6 ms·

A Lego Model of Capitalist Central Planning

68 points by Gigamouse 2y ago

tovej 2y ago
That 30% number for intra-firm trading is interesting. But even more interesting would be to see the historical development of that slice of the pie.
oersted 2y ago
I've always thought that every authoritarian regime is simply a company whose business is to manage and extract value from the country that they own, like any other productive asset. Some of them are longstanding family businesses (monarchies), perhaps they have delegated or divested some of their ownership to a board or to the public to some degree (spectrum of semi-democratic monarchies). Some are private companies with a single leading founder (different kinds of revolutionary/military dictatorships). Some act like large enterprises, that may be democratic or meritocratic to some degree internally, but closed to the public (single-party regimes). It's interesting to think that we spend the majority of our time (work) quite happily within such power structures. I guess the rather obvious trick is that it works as long as a company does not get a monopoly on violence. That's the difference.
- rqtwteye 2y ago
  I spent some time in East Germany when the wall was still up and often think that a corporation is run like a communist planned economy. 5 year plans, lots of internal propaganda, rewards for following the plan, no tolerance for dissent, discouraging of innovation, clear split between leadership and the rest. It’s all there
  - geraldwhen 2y ago
    Access to basic goods are locked behind bureaucracy and often in shortage. “It will be 90 days before you can receive your laptop”. Problems are deflected from one bureaucratic hell to another, with nothing ever getting solved. And the employees are gaslit into thinking everything is very good and normal.
  - AnimalMuppet 2y ago
    It's all there, except the ability to leave. Leaving a corporation is easy. Leaving East Germany... not so much.
    - rqtwteye 2y ago
      That one is true.
- LaserDiscMan 2y ago
  “There is only one holistic system of systems, one vast and immane, interwoven, interacting, multivariate, multinational dominion of dollars” https://youtube.com/watch?v=V9XeyBd_IuA&t=25s&pp=ygUUbmV0d29yayBtb25leSBzcGVlY2g%3D https://youtube.com/watch?v=V9XeyBd_IuA&t=25s&pp=ygUUbmV0d29...
- tovej 2y ago
  I think your analysis seems roughly reasonable, but I would like to point out that violence is not the only way to abuse your position of power. You can also withhold resources or information, or spin narratives which make you work against your own interest. I would also like to point out that, although private companies do not have a monopoly on violence, governments in liberal democracy protect the private property of said private companies using their monopoly on violence.
- rahen 2y ago
  > I've always thought that every authoritarian regime is simply a company whose business is to manage and extract value from the country that they own, like any other productive asset. Yes, they are predatory organizations by nature - in fact a closer operational model would be mafias. This was developed further by Murray Rothbard in his book "Anatomy of the State": https://cdn.mises.org/anatomy-of-the-state.pdf https://cdn.mises.org/anatomy-of-the-state.pdf
  - tovej 2y ago
    Murray Rothbard is a radical anarcho-capitalist of the Austrian school, he doesn't believe that empirical data can falsify a mathematical model of human behavior. In other words, if I can editorialize a little --- he's a nut.
- htrp 2y ago
  Occasionally they do have a monopoly on violence..... as the East India company comes to mind.
- deleted 2y ago
  [deleted]
082349872349872 2y ago
On one side of the coin, we have Daniel 5:5 inspiring "the invisible hand" > In the same hour came forth fingers of a man's hand, and wrote over ... upon the plaister of the wall... On the other side, we have Baum Ch.XV inspiring "pay no attention to that man behind the curtain" > ...they saw, standing in just the spot the screen had hidden, a little old man, with a bald head and a wrinkled face, who seemed to be as much surprised as they were.
- deleted 2y ago
  [deleted]
- gradschoolfail 2y ago
  It might be already kosher to reply to pjc50 (or tovej) directly ;) They are moving towards what i had in mind for Bluestein/gvicino Sorry, need to dig out Society of Mind, i thought i had a annotated copy somewhere but its been awhile..
  - tovej 2y ago
    Hi, here I am, I'm confused as to what you're trying to say here. What do you mean?
    - gradschoolfail 2y ago
