- repudiate the idea of central planning and "economic plans."
- One of the most important issues in this campaign has to do with "planning."
- • Do we want the government to plan our lives, or
• Do we want to plan for ourselves?
- We will enjoy a higher standard of living without government planning.
In 1776 three important documents were published.
The first was The Declaration of Independence.
When esteemed physician Benjamin Rush heard the ideas of John Locke, he was appalled:
Never before had I heard the authority of kings called in question. I had been taught to consider them nearly as essential to political order as the sun is to the order of our solar system.
But he eventually signed the Declaration of Independence.
The second was a book written by Adam Smith: The Wealth of Nations. He explained why a nation can become wealthy without a king: "the Invisible Hand" of Adam Smith was the "Divine Providence" of the Declaration of
Independence. Adam Smith also wrote The Theory of Moral Sentiments. Capitalism (a Free Market) and its foundation, a division of labor, presupposes a people that work and serve others in a moral framework. John Adams wrote:
The moment the idea is admitted into society, that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. If "Thou shalt not covet," and "Thou shalt not steal," were not commandments of Heaven, they must be made inviolable precepts in every society, before it can be civilized or made free.
This is why Adams could support the abolition of the king and a strong, top-down government:
[W]e have no government armed with power capable of contending with human passions unbridled by morality and religion. . . . Our constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other.
The third book was Common Sense by Thomas Paine. Paine was not an atheist. He believed schools should teach "intelligent design." He encouraged the Christians of his day to reject faith in the British king as a form of idolatry. He quoted 1 Samuel 8 in the Bible
where God said those who wanted a king were rejecting government by God's Invisible Hand. (1 Samuel 8 is the first entry in David Boaz' compendium of libertarian writings, The Libertarian Reader: Classic and Contemporary Writings.)
In our day, most Americans are guilty of idolatry, preferring the State to be their Savior, rather than God.
Both Democrats and Republicans believe in this "big government" cult.
Both Democrats and Republicans claim that your life will be better if you leave planning up to them and the bureaucracies they will create.
- Search the Whitehouse.gov website for examples of government planning:
- You will find the following plans (as of February, 2008):
• "The President's plan will make private health insurance more affordable."
• "implementation of the North American Pandemic Influenza Plan" [pdf]
• "The President's Plan To Strengthen America's Energy Security"
• "The President's Emergency Plan
for AIDS Relief
• "Today, President Bush Discussed The Four Parts Of His Practical Plan To Confront High Gas Prices"
• "President Bush Announces Private-Sector Plan To Help Struggling Homeowners
- Search the Democrats website:
- • Senate Democrats' Katrina Relief Plan
• House Democrats Have A Plan
- From the Democrat Party Platform: [pdf]
- • "We have a plan to build a strong, respected America: protecting our people, rebuilding our alliances, and leading the way to a more peaceful and prosperous world."
• "We have a plan to build a strong, growing economy: creating good jobs, rewarding hard work, and restoring fiscal discipline."
• "We have a plan to help our people build strong, healthy families: securing quality health care, offering world-class education, and ensuring clean air and water."
• "No strategy for American security is
complete without a plan to end America's dependence on Mideast oil. "
• "Even the Administration's own economists have found that their energy plan will do nothing to reduce gas prices"
• "Harnessing American ingenuity to create renewable energy. Our plan begins with commonsense investments to harness the natural world around us—the sun, wind, water, geothermal and biomass sources, and a rich array of crops—to create a new generation of affordable energy for the 21st century. By mobilizing the amazing productivity of America's farmers, we can grow our own cleaner-burning fuel."
• "We offer America a new economic plan that will put jobs first. We will renew American competitiveness, make honest budget choices, and invest in our future."
• "A plan
to reinvigorate manufacturing. Manufacturing has lost 2.5 million jobs under President Bush in its worst jobs crisis since the Depression. John Kerry, John Edwards and the Democrats will launch a concerted effort to revitalize American manufacturing. The measures outlined above are important components of our overall strategy. In addition, based on the model that has helped launch some of America's most successful companies, we will establish new investment corporations to give small and medium-sized businesses access to capital. And we will support the growth of high-technology "clusters" that invest in new industries around research institutions."
