Planning Without Prices1948

This paper is concerned with responding to a series of lectures made by Oliver Franks, concerning the topic of central planning in Great Britain. This may sound like an improbable circumstance, but this was right by the end of World War II, a period where planning was required to finance the war and force the allocation of resources towards wartime objectives. The main objective of this essay is to give a position on how to do macroeconomic planning in a liberal society.

At this time Britain faced a critical BoP problem in which there was a heavy reliance of imports for raw materials and food commodities, and it was theorized that the state might have to plan centrally both imports (very scarce foreign resources should be assigned to a social optimum) and exports (ensure there is enough production overseas to finance imports). Needs will need to be foreseen, control be taken, and measures of quantities will be crucial. Two controversies emerged: the first concerned with the extent of such a mode of governance, and the second with the degree of centralization of such a plan.

The lectures by Franks (who are W glazed before the criticism) contend that such large-scale structural economic changes require a central coordinated view of the operation. Meade responds to what he sees as a deficiency in the argument, the lack of emphasis in the pricing system. He does mention it, but this is not sufficient for Meade, who reminds us that arranged in a certain manner, relative prices of final products and relative costs of factors of production are sufficiently persuasive to have it that wrong products produced through wrong means are never produced. Meade asks whether the pricing instrument should be used to carry out the plan.

Meade shows also that this question cannot be ignored. Firstly, addressing the claim that quantitative planning of imports and exports will be necessary, it is shown the conditions in which the pricing system makes the planning unnecessary. However, if planning is required to set some sort of tempo, then the pricing system (if powerful enough) may transform relations between industry and government. Thus, the pricing question cannot be ignored under the grounds that we should first concern ourselves with political and administrative matters, since the pricing system still is involved, as Meade shows. Unless one believes the pricing system will not contribute, a position with which Meade disagrees.

Franks then argues that the plan must be communicated to the public. Meade argues that the pricing system is a language of communication. A form of planning might involve government interventions to induce changes in economic variables, and even though communication with the public is desirable, this shows that it was not necessary. The argument is then about planning in peacetime to continue a unity of purpose. Meade contends that this is only needed in war, as he seems to argue for a liberal ordering of social activity and purpose. At war this is dropped, all that matters is defeating the enemy. Again, if there is a social objective, the pricing mechanism can be used to induce firms to behave in a certain way that generates the desired outcomes. This gives maximum freedom to individuals.

Both Franks and Meade wish for planning to not be authoritarian. Liberal ideology. Here the assumption is made that it has to be that there will be agents that will refuse to agree. Rigging the market is better for Meade than forcing anyone to do anything. He says money is one of the greatest inventions of mankind. Money should be for Meade the main instrument to make something happen, to carry out the plan. He is not some Hayekian free-market believer, as he lists out conditions that must be fulfilled for the pricing system to have the desired effect. This is the main weakness, I believe, and where he can be most easily criticized. It would seem he believes more in the possibility of planning failing than pricing, even though both can do so.An economic reason as to prefer pricing is given partly in relation to the failings of planning, and partly in terms of the benefits of pricing in itself. The reason is thus ideological: it is the one that favors liberty. This liberty however is designed in a way that disguises the social coercion implied in the market economy and the conspicuous consumption of differentiated commodities and the strength of the symbolic order.