      I was guessing that 082349872349872 was trying to motivate a historical understanding of the slicing of pies ;) No, seriously: Hopefully, I’m not replying to an credentialed expert here, but empirico-historical (=archaelogical?)methods seem underrated for advancing institutional (meso-)economics. Don’t know if this is as recognized a subfield as “organizational cybernetics” yet — I’m thinking of figures like Veblen and Lord Skidelsky, but how about more quantitative folks I have no idea of? Anyways, would you argue with me, the question is how to use price-setting mechanisms to allocate resources/experts at the inter/intra-organizational level. You don’t want openAI to concentrate all the world’s RLHF researchers, but you also don’t want to spread the experts out so thin that they can’t run into each other outside of Silicon Valley. There’s a tightrope to walk between centralization and decentralization, I like that this blog series is exploring related issues, and I’m thrilled that some of us here are interested in engaging on the topic: Since nothing is new under the sun, yes, we should study how firms have managed to converge to a rather precise 30-70 split, instead of (only)what Coaseans have been pontificating all along :) [Market design and transaction-cost reductions seem to be generally more sensible for optimizing information flow than manipulation of legal frameworks around hiring practices (see the eternal fiasco over NDAs/noncompetes)] The other more peripheral thing related to Minsky is that the study of expertise at the individual level could also be interesting, GP and I have an ongoing discussion about that; i think its relevant but GP seems to differ?* The concrete question we are thinking of, is how do experts split their attention between central and peripheral issues, hopefully this can be answered more sophisticatedly [i.e. quantitatively] than just handwaving the exploitation-exploration trade-off? Well experiments migggghhht just be possible in this model ;) Btw another topic GP and I have been wrestling with, is of the clash of values within Chinese-run firms in Sweden. Maybe you can help us locate sources ;) *Footnote for GP with regards to “his” small-minds/wide-world dichotomy. Thorstein Veblen's instinct-oriented dichotomy between technology on the one side and the "ceremonial" [including social media — insertion mine] sphere of society on the other.
pjc50 2y ago
The field studying this is "organizational cybernetics". Fallen out of fashion recently, but still important. As to why a company is a single large integrated organization rather than a cloud of independent organizations or individuals bound by contracts: see Coase Theory Of The Firm. It's to do with information flow. The critical difference between corporate central planning and Communist central planning is that corporate still has prices, mostly from outside the organization, which also represent a flow of information. But that 30% of intra-corporate trade often does not have anything close to a real price on it, instead it will have a number chosen for tax optimization purposes. See Apple Ireland, for example.
jmyeet 2y ago
> In 2014, BP had around 85,000 employees across 1180 companies. If you showed a person in 16th century England those numbers, they’d think you were referring to an entire economy. This is ahistorical. I present to you the Dutch East India Company [1]: > The Dutch government formed the VOC in 1602. At its peak, the Company had 57,000 employees, 150 merchant ships, and a private military force with 40 warships and 10,000 soldiers Standard Oil also springs to mind as being absolutely massive, particularly in terms of percent of GDP. That being said, I agree with the general point that the idea of "free markets" in a noeliberal dystopia are kind of ridiculous. But the alternative doesn't necessitate central planning either. The US in particular is a country of contradictions. Capitalism is popular although most people can't define it. Socialism is rejected although almost nobody can define it. The US Military is venerated despite being one of the most socialist institutions in the country. Think about it. In the military all your basic needs are met. Housing, food, medicare care, education. You pick a job you're qualified for (based on the ASVAB and line scores). The military trains you do that job. You get paid while doing all this. Then you do that job. Yet Americans, despite lauding the military, will soundly reject every American having their needs met in the same basic way that the military does. [1]: https://www.curationist.org/editorial-features/article/the-dutch-east-india-company's-colonial-trade-and-plunder https://www.curationist.org/editorial-features/article/the-d...
- wesselbindt 2y ago
  How would you define socialism and capitalism?
  - jmyeet 2y ago