- This is all nonsense. These government plans will never work. They cannot work. Click here to find out why. Or, read more from the Democrat Party Platform:
- • "Promoting small businesses. Small businesses and entrepreneurs are the lifeblood of our economy. We will encourage small business growth with a plan to make it easier for small businesses to secure capital and loans."
• "Through our jobs plan, we will bring hope and jobs back to the cities and small towns devastated by the shuttering of factories."
• "John Kerry, John Edwards and the Democratic Party believe in a stronger, more prosperous America for all our people. We believe in an America where the great American promise of upward mobility is alive and well. We believe in an America where the middle class is growing, our economy is thriving, and America is strong. And we have a plan to build that America."
• "The price of gas is at an all time-high, placing an
enormous burden on millions of Americans who have no choice but to drive to work. We will help cut costs in the short-run by halting additional stockpiling of oil reserves and working more effectively to ensure that OPEC increases production. For the long-run, we offer a detailed plan for energy independence."
• "Cutting health care costs. At the center of our efforts will be a plan to reduce health costs. "
Obviously there are many more "plans" in the Platform that don't use the word "plan." Every area of your life is being planned by misled bureaucrats in government. Click here to find out why they are misled.
|Free Market Planning
History has handed down a powerful verdict: government planning does not work. In every case where the government attempts to plan, it creates failure. In every case where it is allowed to function freely, the Free Market produces miraculous results of prosperity and liberty -- millions of business owners, entrepreneurs, investors, consumers, non-profit and voluntary associations pool their information together across spontaneous networks of communication and cooperation, plan for their individual futures, and raise the standard of living for all people, even the poorest.
Every American should spend an hour learning why that claim is historically true and inescapably rational. Here are some resources to help make up for
what government-planned schools neglected to teach you:
- Why Government Planning Always Fails by Randal O'Toole.
- We now know New Deal planning did more to prolong the Depression than it did to end it. [proof] We know urban-renewal planning in the 1950s and 1960s displaced more than a million, mostly black, low-income families from their homes and turned some inner city neighborhoods into bombed-out landscapes. [proof]
We know President Nixon's wage-and-price controls led to energy shortages but didn't stop inflation. [proof]
The government is incapable of successfully executing a plan to achieve the most simple goal. Consider the humble pencil. The President -- whether Clinton, Bush, or Obama -- does not know how to build a pencil. In fact, no human being knows how to build a pencil. No committee of human beings could build a pencil. The government could never build a pencil -- at the same price the Free Market can build a pencil. Here is a delightful essay on the pencil, with an introduction by Nobel Prize-winning economist Milton Friedman. Every American should read this essay before voting for a politician with a
Millions of people are needed to make a pencil. Yet the vast majority of them have no intention of creating a pencil. Lumber mills aren't thinking about making you your pencil. A company that makes yellow paint doesn't know about you or your desire for a pencil. A million decision-makers are coordinated by "the Invisible Hand" of the Free Market to bring you your pencil. All of the hundreds of businesses and millions of people involved in the making of a pencil are engaged in "economic planning" to keep their businesses profitable. They keep track of inventory, price fluctuations, forecasting, and make innumerable decisions based on the information they acquire through trade publications, the Wall Street Journal, and other sources. All of these millions of business owners have more information available to them than the
government's economic planning board. They make decisions every hour of every day, instead of waiting for a bureaucracy to make decisions for them. And all of these people should be free to make their own decisions about how to run their own businesses, which, after all, are their own property. This is what America is supposed to be all about: Liberty Under God. Neither Democrats nor Republicans seem to understand these most basic political and economic facts of life.
