Animal Spirits with Chinese Characteristics: Investment by M. DeWeaver PDF

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Extra info for Animal Spirits with Chinese Characteristics: Investment Booms and Busts in the World’s Emerging Economic Giant

Example text

Most of these support the idea that private sector outcomes are suboptimal. ” Decentralized decision making is an essential precondition for economic rationality. Central planning cannot be an antidote for investment manias and crashes. ” Using the “objective laws” revealed by Marx, Engels, and Lenin, they claimed the economy could be analyzed as precisely as a clock mechanism. Bukharin, whom Lenin called a “major theorist” and the “favorite of the whole Party,” even believed that Soviet social scientists would eventually be able to forecast events such as wars and economic crises.

In almost all models, however, cycles result from the limitations of private investors. These could easily be remedied by a planner with the advanced understanding of society that Marxism was supposed to provide. Unfortunately, the planner faces two significant limitations. First, it is not really possible for all the relations between men to be obvious to each. Knowledge available to different individuals is often difficult to aggregate. While the planning authority may know more than any one person, it can never know as much as all the members of society collectively.

It is commonly imagined that in a command economy the state’s orders are invariably obeyed without question—that the plan will be followed to the letter. Such claims rest on the assumption that political power can be entirely concentrated in a single individual. In practice this is impossible. No one person can control an entire country single-handedly. As a practical matter, power must always be shared among leaders at various levels. Their interests will invariably diverge. Through the years Communist Party rule has always featured what Mao Zedong referred to as “contradictions among the people”—struggles among producers for plan allocations of raw materials, struggles among localities for investment funds, struggles among Party factions with differing economic agendas.

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