Sober Realist

Yet Another Huge Economic Number Coming out of China. Hard to Believe

An excellent post on the illusions of a centrally planned economy:

"...China is considered by many to be the ultimate example of successful central planning. It is run by a ruthless and totalitarian government and exhibited strong economic growth for three consecutive decades. Previously, I wrote about the assumptions outsiders make when looking at Chinese economic indicators, and the way in which such assumptions affect decision making. However, even those who visit China in order to get a "real idea" of what's going on are often misguided by what they see. Visitors to Beijing, Shanghai, and other cities are impressed with the beautiful airports, highways, and central business districts and deduce that the country is developing well.

More than 65 years ago, F.A. Hayek wrote in The Road to Serfdom about the misleading nature of centrally-planned development. He noted that 'every one of the many things which, considered in isolation...would be possible to achieve in a planned society creates enthusiasts for planning'. Furthermore, it would be 'foolish to deny' that people living in such societies enjoy many good things which they 'owe entirely to planning'. Hayek, an Austrian exile in London, used contemporary examples to illustrate his point: Both Hitler's Germany and Mussolini's Italy had centrally-planned economies, and some of the most 'magnificent roads' and machinery in the world.

However, he noted, it would be 'foolish' to 'quote such instances of technical excellence in particular fields as evidence of the general superiority of planning. It would be more correct to say that such extreme technical excellence out of line with general conditions is evidence of a misdirection of resources'. Put differently, when a poor and oppressive country invests a large amount of its resources in one place, it means that another part of the economy is being neglected. This, in turn, leads to imbalances which hinder overall development. Of course, free societies also suffer from over-investment in different sectors, but these are less pronounced, and are periodically corrected by market forces..."
www.drorism.com/blog/2...

And a Day in the Life of a U.S. Dollar:
www.drorism.com/blog/2...