Many people feel that if the government doesn't plan things, there will just be chaos and disorder. The forget that every socialist nation has failed to prosper, and has left the people in poverty and confusion. Prof. George Reisman explains why this is so in his important text, Capitalism:
Division of labor in the planning process is possible only under capitalism. This is because of the existence of the price system, which is unique to capitalism. [Under Socialism, prices are set by government planners.] Under capitalism each individual plans his own particular sphere of economic activity. But he plans on the basis of a consideration of prices—the prices he will receive as a seller and must pay as a buyer.
The consideration of prices is what integrates and harmonizes the plans of each individual with the plans of all other individuals and produces a fully and rationally planned economic system under capitalism. For example, a student changes his career plan from actor to accountant when he contemplates the vast difference in income he can expect to earn. A prospective home buyer changes
his plan concerning which neighborhood to live in when he compares house prices in the different neighborhoods. And businesses change their plans concerning product lines, methods and locations of production, and every other aspect of their activities, in response to profit-and-loss calculations.
All of these changes represent the adjustment of the plans of particular individuals and businesses to the plans of others in the economic system. For it is the plans of others to purchase accounting services rather than acting services that cause the higher income our student can expect to earn as an accountant rather than as an actor. It is the plans of others willing and able to pay more to live in certain neighborhoods, and less to live in certain others, that determine the relative house prices confronting our home buyer.
It is the plans of its prospective customers, of all competing sellers of its goods, and of all other buyers of the means of production it uses or otherwise depends on, that enter into the formation of the prices determining the revenues and costs of any business firm and thus what it finds profitable or unprofitable to produce.
Now the fact that capitalism even has economic planning, let alone the only possible kind of rational economic planning, is almost completely unknown. Practically everyone under capitalism has been in the position of Molière’s M. Jourdan, who spoke prose all his life without ever knowing it. The overwhelming majority of people have not realized that all the thinking and planning about their economic activities that they perform in their capacity as individuals
actually is economic planning. By the same token, the term “planning” has been reserved for the feeble efforts of a comparative handful of government officials, who, having prohibited the planning of everyone else, presume to substitute their knowledge and intelligence for the knowledge and intelligence of tens of millions, and to call that planning. This is an incredible state of affairs, one which implies the most enormous ignorance on the part of the great majority of today’s intellectuals, from journalists to professors.
[On the myth of government economic planning, see Capitalism pp. 269-275. Read it here for free [pdf].]
George Reisman has also described planning under Capitalism in his article, Some Fundamental Insights Into the Benevolent Nature of Capitalism: [audio]
And now, once more with credit to Mises, so far from being the planless chaos and "anarchy of production" that is alleged by Marxists, capitalism is in actuality as thoroughly and rationally planned an economic system as it is possible to have. The planning that goes on under capitalism, without hardly ever being recognized as such, is the planning of each individual participant in the economic system. Every individual who thinks about a course of economic activity that would be of benefit to him and how to carry it out is engaged in economic planning. Individuals plan to buy homes, automobiles, appliances, and, indeed, even groceries. They plan what jobs to train for and where to offer and apply the abilities they possess. Business firms plan to introduce new products or discontinue
existing products; they plan to change their methods of production or continue to use the methods they presently use; they plan to open branches or close branches; they plan to hire new workers or layoff workers they presently employ; they plan to add to their inventories or reduce their inventories.
Still more examples of routine, everyday economic planning by private individuals and businesses could be found. Private economic planning is everywhere around us and everyone engages in it. But, to everyone except students of Mises, it is invisible. To those who are ignorant of Mises, economic planning is the province of government.
Immense, all-pervasive private economic planning not only exists, but it is also all coordinated,
integrated, harmonized to produce a cohesively planned economic system. The means by which this is accomplished is the price system. All of the economic planning of private individuals and business firms takes place on the basis of a consideration of prices—prices constituting costs and prices constituting revenue or income. Individuals planning to buy goods or services of any kind always consider the prices of those goods and services and are prepared to change their plans in the face of price changes. Individuals planning to sell goods or services always consider the prices they can expect for their goods or services and are also prepared to change their plans in the face of price changes. Business firms, of course, base their plans on a consideration both of sales revenues and of costs and thus of the respective prices constituting both,
and are prepared to change their plans in response to changes in profitability.