    In terms of feudalism. Feudalism was an economic system borne from the Divine Right of Kings [1]. But this was really just an excuse, much like every religious war isn't really about relilgion. Religion is just an excuse to seize land. Anyway, under feudalism, a King controlled some portion of land. That King would typically have vassals who control part of it. Depending on the size, those vassals may themselves have vassals. At the bottom of this totem pole was the serf. A noble would control all the land but would grant a serf the ability to use the land to grow a harvest and feed his family. Often the serf would live on that land. In exchange for this the serf would give a portion of his harvest to his lord. The serf may also owe the lord military service in times of war. By late feudalism, instead of giving crops, the serf would sell their harvest at markets and pay the lord money. This led to the rise of the merchant class and ultimately paved the way for capitalism. So what's going on here? In feudalism, the lord owns the means of production (being the land). The serf, through his labor, creates value by sowing and harvesting a crop. There is no value to the land without labor. So one can say the the lord is extracting the surplus value of the serf's labor. This framing and understanding was really formalized by Karl Marx later but the origin of the Labor Theory of Value [2] goes back to Ancient Greece and probably beyond. So what is capitalism? Capitalism simply replaces the noble lord with a capital owner. That's literally it. As the world industrialized the means of production expanded beyond farms and mines to factories. But everything else applies. A factory extracts the surplus value of the workers' labor to enrichen the factory's owner. Instead of kings, we have Elon Musk, Jeff Bezos and the like. So what Marx talked about was the workers' relationship to the means of production. Socialism in this context simply means the workers own the means of production. So if you look at your local town or city, Walmart represents capitalism. The value of that labor and from that community is extracted to distant owners. If your town has a local family-owned restaurant, well that's socialism. The restaurant is the means of production here. The family who works there owns it. A Monsanto-owned agribusiness? Capitalism. Family-owned farm? Socialism. The crazy thing is that people like boutique hotels, farmers markets, family-owned farms, locally-grown produce and so on. Some theory wonks migh tyell at me about syndaclism, Marxism, Marxist-Leninism or Mao third-worldism. Don't get lost in the weeds however. The key part of this is that capitalism has almost nothing to do with markets (let alone "free markets", which is an oxymoron). Markets existed for thousands of years before capitalism did. Markets exist in non-capitalist countries. [1]: https://en.wikipedia.org/wiki/Divine_right_of_kings https://en.wikipedia.org/wiki/Divine_right_of_kings [2]: https://en.wikipedia.org/wiki/Labor_theory_of_value https://en.wikipedia.org/wiki/Labor_theory_of_value
sunir 2y ago
Just because democracy and capitalism were invented, didn’t change what humans knew worked beforehand. The innovation is that you aren’t born into a given regime and you can switch regimes. This made the system capable of any number of regimes from the freelancer to coops to communes to partnerships to private corporations to public corporations to crown corporations to charities to not-for-profit trade associations to your kids lemonade stand to nonincorporated affiliated entities to manage the local block yard sale to Uber to open source projects to family trusts to whatever and so on. However to manage a market function to extract petroleum cost effectively, it seems a corporation at the scale of BP, as a hierarchical corporation is the system so far shown to be most efficient? I presume anyway.
- Towaway69 2y ago
  > … to be the most efficient I assume you mean financial efficient. I personally suspect that getting resources out of the ground and to consumers would be a different usage of the word efficient. Financial efficiency isn’t the same as being efficient in resource utilisation. The capitalistic systems produces much waste in terms of resources and little or no waste in terms of capital.
  - from-nibly 2y ago
    Financially efficient is resource plus labor efficiency. Money represents resources and labor. Financially efficient cant be anything other than labor and resource efficient.
    - mindslight 2y ago
      iff P == NP. Otherwise the market is just a heuristic for obtaining one type of workable solution and then refining it into a local optimum. Business thought heartily embraces this when talking about how to make a profit - profit itself is an indicator of non-optimality, and nowhere near a small epsilon for most businesses. But then when criticizing instances where the heuristic has failed and created solutions/structures that look quite non-optimal, so many people want to brush this aside this reality and invoke the efficient market fallacy.
lnxg33k1 2y ago
Has theoretical economy ever worked? To me modern complex economics has started to feel like "we're a bunch of people, trying to theoretically represent populations on a whiteboard, but we've no idea what we're doing" Probably Lego is a good way to represent this joke of a field of study
- deleted 2y ago
  [deleted]
AndrewKemendo 2y ago
[flagged]

