76-05-A1
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Centralized Planning[edit]
Transcript[edit]When the economy is in trouble some politicians try to cure it with a neatly wrapped package called centralized planning. Trouble is it leaves out the human ingredient. I'll be right back. I've talked before about centralized economic planning, but like a lot of other bad ideas proposed in Congress it keeps coming back like a song. Last year it was in the form of something called the Humphrey-Javits bill. This year it has been the Humphrey-Hawkins bill. Labeled as a jobs bill but in reality the forerunner of central government planning of our economy. Very few reputable economists support the idea of centralized planning and for a good reason, it just plain doesn't work. Look at Britain, with all our woes and falling pounds and you'll see what I mean, or that consumer paradise the Soviet Union. There are several reasons why centralized planning fails, but for the moment, let's examine one. Advocates of central planning create the image of the planner as an objective expert who analyzes problems, then plans solutions. He acts only out of concern for the public interest, never pursuing his own interests, or so the myth goes. james buchanan and gordon tullock both economists at virginia polytechnic institute have studied this problem and they found, as you would expect, that in reality this is not what happens at all. Planners are human beings and like most other people when there's a conflict between self-interest and the public interest they will almost always follow their own personal interest in every planning decision. There are always special interest groups involved, usually including business and labor and they want to say in the planner's decision. These special interests will concentrate their energy on influencing the planners one way or the other. George Hilton the UCLA economist cites as a case in point Amtrak, the government's passenger rail system. How do you think Amtrak schedules have been set by government planners? The answer has little to do with service needs and a lot to do with the location of the politicians interested in transportation. It's a case of the squeaky wheel getting the grease. Montana for instance has a relatively small population and therefore few people who ride trains, but because both senators from Montana are interested in transportation. Amtrak planners have scheduled two trains to run east and west across the state every day. The same is true of West Virginia. According to Professor Hilton it has little need for rail passenger service but a member of the interstate commerce commission hails from there and a West Virginia Congressman is the chairman of the house commerce committee. So Amtrak planners have scheduled frequent service there. Ohio is a different story. It has a large population and a big potential demand for rail service but Cleveland wasn't even included in Amtrak's original service plan. Ohio's Congressmen must have had other things on their minds at the time. It all boils down to the fact that economic decisions made by a government tend to be made for political not economic reasons. Planning in the private marketplace on the other hand is done by millions of people buying and selling goods and services as their needs require. One reason for the success of the market system is that individuals do their planning for economic not political reasons. One thing is certain about centralized planning, it can't rearrange human nature. This is Ronald Reagan. Thanks for listening.
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