Mises Daily Articles
Planning, Science, and Freedom
[Nature, no. 3759 (November 15, 1941), p. 581–84]
The last ten years have witnessed in Great Britain a strong revival of a movement that for at least three generations has been a decisive force in the formation of opinion and the trend of social affairs in Europe: the movement for "economic planning." As in other countries — first in France and then particularly in Germany — this movement has been strongly supported and even led by men of science and engineers.
It has now so far succeeded in capturing public opinion that what little opposition there is comes almost solely from a small group of economists. To these economists this movement seems not only to propose unsuitable means for the ends at which it aims; it also appears to them as the main cause of that destruction of individual liberty and spiritual freedom which is the great threat of our age. If these economists are right, a large number of men of science are unwittingly striving to create a state of affairs which they have most reason to fear. It is the purpose of the following sketch to outline the argument on which that view is based.
Any brief discussion of "economic planning" is handicapped by the necessity of first explaining what precisely is meant by "planning." If the term were taken in its most general sense of a rational design of human institutions, there could be no room for argument about its desirability. But although the popularity of "planning" is at least partly due to this wider connotation of the word, it is now generally used in a narrower, more specific sense. It describes one only among the different principles which might be deliberately chosen for the organization of economic life: that of central direction of all economic effort as against its direction by competition.
Planning, in other words, now means that not only the kind of economic system which we want to adopt should be rationally chosen, but that we should chose one that rests on "conscious" or central control of all economic activity. It is evidently in this sense that, for example, Professor P.M.S. Blackett uses the term when he explains that "the object of planning is largely to overcome the results of competition."1 This narrow use of the term is of course meant to suggest that only this kind of economic organization is rational, and that therefore it alone deserves to be called planning. It is this contention which economists deny.
The full argument which leads to the conclusion that planning in the sense of central direction is in fact an inefficient system cannot be reproduced in a few sentences. But the gist of it is simple enough. It is that the competitive or price system makes possible the utilization of an amount of concrete knowledge which could never be achieved or approached without it. It is true, of course, that the director of any centrally planned system is likely to know more than any single entrepreneur under competition. But the former could not possibly use in his single plan all the combined knowledge of all the individual entrepreneurs that is used under competition. The knowledge which is significant here is not so much knowledge of general laws, but knowledge of particular facts and the ever-changing circumstances of the moment — a knowledge which only the man on the spot can possess.
The problem of the maximum utilization of knowledge can therefore be solved only by some system which decentralizes the decisions. There is no possibility of a division between the general outline of the plan and the detail of the execution — or at least no way for such a division has yet been shown. The reason for this is that the general features are just the result of an infinity of detail, and there are no principles which, without harm, can be laid down irrespective of the detail. Yet, in order that in a decentralized system the individual decisions should be mutually adjusted to each other, it is of course essential that the individual entrepreneur should learn as promptly as possible about any relevant change in the conditions affecting the factors of production and the commodities with which he is concerned.
Now this is precisely what the price system brings about if competition is functioning. It is in effect a system under which every change in conditions and opportunities is promptly and automatically registered so that the individual entrepreneur can read off, as it were, from a few gauges and in simple figures, the relevant results of everything which happens anywhere in the system with respect to the factors and commodities with which he is concerned.
"The object of planning is largely to overcome the results of competition."
This method of solving by an automatic decentralization a task which, if it had to be solved consciously, would exceed the powers of any human mind, would have been hailed as one of the most marvelous inventions — if it had been invented deliberately. Compared with it the more obvious method of solving the problem by central direction appears incredibly clumsy, primitive, and limited in scope.