68 points by Gigamouse 2y ago

That 30% number for intra-firm trading is interesting. But even more interesting would be to see the historical development of that slice of the pie.

oersted 2y ago

I've always thought that every authoritarian regime is simply a company whose business is to manage and extract value from the country that they own, like any other productive asset. Some of them are longstanding family businesses (monarchies), perhaps they have delegated or divested some of their ownership to a board or to the public to some degree (spectrum of semi-democratic monarchies). Some are private companies with a single leading founder (different kinds of revolutionary/military dictatorships). Some act like large enterprises, that may be democratic or meritocratic to some degree internally, but closed to the public (single-party regimes). It's interesting to think that we spend the majority of our time (work) quite happily within such power structures. I guess the rather obvious trick is that it works as long as a company does not get a monopoly on violence. That's the difference.

rqtwteye 2y ago
I spent some time in East Germany when the wall was still up and often think that a corporation is run like a communist planned economy. 5 year plans, lots of internal propaganda, rewards for following the plan, no tolerance for dissent, discouraging of innovation, clear split between leadership and the rest. It’s all there
- geraldwhen 2y ago
  Access to basic goods are locked behind bureaucracy and often in shortage. “It will be 90 days before you can receive your laptop”. Problems are deflected from one bureaucratic hell to another, with nothing ever getting solved. And the employees are gaslit into thinking everything is very good and normal.
- AnimalMuppet 2y ago
  It's all there, except the ability to leave. Leaving a corporation is easy. Leaving East Germany... not so much.
  - rqtwteye 2y ago
    That one is true.
LaserDiscMan 2y ago
“There is only one holistic system of systems, one vast and immane, interwoven, interacting, multivariate, multinational dominion of dollars” https://youtube.com/watch?v=V9XeyBd_IuA&t=25s&pp=ygUUbmV0d29yayBtb25leSBzcGVlY2g%3D https://youtube.com/watch?v=V9XeyBd_IuA&t=25s&pp=ygUUbmV0d29...
tovej 2y ago
I think your analysis seems roughly reasonable, but I would like to point out that violence is not the only way to abuse your position of power. You can also withhold resources or information, or spin narratives which make you work against your own interest. I would also like to point out that, although private companies do not have a monopoly on violence, governments in liberal democracy protect the private property of said private companies using their monopoly on violence.
rahen 2y ago
> I've always thought that every authoritarian regime is simply a company whose business is to manage and extract value from the country that they own, like any other productive asset. Yes, they are predatory organizations by nature - in fact a closer operational model would be mafias. This was developed further by Murray Rothbard in his book "Anatomy of the State": https://cdn.mises.org/anatomy-of-the-state.pdf https://cdn.mises.org/anatomy-of-the-state.pdf
- tovej 2y ago
  Murray Rothbard is a radical anarcho-capitalist of the Austrian school, he doesn't believe that empirical data can falsify a mathematical model of human behavior. In other words, if I can editorialize a little --- he's a nut.
htrp 2y ago
Occasionally they do have a monopoly on violence..... as the East India company comes to mind.
deleted 2y ago
[deleted]

082349872349872 2y ago

On one side of the coin, we have Daniel 5:5 inspiring "the invisible hand" > In the same hour came forth fingers of a man's hand, and wrote over ... upon the plaister of the wall... On the other side, we have Baum Ch.XV inspiring "pay no attention to that man behind the curtain" > ...they saw, standing in just the spot the screen had hidden, a little old man, with a bald head and a wrinkled face, who seemed to be as much surprised as they were.

