Computer Advances Cannot Replace the Market-Based Discovery Process

* Article: On the feasibility of technosocialism. By Peter J. Boettke and Rosolino A. Candela. Journal of Economic Behavior & Organization, Volume 205, January 2023, Pages 44-54 doi

URL = https://www.sciencedirect.com/science/article/abs/pii/S0167268122004048

Contextual Quote

Jack Ma of Alibaba on the Prospects of Planning

"Over the past 100 years, we have come to believe that the market economy is the best system, but in my opinion, there will be a significant change in the next three decades, and the planned economy will become increasingly big. Why? Because with access to all kinds of data, we may be able to find the invisible hand of the market.

The planned economy I am talking about is not the same as the one used by the Soviet Union or at the beginning of the founding of the People's Republic of China. The biggest difference between the market economy and planned economy is that the former has the invisible hand of market forces. In the era of big data, the abilities of human beings in obtaining and processing data are greater than you can imagine.

With the help of artificial intelligence or multiple intelligence, our perception of the world will be elevated to a new level. As such, big data will make the market smarter and make it possible to plan and predict market forces so as to allow us to finally achieve a planned economy."

- Jack Ma [1]

Abstract

"Technological advances associated with computing power and the prospect of artificial intelligence have renewed interest on the economic feasibility of socialism. The question of such feasibility turns on whether the problem of economic calculation has fundamentally changed. In spite of the prospect of what King and Petty (2021) refer to as “Technosocialism]],” we argue that technological advances in computation cannot replace the competitive discovery process that takes place within the context of the market. We do so by situating the case for technosocialism in the context of the socialist calculation debate. Understood in these terms, technosocialism represents a restatement of the case for market socialism, which incorrectly framed the “solution” to economic calculation under socialism as one of computing data, rather than the discovery of context-specific knowledge that only emerges through the exchange of property rights. Therefore, the arguments put forth by Ludwig von Mises and F.A. Hayek, and later Israel Kirzner and Don Lavoie, regarding the impossibility of economic calculation under socialism remains just as relevant today."

Contents

"In Section 2 we will revisit the classic argument against the feasibility of socialist planning, with an emphasis on the dynamic nature of the problem. Section 3 will discuss the claim from Lange onward that modern developments in computer technology have rendered the older concerns about economic planning obsolete. Section 4 attempts to provide a restatement of the Mises-Hayek-Kirzner-Lavoie position in light of the arguments for technosocialism. Section 5 will conclude."

Discussion

The Problem with Technosocialism

Peter J. Boettke and Rosolino A. Candela:

"Capitalism isn't in crisis, the argument goes; it is the crisis. But technological advances in AI provide the solution to the ills that plague contemporary society throughout the world.

Sound utopian? Perhaps, but so have all socialist proposals throughout history, e.g., the Paris Commune to the Bolshevik Revolution. The historical problem is that reality fell far short of the promised utopia, and in fact produced hell on earth. Technosocialism, like the previous Marxist and non-Marxist versions of socialism, promises the transformation from the Kingdom of Necessity to the Kingdom of Freedom. No matter how much the current advocates insist that their project cannot be equated with the older project to transform society, they share this common element – the rationalization of production to such an extent that a burst of productivity will result in material abundance. In short, the economic problem of society will be solved.

However, we argue that the proposal provided by technosocialism is analogous to putting old wine into an irrelevant new bottle. What seems to be a novel proposal to deliver the age-old aspiration of socialism is not fundamentally different from the market-socialist model which had been proposed by Oskar Lange and Abba Lerner in the 1930s in response to Ludwig von Mises and F.A. Hayek, both of whom had argued that economic calculation under socialism was impossible. Lange would later propose the following in response to Mises and Hayek: “Let us put the simultaneous equations on an electronic computer and we shall obtain the solution in less than a second. The market process with its cumbersome tâtonnements appears old-fashioned. Indeed, it may be considered as a computing device of the pre-electronic age” (emphasis in original; 1967: 158).

The promise only works, however, if the technology is actually capable of rationalizing production as advertised. The organization of society through AI must, as was the case with proposals for comprehensive central planning or decentralized market-socialist planning before it, be able to achieve the goal of rationalization and thus eliminate the inefficiency, instability and inequality that is claimed to plague capitalism. Thus, the question remains fundamentally one that is subject to the economic analysis of the feasibility of the social system to achieve its stated ends via its chosen means, and not a dispute over the ends of technosocialism.3

Therefore, we propose to tackle this feasibility question by restricting our analysis only to means-ends assessment, and in particular, focus on the question of whether modern information technology can meet “knowledge problem” challenge that Mises, Hayek, Kirzner and Lavoie raised during the socialist calculation debate and after. As Cockshott and Cottrell (1993: 111) so clearly state: “The problem of information has a social as well as a technical aspect. We need the right hardware and software, but we also need the right measures and incentives, so that it will be in people's interest to supply accurate information.” It is clear that effective comprehensive planning requires the transmission of vital information quickly and correctly. To most technosocialist enthusiasts, the market process with its price adjustments, its profit-and-loss accounting, and shifting pattern of resource ownership is merely an old-fashioned computing device of a pre-electronic age, as was argued by Lange (1967). However, Lange's assessment, like that of technosocialism, is based on a fundamental misunderstanding of the economic problem of society as being of a computational nature rather than a “knowledge problem” that must be addressed and the nature of how the market process in fact does address the problem."

(https://www.sciencedirect.com/science/article/abs/pii/S0167268122004048)

More information

• "Don Lavoie, in an essay titled “Computation, Incentives and Discovery” (1990), attempts to clarify why even the most sophisticated advances in computer technology do not address the Mises-Hayek-Kirzner objections to socialist economic planning. It is the last word in his title that is the key – discovery – and all that it entails for how the price system works in a market economy that is still missing from the arguments." [2]

Book

• Book: The Rise of Technosocialism. By Brett King and Richard Petty.

Peter J. Boettke and Rosolino A. Candela:

"In their manifesto, The Rise of Technosocialism Brett King and Richard Petty define technosocialism not as a political movement, but as a “social outcome” (2021: 38) based on “long-term sustainability, equality and the advancement of humanity as a whole” (2021: 39). The means by which to achieve this outcome, according to King and Petty, is the advanced computational power of artificial intelligence: “With the emergence of Artificial Intelligence (AI) we are on the verge of perhaps solving the biggest mysteries of the universe, but AI will also allow us to automate society to provide untold abundance and prosperity” (2021: 15)."

(https://www.sciencedirect.com/science/article/abs/pii/S0167268122004048)