Central Planning by Business Is Not the Same as Central Planning by Government

Advocates of capitalism say: “CENTRAL PLANING DOESN’T WORK!”

Also advocates of capitalism: “CORPORATIONS DO WORK!”

Sensible socialist: “Uhhh … aren’t corporations all centrally planned?”

This is a relatively new, and even imaginative critique of markets which has recently been circulating the meme-o-sphere. It looks like a pretty clever point at first glance, but it completely misses the mark on how and why markets work and why we advocate for them. There are several key differences between a so-called central plan issued by the CEO of a company and those issued by a commissar, or even a democratically elected senate or parliament.

Do the people whom services are produced for actually like the product? How can we tell? Well, on the free market people have limited resources and they need to make choices on what to spend those on. There is a tendency for them to buy the things they value the most first, and to get the stuff they could make do without if they have enough left over. This means that businesses have the feedback mechanism of profit and loss to let them know if, when it comes to the crunch, people value what they are selling enough to buy it at the expense of everything else they could possibly buy instead. This lets them know if their “plan” is any good or not. The government has to tax people and then make a wild guess.

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Πηγή: mises.org

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