It is very significant that those socialist economists who have most carefully studied the practical problems of a socialist economy have more than once rediscovered competition and the price system as the best solution — only that unfortunately this system cannot work without private property.2 For the general attitude towards the price system it has, however, been most unfortunate that it has not been deliberately invented, but that it has spontaneously grown up long before we had learnt to understand its operation. It seems to offend a deep instinct of the man of science and particularly the engineer to be asked to believe that anything which has not been deliberately constructed but is the result of a more or less accidental historical growth should be the best method for a human end. Yet the contention is of course not that by some miracle just that system has spontaneously developed which is best suited to modern civilization, but rather that the division of labor, which forms the basis of modern civilization, has been able to develop on a large scale only because man happened to tumble on the method which made this possible.
It is now sometimes argued — often by the same type of people who by their propaganda against competition have contributed largely towards its progressive suppression — that although all this is quite true, and although it would be desirable to have competition if it were still possible, technological facts prevent this, and that therefore central planning has become inevitable. This, however, is just one of the many myths which, like that of the "potential plenty," are taken over by one propagandist work from another until they come to be regarded as established facts, although they have little relation to reality.
There is no space here to discuss this point at any length, and it must suffice to quote the conclusion at which the most comprehensive recent investigation of the facts has arrived. This is what the final report of the investigation on the "Concentration of Economic Power," by the American Temporary National Economic Committee, has to say on the point:
It is sometimes asserted, or assumed, that large scale production, under the conditions of modern technology, is so much more efficient than small-scale production that competition must inevitably give way to monopoly as large establishments drive their smaller rivals from the field. But such generalization finds scant support in any evidence that is now at hand.3
Indeed few people who have watched economic development during the last 20 years or so can have much doubt that the progressive tendency towards monopoly is not the result of any spontaneous or inevitable force, but the effect of a deliberate policy of the governments, inspired by the ideology of "planning." The really remarkable fact is the vitality of competition, which in spite of the persistent attempts towards its suppression is ever again raising its head — only to encounter new measures designed to stifle it.
It is a serious thing that in this situation men of science and engineers should so frequently be found leading a movement which in effect merely serves to support the unholy alliance between the monopolistic organizations of capital and labor, and that for a hundred men of science who attack competition and "capitalism" scarcely one can be found who criticizes the restrictionist and protectionist policies which masquerade as "planning" and which are the true cause of the "frustration of science." That this attitude should be so common among natural scientists can scarcely be fully explained by that characteristic bias for anything consciously constructed and against anything which has merely grown up, to which I have already alluded. It is at least as much due to the antagonism of so many natural scientists towards the teaching of economics, whose methods appear to them unfamiliar and strange, and whose results they often either disregard or, like Professor L. Hogben, even violently attack as "the medieval rubbish taught as economics at our Universities."4
This conflict over the methods proper to the pursuit of the study of society is an old one and raises exceedingly complex and difficult problems. But as the prestige which the natural scientists enjoy with the public is so often used to discredit the results of the only systematic and sustained effort to increase our understanding of social phenomena, this dispute is a matter of sufficient importance to make in this context a few words of comment necessary.
If there were reason to suspect that the economists persist in their ways merely from the force of habit and in ignorance of the methods and techniques which in other fields have proved so eminently successful, there could indeed be grave doubt about the validity of their arguments. But attempts to advance the social sciences by a more or less close imitation of the methods of the natural sciences, far from being new, have been a constant feature for more than a century.
The same objections against "deductive" economics, the same proposals to make it at last "scientific," and, it must be added, the same characteristic errors and primitive mistakes to which natural scientists approaching this field seem to be prone, have been repeated and discussed over and over again by successive generations of economists and sociologists and have led precisely nowhere. All the progress in the understanding of the phenomena which has been achieved has come from the economists patiently developing the technique which has grown out of their peculiar problems. But in their efforts they have constantly been embarrassed by famous physicists or biologists pronouncing in the name of science in favor of schemes or proposals which do not deserve serious consideration. It was expressing a common experience of all students of social problems when an American sociologist recently complained that "one of the most terrible examples of unscientific mindedness is frequently an eminent natural, i.e., physical or biological scientist speaking on societal matters."5
As the dispute on central planning has become so closely connected with the dispute on the scientific validity of economics, it has been necessary briefly to refer to these matters. But this must not draw us away from our main theme. The technical inferiority or superiority of central planning over competition is not the sole or even the main problem. If the degree of economic efficiency were all that is at stake in this controversy, the dangers of a mistake would still be small compared with what they really are. But just as the alleged greater efficiency of central planning is not the only argument used in its favor, so the objections do not rest solely on its real inefficiency.
