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Tuesday, December 12, 2006

Interesting analogy

David Klein writes an interesting article in Economic Affairs in which he compares economic systems to the organization of individuals on a skating rink:
Suppose the social good on the floor of the roller rink were entrusted to central planning.

The rink owner appoints a really smart, ethical guy to look out for the social good. He hires a man with the reputation of a saint, and with two PhDs from Yale, one in Civil Engineering and one in Ethics. This smart saint stands in the organ booth, holds a bullhorn up to his mouth, and calls out directions: "You in the blue jacket, speed up and veer to the left." "You in the black overalls, I want you to slow down and move towards the inside." And so on.

The results would be terrible. The smart saint could not come close to achieving the brisk dynamic order that spontaneous skating achieves. The main reason he could not do so is that he lacks knowledge of individual conditions. Using his Yale learning, he looks closely and does his best. But he has 100 skaters to watch, and the conditions of each are changing moment by moment. The planner's college knowledge is useless in informing him of the particular conditions of your situation. The planner tries to apply engineering principles, but each skater has principles of motion all of his own: Do I feel like going faster? Am I losing my balance? Can I handle this turn? Do I have to go to the bathroom? Am I content to follow the planner's directions?

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