Thus, for example, when my wife and I first moved to California, our housing plan was to purchase a house high on a hill overlooking the Pacific Ocean. But after learning the price of such houses, we quickly decided that we needed to revise our housing plan and look for a house several miles inland instead. In this way, we were led to change our housing plan in a way that made it harmonize with the plans of other people, who also planned to buy the kind of house we were originally planning to buy but, in addition, were willing and able to commit to their plan more money than we were willing and able to commit. The higher bids of others and our consideration of those bids brought about a harmonization of our housing plan with
Similarly, a naive college freshman might have a career plan that calls for him to major in Medieval French literature or Renaissance poetry. But sometime before the start of his junior year, he comes to realize that if he persists in such a career plan, he can expect to live his life starving in a garret. On the other hand, if he changes his career plan and majors in a field such as accounting or engineering, he can expect to live very comfortably. And so he changes his career plan and major. In changing his career plan on the basis of a consideration of prospective income, the student is making a change that better accords with the plans of others in the economic system. For execution of the plans of others requires the services of far more accountants and engineers than it does the services of literary
A last example: consumers change their dietary plan, and thus plan, say, to eat more fish and chicken and less red meat. This results in a corresponding change in their pattern of buying and abstention from buying. Now, in order to maintain their profitability, supermarkets and restaurants must plan to change their offerings, namely, to increase the respective quantities of fish and chicken and fish and chicken entrees or sandwiches they supply, and decrease the quantities of red meat and red-meat entrees or sandwiches they supply. These plan changes, and corresponding purchase changes, on the part of supermarkets and restaurants result in further plan changes and purchase changes, on the part of their suppliers and on the part of their suppliers' suppliers, and so on, until the entire economic system has
been sufficiently replanned to accord with the change in the plans and purchases of the consumers.
The price system and the consideration of cost and revenue that it entails on the part of all individuals leads to the economic system continually being replanned in response to changes in demand or supply in a way that maximizes gains and minimizes losses and ensures that each individual process of production is carried on in a way that is maximally conducive to production in the rest of the economic system.
For example, as the result of a decrease in the supply of crude oil, there will be a rise in the price of crude oil and of oil products. All individual buyers will consider the higher prices in relation to their own specific circumstances—in the case of consumers, their
own needs and desires; in the case of business firms, their ability to pass along the increase to customers. And all of them will consider the alternatives to the use of oil or oil products available to them specifically. Thus, on the basis of his individual thinking and planning, each of the participants will reduce his demand for the items in a way that least impairs his well-being. And in this way, the thinking and planning of all participants in the economic system who use oil or oil products will enter into the determination of where and by how much the quantity of oil and oil products demanded decreases in response to a rise in their price. This is clearly an instance of responding to a loss of supply in a way that minimizes the loss. The reduction in supply will be accompanied by an equivalent reduction in its use in the least important of the
employments for the which the previously larger supply had been sufficient.
Similarly, the price system and the individual thinking and planning of all participants leads to the maximization of the gains from an increase in the supply of any scarce factor of production. The additional supply is absorbed in those uses in which it is most highly valued, that is, in which it can be absorbed with the least fall in price.
Ironically, while capitalism is an economic system that is thoroughly and rationally planned, and continuously replanned in response to changes in economic conditions, socialism, as Mises has shown, is incapable of rational economic planning. In destroying the price system and its foundations, namely, private ownership of the means of production, the profit
motive, and competition, socialism destroys the intellectual division of labor that is essential to rational economic planning. It makes the impossible demand that the planning of the economic system be carried out as an indivisible whole in a single mind that only an omniscient deity could possess.