deleted 2y ago
[deleted]
gradschoolfail 2y ago
It might be already kosher to reply to pjc50 (or tovej) directly ;) They are moving towards what i had in mind for Bluestein/gvicino Sorry, need to dig out Society of Mind, i thought i had a annotated copy somewhere but its been awhile..
- tovej 2y ago
  Hi, here I am, I'm confused as to what you're trying to say here. What do you mean?
  - gradschoolfail 2y ago
    I was guessing that 082349872349872 was trying to motivate a historical understanding of the slicing of pies ;) No, seriously: Hopefully, I’m not replying to an credentialed expert here, but empirico-historical (=archaelogical?)methods seem underrated for advancing institutional (meso-)economics. Don’t know if this is as recognized a subfield as “organizational cybernetics” yet — I’m thinking of figures like Veblen and Lord Skidelsky, but how about more quantitative folks I have no idea of? Anyways, would you argue with me, the question is how to use price-setting mechanisms to allocate resources/experts at the inter/intra-organizational level. You don’t want openAI to concentrate all the world’s RLHF researchers, but you also don’t want to spread the experts out so thin that they can’t run into each other outside of Silicon Valley. There’s a tightrope to walk between centralization and decentralization, I like that this blog series is exploring related issues, and I’m thrilled that some of us here are interested in engaging on the topic: Since nothing is new under the sun, yes, we should study how firms have managed to converge to a rather precise 30-70 split, instead of (only)what Coaseans have been pontificating all along :) [Market design and transaction-cost reductions seem to be generally more sensible for optimizing information flow than manipulation of legal frameworks around hiring practices (see the eternal fiasco over NDAs/noncompetes)] The other more peripheral thing related to Minsky is that the study of expertise at the individual level could also be interesting, GP and I have an ongoing discussion about that; i think its relevant but GP seems to differ?* The concrete question we are thinking of, is how do experts split their attention between central and peripheral issues, hopefully this can be answered more sophisticatedly [i.e. quantitatively] than just handwaving the exploitation-exploration trade-off? Well experiments migggghhht just be possible in this model ;) Btw another topic GP and I have been wrestling with, is of the clash of values within Chinese-run firms in Sweden. Maybe you can help us locate sources ;) *Footnote for GP with regards to “his” small-minds/wide-world dichotomy. Thorstein Veblen's instinct-oriented dichotomy between technology on the one side and the "ceremonial" [including social media — insertion mine] sphere of society on the other.

pjc50 2y ago

The field studying this is "organizational cybernetics". Fallen out of fashion recently, but still important. As to why a company is a single large integrated organization rather than a cloud of independent organizations or individuals bound by contracts: see Coase Theory Of The Firm. It's to do with information flow. The critical difference between corporate central planning and Communist central planning is that corporate still has prices, mostly from outside the organization, which also represent a flow of information. But that 30% of intra-corporate trade often does not have anything close to a real price on it, instead it will have a number chosen for tax optimization purposes. See Apple Ireland, for example.

jmyeet 2y ago

> In 2014, BP had around 85,000 employees across 1180 companies. If you showed a person in 16th century England those numbers, they’d think you were referring to an entire economy. This is ahistorical. I present to you the Dutch East India Company [1]: > The Dutch government formed the VOC in 1602. At its peak, the Company had 57,000 employees, 150 merchant ships, and a private military force with 40 warships and 10,000 soldiers Standard Oil also springs to mind as being absolutely massive, particularly in terms of percent of GDP. That being said, I agree with the general point that the idea of "free markets" in a noeliberal dystopia are kind of ridiculous. But the alternative doesn't necessitate central planning either. The US in particular is a country of contradictions. Capitalism is popular although most people can't define it. Socialism is rejected although almost nobody can define it. The US Military is venerated despite being one of the most socialist institutions in the country. Think about it. In the military all your basic needs are met. Housing, food, medicare care, education. You pick a job you're qualified for (based on the ASVAB and line scores). The military trains you do that job. You get paid while doing all this. Then you do that job. Yet Americans, despite lauding the military, will soundly reject every American having their needs met in the same basic way that the military does. [1]: https://www.curationist.org/editorial-features/article/the-dutch-east-india-company's-colonial-trade-and-plunder https://www.curationist.org/editorial-features/article/the-d...