It must indeed be admitted that if we wanted to make the distribution of incomes between individuals and groups conform to any predetermined absolute standard, central planning would be the only way in which this could be achieved. It could be argued — and has been argued — that it would be worth putting up with less efficiency if thereby greater distributive justice could be obtained. But unfortunately the same factors which make it possible in such a system to control the distribution of income also make it necessary to impose an arbitrary hierarchical order comprising the status of every individual and the place of practically all values of human life.
In short, as is now being more and more generally recognized, economic planning inevitably leads to, and is the cause of, the suppression of individual liberty and spiritual freedom which we know as the "totalitarian" system. As has recently been said in Nature by two eminent American engineers, "the State founded on dictatorial authority … and the planned economy are essentially one and the same thing?"6
The reasons why the adoption of a system of central planning necessarily produces a totalitarian system are fairly simple. Whoever controls the means must decide which ends they are to serve. As under modern conditions control of economic activity means control of the material means for practically all our ends, it means control over nearly all our activities.
The nature of the detailed scale of values which must guide the planning makes it impossible that it should be determined by anything like democratic means. The director of the planned system would have to impose his scale of values, his hierarchy of ends, which, if it is to be sufficient to determine the plan, must include a definite order of rank in which the status of each person is laid down.
If the plan is to succeed or the planner to appear successful, the people must be made to believe that the objectives chosen are the right ones. Every criticism of the plan or the ideology underlying it must be treated as sabotage. There can be no freedom of thought, no freedom of the press, where it is necessary that everything should be governed by a single system of thought.
In theory socialism may wish to enhance freedom, but in practice every kind of collectivism consistently carried through must produce the characteristic features which Fascism, Nazism and Communism have in common. Totalitarianism is nothing but consistent collectivism, the ruthless execution of the principle that "the whole comes before the individual" and the direction of all members of society by a single will supposed to represent the "whole."
It would need much more space than can be given to it here to show in detail how such a system produces a despotic control in every sphere of life, and how in particular in Germany two generations of planners have prepared the soil for Nazism. This has been demonstrated elsewhere.7 Nor is it possible here to show why planning tends to produce intense nationalism and international conflict,"8 or why, as the editors of one of the most ambitious cooperative volumes on planning discovered to his sorrow, "most 'planners' are militant nationalists."9
We must turn here to a more immediate danger which the present trend in Great Britain creates. It is that of a growing divergence between the economic systems here and in the United States which threatens to make impossible any real economic collaboration between the two countries after the war. In the United States the present development is well described by the program for restoring competition developed by President Roosevelt in the message to Congress of April 1938, which, in the president's words, is based on the thesis "not that the system of free private enterprise for profit has failed in this generation, but that it has not yet been tried."10
Of Great Britain, on the other hand, it could be rightly said about the same time that "there are many signs that British leaders are growing accustomed to thinking in terms of national development by controlled monopolies."11 This means that we are following the paths on which Germany has led and which the United States is abandoning because, as states the report on the "Concentration of Economic Power" to which the president's message gave rise, "the rise of political centralism is largely the result of economic centralism."12
The alternative is, of course, not laissez-faire, as this misleading and vague term is usually understood. Much needs to be done to ensure the effectiveness of competition; and a great deal can be done outside the market to supplement the results. But by the attempts to supplant it we deprive ourselves not only of an instrument which we cannot replace, but also of an institution without which there can be no freedom for the individual.