What socialism represents is so far from rational economic planning that it is actually the prohibition of rational economic planning. In the first instance, by its very nature, it is a prohibition of economic planning by everyone except the dictator and the other members of the central planning board. They are to enjoy a monopoly privilege on planning, in the absurd, virtually insane belief that their brains can achieve the all-seeing, all-knowing capabilities of omniscient
deities. They cannot. Thus, what socialism actually represents is the attempt to substitute the thinking and planning of one man, or at most of a mere handful of men, for the thinking and planning of tens and hundreds of millions, indeed, of billions of men. By its nature, this attempt to make the brains of so few meet the needs of so many has no more prospect of success than would an attempt to make the legs of so few the vehicle for carrying the weight of so many.
To have rational economic planning, the independent thinking and planning of all are required, operating in an environment of private ownership of the means of production and the price system, i.e., capitalism.
Here's more on decentralized economic planning from Reisman in his article "Ludwig von Mises: Defender of Capitalism":
Von Mises's contributions to the debate between capitalism and socialism—the leading issue of modern times—are overwhelming. Before he wrote, people did not realize that capitalism has economic planning. They uncritically accepted the Marxian dogma that capitalism is an anarchy of
production and that socialism represents rational economic planning. People were (and most still are) in the position of Moliere's M. Jourdan, who never realized that what he was speaking all his life was prose. For, living in a capitalist society, people are literally surrounded by economic planning, and yet do not realize that it exists. Every day, there are countless businessmen who are planning to expand or contract their firms, who
are planning to introduce new products or discontinue old ones, planning to open new branches or close down existing ones, planning to change their methods of production or continue with their present methods, planning to hire additional workers or let some of their present ones go. And every day, there are countless workers planning to improve their skills, change their occupations or places of work, or to continue with things as they are; and consumers, planning to buy homes, cars, stereos, steak or hamburger, and how to use the goods they already have—for example, to drive to work or to take the
Yet people deny the name planning to all this activity and reserve it for the feeble efforts of a handful of government officials, who, having prohibited the planning of everyone else, presume to substitute their knowledge and intelligence for the knowledge and intelligence of tens of millions. Von Mises
identified the existence of planning under capitalism, the fact that it is based on prices (“economic calculations”), and the fact that the prices serve to coordinate and harmonize the activities of all the millions of separate, independent planners.
He showed that each individual, in being concerned with earning a
revenue or income and with limiting his expenses, is led to adjust his particular plans to the plans of all others. For example, the worker who decides to become an accountant rather than an artist, because he values the higher income to be made as an accountant, changes his career plan in response to the plans of others to purchase accounting services rather than paintings. The individual who decides that a house in a particular neighborhood is too expensive and who therefore gives up his plan to live in that neighborhood, is similarly engaged in a process of adjusting his plans to the plans of others; because what makes the house too expensive is the plans of others to buy it who are able and willing to pay more. And, above all, von Mises showed, every business, in seeking to make profits and avoid losses, is led to plan its activities in a way that not
only serves the plans of its own customers, but takes into account the plans of all other users of the same factors of production throughout the economic system.
Thus, von Mises demonstrated that capitalism is an economic system rationally planned by the combined, self-interested efforts of all who participate in it. The
failure of socialism, he showed, results from the fact that it represents not economic planning, but the destruction of economic planning, which exists only under capitalism and the price system.
Socialism, von Mises showed, in his greatest original contribution to economic
thought, not only abolishes the incentive of profit and loss and the freedom of competition along with private ownership of the means of production, but makes economic calculation, economic coordination, and economic planning impossible, and therefore results in chaos. For socialism means the abolition of the price system and the intellectual division of labor; it means the concentration and centralization of all decision-making in the hands of one agency: the Central Planning Board or the Supreme Dictator.
the planning of an economic system is beyond the power of any one consciousness: the number, variety and locations of the different factors of production, the various technological possibilities that are open to them, and the different possible permutations and combinations of what might be produced from them, are far beyond the power even of the greatest genius to keep in mind. Economic planning, von Mises showed, requires the cooperation of all who participate in the economic system. It can exist only under capitalism, where, every day, businessmen plan on the basis of calculations of profit and loss; workers, on the basis of wages; and consumers, on the basis of the prices of consumers' goods.
next: Campaign Finance, Corruption and the Oath of Office