wesselbindt 2y ago
How would you define socialism and capitalism?
- jmyeet 2y ago
  In terms of feudalism. Feudalism was an economic system borne from the Divine Right of Kings [1]. But this was really just an excuse, much like every religious war isn't really about relilgion. Religion is just an excuse to seize land. Anyway, under feudalism, a King controlled some portion of land. That King would typically have vassals who control part of it. Depending on the size, those vassals may themselves have vassals. At the bottom of this totem pole was the serf. A noble would control all the land but would grant a serf the ability to use the land to grow a harvest and feed his family. Often the serf would live on that land. In exchange for this the serf would give a portion of his harvest to his lord. The serf may also owe the lord military service in times of war. By late feudalism, instead of giving crops, the serf would sell their harvest at markets and pay the lord money. This led to the rise of the merchant class and ultimately paved the way for capitalism. So what's going on here? In feudalism, the lord owns the means of production (being the land). The serf, through his labor, creates value by sowing and harvesting a crop. There is no value to the land without labor. So one can say the the lord is extracting the surplus value of the serf's labor. This framing and understanding was really formalized by Karl Marx later but the origin of the Labor Theory of Value [2] goes back to Ancient Greece and probably beyond. So what is capitalism? Capitalism simply replaces the noble lord with a capital owner. That's literally it. As the world industrialized the means of production expanded beyond farms and mines to factories. But everything else applies. A factory extracts the surplus value of the workers' labor to enrichen the factory's owner. Instead of kings, we have Elon Musk, Jeff Bezos and the like. So what Marx talked about was the workers' relationship to the means of production. Socialism in this context simply means the workers own the means of production. So if you look at your local town or city, Walmart represents capitalism. The value of that labor and from that community is extracted to distant owners. If your town has a local family-owned restaurant, well that's socialism. The restaurant is the means of production here. The family who works there owns it. A Monsanto-owned agribusiness? Capitalism. Family-owned farm? Socialism. The crazy thing is that people like boutique hotels, farmers markets, family-owned farms, locally-grown produce and so on. Some theory wonks migh tyell at me about syndaclism, Marxism, Marxist-Leninism or Mao third-worldism. Don't get lost in the weeds however. The key part of this is that capitalism has almost nothing to do with markets (let alone "free markets", which is an oxymoron). Markets existed for thousands of years before capitalism did. Markets exist in non-capitalist countries. [1]: https://en.wikipedia.org/wiki/Divine_right_of_kings https://en.wikipedia.org/wiki/Divine_right_of_kings [2]: https://en.wikipedia.org/wiki/Labor_theory_of_value https://en.wikipedia.org/wiki/Labor_theory_of_value

sunir 2y ago

Just because democracy and capitalism were invented, didn’t change what humans knew worked beforehand. The innovation is that you aren’t born into a given regime and you can switch regimes. This made the system capable of any number of regimes from the freelancer to coops to communes to partnerships to private corporations to public corporations to crown corporations to charities to not-for-profit trade associations to your kids lemonade stand to nonincorporated affiliated entities to manage the local block yard sale to Uber to open source projects to family trusts to whatever and so on. However to manage a market function to extract petroleum cost effectively, it seems a corporation at the scale of BP, as a hierarchical corporation is the system so far shown to be most efficient? I presume anyway.

Towaway69 2y ago
> … to be the most efficient I assume you mean financial efficient. I personally suspect that getting resources out of the ground and to consumers would be a different usage of the word efficient. Financial efficiency isn’t the same as being efficient in resource utilisation. The capitalistic systems produces much waste in terms of resources and little or no waste in terms of capital.
- from-nibly 2y ago
  Financially efficient is resource plus labor efficiency. Money represents resources and labor. Financially efficient cant be anything other than labor and resource efficient.
  - mindslight 2y ago
    iff P == NP. Otherwise the market is just a heuristic for obtaining one type of workable solution and then refining it into a local optimum. Business thought heartily embraces this when talking about how to make a profit - profit itself is an indicator of non-optimality, and nowhere near a small epsilon for most businesses. But then when criticizing instances where the heuristic has failed and created solutions/structures that look quite non-optimal, so many people want to brush this aside this reality and invoke the efficient market fallacy.

lnxg33k1 2y ago

Has theoretical economy ever worked? To me modern complex economics has started to feel like "we're a bunch of people, trying to theoretically represent populations on a whiteboard, but we've no idea what we're doing" Probably Lego is a good way to represent this joke of a field of study

deleted 2y ago
[deleted]

AndrewKemendo 2y ago

[flagged]