Nothing in this situation deserves to be studied and pondered so much as the intellectual history of Germany during the last two generations. What has to be realized is that the features which made her what she is are largely the same as those which made her admired and which still exert their fascination; and that the corruption of the German mind came largely from the top, the intellectual and scientific leaders.
Men, undoubtedly great in their way, made Germany an artificially constructed state — "organized through and through," as the Germans prided themselves. This provided the soil in which Nazism grew and in which representatives of state-organized science were found among its most enthusiastic supporters. It was the "scientific" organization of industry which deliberately created the giant monopolies and represented them as inevitable growths 50 years before it happened in Great Britain.
The very type of social doctrine which is now so popular among some British men of science began to be preached by their German counterparts in the '70s and '80s of last century. The subservience of the men of science to whatever became official doctrine began with the great development of state-organized science which is: the subject of so much eulogy in Great Britain. It was the state in which everyone tended to become a state employee and in which all pursuits for profit were held in contempt which produced the disregard and final destruction of liberty which we now witness.
I shall conclude with an illustration of what I have said about the role of some of the great men of science of Imperial Germany. The famous physiologist Emil du Bois-Reymond was one of the leaders of the movement anxious to extend the methods of natural sciences to social phenomena and one of the first and most effective advocates of the now so fashionable view that "the history of natural science is the real history of mankind."13 It was also he who uttered what is perhaps the most shameful statement ever made by a man of science on behalf of his fellows. "We, the University of Berlin," he proclaimed in 1870 in a public oration as rector of the University, "quartered opposite the King's palace, are, by the deed of our foundation, the intellectual bodyguard of the house of Hohenzollern."14
The allegiance of the German scientist-politicians has since changed, but their respect for freedom has not increased. And the phenomenon is not confined to Germany. Has not Mr. J.G. Crowther recently, in a book which develops views so similar to du Bois-Reymond's, undertaken to defend even inquisition because, in his view, it "is beneficial to science when it protects a rising class"?15 On this view clearly all the persecutions of men of science by the Nazis after they came to power could be justified — for were not the latter then a "rising class"?
- 1. P.M.S. Blackett and others, "The Frustration of Science," Allen and Unwin (1935), p. 142.
- 2. H.D. Dickinson, "Economics of Socialism," Oxford University Press (1939); O. Lange and F.M. Taylor, "On the Economic Theory of Socialism," University of Minnesota Press (1938); F.A. Hayek, Economica, N.S., 7 (1940).
- 3. Final Report of the Temporary National Economic Committee ("TNEC"), USA, 77th Congress, 1st Session, Senate Document No. 35, 89.
- 4. L. Hogben, "Education for an Age of Plenty," British Institute of Adult Education (1937), p. 10.
- 5. R. Bain, Social Philosophy, 230 (April 1939).
- 6. F.B. Jewett and W.R. King, Nature, 146, 826 (1940).
- 7. W. Lippmann, "The Good Society," Little, Brown and Co. (1937); M. Polanyi, "The Contempt of Freedom," Watts and Co. (1940); W. Sulzbach, Ethics, 50 (April, 1940); F.A. Hayek, "Freedom and the Economic System," University of Chicago Press (1939).
- 8. L. Robbins, "Economic Planning and International Order," Macmillan (1937).
- 9. F. Mackenzie (ed.), "Planned Society," Prentice Hall (1937), p. xx.
- 10. Final Report of the TNEC, p. 20.
- 11. Spectator, 337 (March 3, 1939).
- 12. Final Report of the TNEC, p. 5.
- 13. Emil du Bois-Reymond, "Kulturwissenschaft und Naturwissenschaft," (1879).
- 14. "A Speech on the German War," Delivered on August 3, 1870, before the University of Berlin, by Emil du Bois-Reymond, at that time Rector. London, Rd. Bentley (1870), p. 31.
- 15. J.G. Crowther, "The Social Relations of Science." Macmillan (1940), p. 333.