Krugman's whole point is wrong, "people stopped believing, blah, blah" but this setenced is so true and describes our socialistic system of education in the US.

" In the later years of the Soviet Union, workers knew that they would be paid regardless of how hard they tried; managers knew that promotions would depend more on political connections than on performance; and nobody was offered rewards large enough to justify taking unpopular positions or any sort of serious risk. "

"For much of the past century and a half men have dreamed of something better, of an economy that drew on man's better nature."

Problem was with the first premise - assuming that man had a better nature to begin with. Or GIGO.

Posted by: Mikey at March 13, 2008 11:32 AM

"A market system, of course, works whether people believe in it or not. You may dislike capitalism, even feel that as a system it will eventually fail, yet do your job well because your family needs the money you earn. Capitalism can run, even flourish, in a society of selfish cynics."

This man is supposed to be a preeminent economist? These 3 sentences aren't even close to being coherent or even compatible with each other.

Fooey. There are three forces that always work to kill "socialist" or highly-centralized resource management systems, and they are synergistic with one another.

1: The center doesn't know everything. Important details apparent to the periphery never make their way up the hierarchy, which invariably excuses the lack of data as "trivialities" and makes decisions using other criteria. Because they are made on bad data, the decisions are always partly or completely wrong.

2: Markets happen anyway. A directed economy suppresses the market(s) in goods and services, but the market doesn't disappear; it simply begins trading in the attention and influence of the people charged with direction. That market is always distorted, because the goods and services it trades cannot be well-defined and the currency it is based on varies wildly and unpredictably in value.

3: Ants find the sugar. The bureaucrats charged with managing the economy have posts of great power which direct the disposition of enormous quantities of assets. This makes them irresistably attractive to people whose goals lie primarily or entirely in self-aggrandizement, whether such aggrandizement is materialistic (wealth) or the self-satisfaction of being able to exert power. Such persons exert every possible effort to attain the posts, and eventually displace anyone and everyone in the system who actually believes in the original goals and purposes. (The fact that, to do so, they must also lie through their teeth about their motives means that they are not only corrupt in terms of diverting the resources of society for their own benefit, they corrupt the entire selection process. This is very nearly a fourth destructive factor on its own.)

So even when tight central control works, it quits working before too long. When it's a single corporation, however large, that's been taken over by egotists and "efficiency experts", the failure doesn't threaten the whole society. When the whole society is managed by such people, disaster is inevitable.

Regards,
Ric

"I don't think anyone really knows the answer"

English translation: we all know the answer, but I don't like it.

For much of the past century and a half men have dreamed of something better, of an economy that drew on man's better nature. But dreams, it turns out, can't keep a system going over the long term; selfishness can.

I am still dreaming that selfish Krugman would share his ill-gotten gains with me once he wakes up to his better natured self.

OJ:

What's that phrase you use with seven or so F-words covering every part of speech? I need to know it, fast.

One other thing: Even as a trained economist, Krugman can't get over the kind of intellectual hubris that makes him think that he and people like him are smart enough to run everything. It's the same thing that makes him so sure that someday we'll have a real-life version of Asimov's psychohistory.

Thomas Sowell's estimate is that there were 24 million prices in the USSR that needed to be set and re-set relative to each other. I don't care how high your IQ is, if you think you're smart enough to run something like that then you ought to be locked up in an Ivy League university with the rest of your fellow yokels.

I don't really know what I'm talkin bout / on

The problem with socialism as an economic paradigm isn't so much the central planning; computers would help greatly with that but rather the -dynamic- nature of a healthy market.

By example, it is highly unlikely Soviet central planners allocated resources for the Russian equivalent of Bill Gates and Steve Jobs to do their computer thing in dorm rooms and garages thereby jump starting whole industries as they did.

But even if they did, simply picking a winner is not the end of it; you have to pick a loser too like ordering the typewriter industry out of business.

The insider trading at that kind of level spells doom.

BS / off

F you, you f'in f f, f!