Danila

This is about the following cycle of three articles: Libertarians have shrugged their shoulders, Soviet society is not 1984, and Corporate Wastefulness in the 21st Century.

Shoulders

§1. The concept of Schumpeter’s entrepreneurial function and Hayek’s dispersed knowledge is described, as well as the problems that arise in a planned economy lacking access to this knowledge, since it is embedded in market prices. Everything is quite correct, with various amusing examples from life in the USSR.

§2. Mises’s calculation argument is described, according to which in the absence of market prices, a planning agency has to assign them arbitrarily, leading to suboptimal resource allocation, making the planned economy wasteful and inferior to the market economy. As a partial answer to how the USSR managed to survive for 70 years, it is pointed out that it was able to peek at some market prices from its capitalist neighbors. There are no complaints about this paragraph either.

§3. Here, the author, on one hand, shows that the lion’s share of innovations appears in small startups, but on the other hand, says that the world has long been ruled not by shopkeepers, but by corporations, and therefore classical liberalism is a libertarian’s dream. Essentially, “pipe down and return to the real world from your beloved 18th century.” Generally, the facts presented are quite correct, but the author’s pathos is unclear: the fact that the current economy is not fully market-based does not mean that its state is optimal or even inevitable. It’s just the way it is now.

1984

§4. Here the author points out that both Mises’s calculation argument and Hayek’s argument about dispersed knowledge neglect empirics. Since a global planned economy has never been built, it cannot be verified that it is incapable of economic calculation. Since the Soviet economy contained some rudimentary elements of a market rather than being fully planned, it again cannot be verified that a planned economy is unable to account for this dispersed knowledge. In short, the unverifiability of the arguments regarding the impossibility of building a planned economy is confirmed by the fact that no one has ever been able to build a pure planned economy. I would say that the absurdity (okay, let’s say more gently—the paradox) of such argumentation is quite obvious.

On the other hand, it is pointed out that both Hayek in The Road to Serfdom and Orwell in 1984 clearly overdid the pessimism of their forecasts, because the inefficiency of a totalitarian society quickly begins to require a minimum of market lubrication, and only with its presence is this planned machine somehow able to move forward. Again, the criticism seems strange. Hayek says: if you are consistent in your madness, this is what will happen. Then Netesov claims: look, Soviet society was not consistent enough in its madness, therefore Hayek was wrong. Well, sort of…

§5. Here it is said that Hayek claimed: under a system of centralized planning, all plans are handed down from above by one leader. But this is not the case: huge, cumbersome structures were built to create plans, which worked terribly, and these plans were not properly fulfilled. It is clear that empirical data should differ somewhat from theoretical ones: the Soviet Union was not an ideal system of centralized planning because such an ideal system is simply unattainable, just as absolute zero is unattainable.

But essentially, the author is right: The Road to Serfdom is not a detailed description of a specific USSR, nor even of socialism as a system. It is simply a political pamphlet, a warning to British society not to flirt too much with the Labour Party. For studying socialism, Hayek’s book is too superficial; if anyone is interested, there are many established Sovietologists, and the author suggests getting acquainted with them.

Greedy Escort

§6. Here, the author first suggests that libertarians get rid of praxeology. Then he begins to reason that a corporation is not some single and indivisible entrepreneur, but a multitude of people, each acting in their own personal interests, which do not necessarily coincide with some conceptual interests of the corporation as a whole or even its management. The question arises: why should we discard praxeology if it is precisely concerned with the consideration of individual human interests, which are much broader than economics?

It is also pointed out that Mises’s calculation argument regarding the impossibility of economic calculation in a planned economy applies to corporations in the same way. That is, the more internal transfer pricing within a corporation is detached from the market, the worse resources are distributed within it. Next, positive and negative economies of scale are mentioned, which Mises touched upon only slightly. Well, Mises wasn’t the only one; Ronald Coase did a lot of work in the field of firm theory, and supporters of the Austrian School of Economics can perfectly well use his constructions; they fit into the general economic theory and do not violate the principles of praxeology.

Further in this very long paragraph, there are reflections that the efficiency of a corporation becomes even lower when it reaches the state trough, and Mises is accused of ignoring this circumstance. Here, one can only be surprised, because the entire sixth part of Human Action is devoted to various distortions that the government can introduce into economic activity.

§7. Here, referencing Hernando de Soto, explanations are given as to why supercomputers are unable to save a planned economy, and then a question is left hanging about what prevents these same arguments from being applied to TNCs. Nothing prevents it. Centralization has its costs, and decentralization has its own.

§8. Here the author repeats a number of theses from previous paragraphs and mentions that Joseph Salerno proved: market prices convey a reliable signal to entrepreneurs only under proximal equilibrium. He uses this as an argument that Hayek is outdated, and along with him, the entire Austrian School. But Salerno is also a representative of the Austrian School, so we are seeing an evolving school rather than a dead dogma, so what’s the problem?

§9. In conclusion, Netesov lists the reasons why, in his view, the rapid expansion of the influence of the Russian-speaking libertarian movement has slowed down significantly recently. The selection looks like a set of random facts that caught the author’s eye and serves as a warning to me personally not to do the same, because it looks very funny from the side. There, literally, as reasons for the end of the golden age of libertarianism in Russia, he lists the publication of a feuilleton with 13 thousand reads (I first learned about it from Netesov’s article), Usanov’s weak performance in debates with Vatoadmin, and the failure of Zelensky’s reforms. Where is my pre-New Year depression? I also influenced the fading interest in libertarianism in Russia!

In my view, the problem is more that almost all the low-hanging fruit have been picked, and further, if one wants to continue spreading their ideology at the previous pace, new approaches must be found. The second problem is, undoubtedly, the COVID restrictions, which completely cut off the sphere of offline agitation. The third is the recent split of the libertarian community. However, the latter circumstance, on the contrary, may provide new growth points due to increased competition for fresh minds.