National Economic Planning

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Published by the Mercatus Center at George Mason University in the Advanced Studies in Political Economy series.

Can a “radical free-market” economy help to end poverty and militarism while avoiding the quagmire of central planning? Don Lavoie makes a strong case that it can in National Economic Planning: What Is Left?

Avoiding the conventional pitfalls of right and left, Lavoie argues with a strong social consciousness that liberal and radical arguments for national economic planning fail to solve the basic problem of coordinating knowledge in society. He shows how decentralized markets solve this problem, while no means exist for a central planner to elicit the information needed to coordinate a complex, interrelated economy.

National Economic Planning: What Is Left? begins by showing why there is a need for a scientific-radical perspective and why central planning is not the answer. The author systematically and thoroughly critiques Far Left and Marxist positions, as well as the more popular views of macroeconomic planning, economic democracy, and industrial policy.

Lavoie’s premise is that economic planning is not a rationally organized, objective system but rather a dynamic process with only very subjective means for determining which product is “best” or preferred by the consumer. The arbiter for “what is best?” must be free-market competition and not a centralized planner. Planning can do nothing but disrupt social and economic coordination and worsen the serious problems of modern economies.

Constantly sensitive to the social concerns that have inspired “radicals” from Thomas Jefferson to Karl Marx, Lavoie demonstrates where and why the traditional policies of the Left have failed, why today’s liberal and neoconservative variations on economic planning cannot accomplish their goals, and what alternative policies can produce progressive social change in a prosperous and growing economy.

Economic planning, Lavoie contends, is an unworkable and ultimately reactionary policy that must be rejected by the Left if radicals seek to offer real solutions to our pressing social problems. This book challenges radicals—and their critics—to begin reformulating their whole conception of progressive economic change without reliance on central planning.

National Economic Planning: What Is Left? is as comprehensive as it is controversial. Written for lay readers as well as economists and social analysts, its arguments rely as heavily on common sense as they do on scientific method and will challenge thinkers and policymakers of every political persuasion.
 

“Don Lavoie’s book will serve a very important function. After more than fifty years of discussion in which the socialists at first just would not listen, their position has now collapsed. Yet this long discussion was not without benefits. We have learnt much from this resistance to seeing the truth, and we shall also learn much from studying this systematic exposition of the present state of our knowledge of the problems.”
—F. A. Hayek

“Lavoie’s superb study develops an immensely powerful case for the irrationality of national economic planning. It is distinctive in showing that conventional ideas of economic planning depend upon conceptions of human knowledge that are philosophically untenable. It will be of great interest to economists, political scientists, philosophers, and all those concerned with current trends in public policy.”
—John Gray

“After over 30 years, Don Lavoie’s National Economic Planning: What Is Left? has retained much of its freshness and relevance, even after the fall of the Berlin Wall and the end of the Cold War. Some of the major points that he raises in the book have become more relevant today. In particular, Lavoie pointed to a growing crisis of both identity and direction for the Left; this has become much more severe in recent years. We do not have to agree with him on everything to see that his work has enormous prescience. It deserves a wide audience from across the entire political spectrum.”
—Geoffrey Hodgson

“In National Economic Planning, Don Lavoie brilliantly shows how Ludwig von Mises’s and F. A. Hayek’s arguments against comprehensive socialist planning in the 1920s and ’30s apply to arguments for economic planning that are less comprehensive yet still widely advocated today. Lavoie shows how the market’s competitive process generates the very knowledge that is necessary to facilitate economic coordination. Thus, any attempt to plan the competitive process in favor of any particular industry or outcome is, in his words, a case of the blind leading the sighted. Lavoie’s great book has such far-reaching applications that it should be read by all serious scholars working at the intersection of economics and public policy.”
—Benjamin Powell

“National Economic Planning was instrumental for a generation of students in demonstrating how the Mises-Hayek critique of socialism could be extended and applied to a variety of proposals for less comprehensive forms of planning. It is also the source of the now commonly used term ‘knowledge problem’ to refer to the challenge facing socialist planners. Lavoie’s book sketched out a new libertarian radicalism that both unabashedly saw itself on the Left and made use of the latest ideas in philosophy of science, epistemology, and sociobiology to support that radicalism. It remains a powerful vision of a libertarianism that could be the truly radical leftism of the future.”
—Steven Horwitz

Contents

Chapter 1: Planning and the Radical Perspective

Chapter 2: Coordination in Society: Tradition, Market, and Planning

Chapter 3: The Knowledge Problem

Chapter 4: Leontief and the Critique of Aggregative Planning

Chapter 5: Planning from the Bottom Up? The Myth of Economic Democracy

Chapter 6: Reindustrialization: Shoring Up the Economy's "Structural" Sectors

Chapter 7: What Is Left? Toward an Alternative Radicalism