate determinant of value. Let us keep in mind, however, that it is not the labor invested in producing the “good” which fixes its value—not the “cost of production”—but the labor one must give up as the price of possession. The fisherman was not unaware of the effort expended in getting the fish, effort he might have put into growing potatoes, and the other frontiersman knows how much time he invested in his tubers. This awareness of labor cost bears heavily on their respective evaluations of their desires for the things offered in trade; therefore, the cost of production (or the cost of reproduction) tends to approximate the price of gratification.

It would not serve the purposes of this essay—which is concerned with the economic forces that underlie social institutions—to delve into the theory, or theories, of value, or the related subject of price. It is enough to point out that were it not for this human capacity to make evaluations there would be no market place, and if there were no market place there would be no Society. Despite all the recondite thought that has been put into this subject, no definition of value offered is quite as definitive as the popular phrase “easy come, easy go.” What one acquires with little effort one has little reluctance to part with if in so doing one can obtain something wanted; on the other hand, if the getting of a pair of shoes calls for the giving up of a month’s labor, an inhibitory influence comes into play and maybe the old shoes will be pressed into service for a while longer. It is this interplay of two psychological forces—intensity of desire and aversion to labor—that is the essence of value, and any attempt to reduce it to a mathematical formula is fatuous; to do so would require an understanding of the inner workings of every individual, under all circumstances, and that calls for omniscience. When a trade is consummated, the psychological forces come to rest, and this objective act is a historical fact that is measurable; that is, the price agreed upon tells us something about what the buyer and seller had been cogitating upon before the trade took place. There is no way of measuring their antecedent emotional experiences. And even then, even after the trade has been consummated, it cannot be said with certainty that it will be repeated. The determination of value in the future is largely guesswork. That is why there are “mark down” sales.

This impossibility of fixing future values is the rock on which “economic planning” founders. Not only is the planner without data on which to base his prognoses, but the plannee himself cannot furnish it. No man can foretell with certainty what he will want at a future time, or how much he will want it, for no man can predict the influences that will determine his decisions. Today he is most anxious to have a hat, but tomorrow he is convinced that headgear causes loss of hair and he decides to go uncovered; or the repair of his roof is a more pressing need than the automobile he had set his heart on; or a lessening of his income compels a reevaluation of his desires. Variability of choice makes predictions most precarious, as producers well know. The best the planner can do is to forecast “average” desires on the basis of past experience. But the “average” necessarily eliminates the desires of last year’s minority, who may be the majority this year. Confronted with this problem of variability in desires, the “economic planner” must resort to constriction, to limitation of choice, to the strangulation of imagination. The planner undertakes to prescribe what the individual should want, and the basis for his prescription is a conviction that he knows best what is “good” for the individual. Because it is in the market place that variability of choice expresses itself, through price, the planner’s conceit leads him to attempt to control consumption by controlling price. But price is not controllable, simply because desires are not controllable. The barrier to free choice which the planner sets up acts like the dam in the river; the water does not stop flowing but either overflows the dam or spreads out in a lake. Price control does not stop wanting or bidding; it simply creates what propaganda calls a “black market,” which is in fact the true market, somewhat distorted but nevertheless true. It may be illegal but it is highly moral, for it arises from the individual’s right to himself, to the product of his labors, and to the pursuit of happiness which is the essence of living.

Since the control of consumption by means of fixed prices proves impossible, the planner turns to constricting productive specialization. That is, he undertakes to desocialize Society. As we have seen, men come together and cooperate for the improvement of their circumstances—to raise their common wage level—and they accomplish this purpose through specialization; any attempt to constrict specialization is therefore unnatural and regressive; to the extent that if it succeeds it tends to break up the integration or to retard its growth. Men must then get along on less. But it is not in the nature of men to get along on less, and to counteract this inner drive the planner must resort to violence. All “economic planning” ultimately rests on purging. Purging of what? Of the impulses on which Society is built. The “economic planner” does not control prices or production; he polices men.

The Oracle and the Sphinx

simply Capitalism writes about the “Oracle of Omaha” – Warren Buffett – and his preference for the “mixed economy” plus his attributing his success to an “ovarian lottery.”

O&M writes about why politicians and economists “heart Keynes”. This part is very interesting-

Third, the Keynesian delusion afflicts not only policymakers, but professional economists as well. I’ve long suspected that the appeal of Keynes to people like Krugman and DeLong is ultimately based on aesthetic, not scientific, grounds. Deep in their hearts, they just don’t like private property, markets, and individual choice. They don’t think ordinary people are capable of making wise decisions and think they, the elites, should be in charge. They resent the fact that most people don’t want their lives controlled by liberal intellectuals. Technical arguments about the effectiveness of monetary and fiscal policy, the relationship between aggregate demand and output, the experience of the 1930s, and the like are really beside the point. For Keynesian economists, the belief that markets are naturally unstable in the absence of government planning is a matter of faith.

I think Nozick’s hypothesis on intellectuals vs. capitalism is relevant here; he takes them back to school. From “Why Do Intellectuals Oppose Capitalism?”-

Central Planning in the Classroom
There is a further point to be added. The (future) wordsmith intellectuals are successful within the formal, official social system of the schools, wherein the relevant rewards are distributed by the central authority of the teacher. The schools contain another informal social system within classrooms, hallways, and schoolyards, wherein rewards are distributed not by central direction but spontaneously at the pleasure and whim of schoolmates. Here the intellectuals do less well.

It is not surprising, therefore, that distribution of goods and rewards via a centrally organized distributional mechanism later strikes intellectuals as more appropriate than the “anarchy and chaos” of the marketplace. For distribution in a centrally planned socialist society stands to distribution in a capitalist society as distribution by the teacher stands to distribution by the schoolyard and hallway.

Overprotected. Over-administered. Over-planned.

That’s India of the 1950s-1980s – the age of the “permit raj”. wgreen has a post on the proposed US auto bailout where he has linked to a YouTube video (about 3 1/2 minutes) – a clip from the PBS documentary Commanding Heights: The Battle for the World Economy – that deals with the problems that plagued socialist India. Read his post for that clip, and visit this website for the whole three-episode-six-hour documentary.

The video I refer to is the fourth chapter from the second episode – India’s Permit Raj and this is the complete transcript of that chapter. You have everyone from Yashwant Sinha to Chidambaram to Jairam Ramesh to Manmohan Singh talking about how government control of the economy and “protecting” local industry was a recipe for disaster, and the funny part is, in 2008, none of them are ready to completely open up the economy. Its as if they don’t understand economics at all.