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Central Planning

Once again Cafe Hayek has an excellent economic observation.  The notion of central planning, in the form of the so-called economic stimulus package from Washington is debunked by pointing out the inability of the central planners to stimulate jobs that produce goods that consumers want.  As noted by Donald Boudreaux:

We non-Keynesian economists also believe that it will fail, but for very different reasons: the chief problem is less one of deficient aggregate demand than it is one of poor coordination of the plans of producers with the (non-bubblicious) demands of consumers.

Economic prosperity requires that workers whose jobs were created by the bubble be redeployed into jobs that are viable.  Stimulus spending does nothing to promote this greater coordination of economic activities - and, by promising higher taxes or higher inflation in the future, likely interferes with the economy's capacity to coordinate.

Central planners, even if they developed thorough well thought out plans (which the current stimulus package is not), are not able to determine which jobs are needed to meet the demands of consumers. 


Another Example

The Ludwig von Mises Institute describes another example of the failure of government central planning at their daily blog.  The inaugural ticket fiasco is a perfect example of what to expect in the distribution of the stimulus money.  As pointed out in the article:


when governments, instead of markets, ration scarce resources, their performance is dismal. Shortages and incompetence are commonplace in government-run economies, because no amount of design by government planners can anticipate the myriad demands of the people.



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