Olga Bourlin writes
> My dear husband and I were recently talking, and something he said really
> caught my attention. He speculated that if past failures of statist
> economies can often be attributed to mismanagement of faulty data, then with
> the advent of advances such as artificial intelligence, comprehensive
> economic data on both macro- and micro- levels, as well as more refined
> modeling and forecasting techniques, there is no reason why centrally
> controlled economies may not turn out to be the more effective system,
> after all, in the future.
It's still very unlikely that centrally managed economies would *ever*
work as well as decentralized ones do. I could never explain this as
well as Michael Friedman in "The Machinery of Freedom", nor Thomas Sowell
in "Knowledge and Decisions", nor of course, anything that Hayek wrote.
But thanks for the opportunity for me to describe in my own way how I
think one revealing instance works.
There is no better or more familiar daily example of free-market
cut-throat competition than supermarkets. They want your business
so badly that they stop at almost nothing except physically man-handling
you into the stores from the parking lot. They lower prices whenever
possible, and use ingenious jingles, advertisements, attractive
floor plans, proper lighting, and every other trick that the ingenuity
of humankind has come up with so far to get you to choose to patronize
their particular chain.
Here is a funny anecdote. A certain Russian spy had just defected to
the West and was being interrogated in Washington D.C., but no one
was certain that he wasn't a double agent, and so the level of games
that he and his captors were playing was high. At one point he needed
to be transported to another city, and so rode by car along with his
guards to the other locale. On the way, they decided to stop and pick
up something at a supermarket, perhaps some snacks. The agent was
led inside a typical supermarket, with goods piled high on all sides,
and everything done in as an attractive manner as could be thought of
after fifty years of cutthroat survival evolution.
The Russian agent didn't believe that this could possibly be a typical
grocery store in America, and was even more convinced that his captors
were really going out of their way to play mind games with him. Nothing
that they could say would convince him that the unbelievably elaborate
displays of food and other stocks were not specially arranged just for
Well, so what is the actual guiding principle behind the evolution of
the supermarket in the last fifty years? My idea is that to a great
extent it's the doing of the store managers (or in the case of large
chains, perhaps some of the company psychologists). But typically in
an American store---where there is freedom, and things have not yet
become too regulated---store managers lay awake at nights thinking
about how they can improve their facility, and how they can beat
the Safeway down the street. Month in and month out, they study
their customers---their body language, their shopping patterns, and
most of all, their buying habits. This immense concentration of
knowledge takes place in the minds of a few people who have an
enormous incentive to improve the quality of the stores. The
immensity of this knowledge at present *cannot* be centralized.
(For just one reason why, the customers in Appalachia don't
resemble the customers in Chicago at all, and even the customers
in Chicago's suburbs may not resemble each other if you travel
in some direction a couple of miles.)
Of course, this is just one tiny aspect of capitalism, but I think
it is indicative of the power of freedom---because all of this fails
immediately if the customers aren't free to shop where they want,
or select any kinds of services they want (e.g., medicine). Only
the free market, at present, has via Smith's invisible hand, the
true intelligence to do what is needed. Stuffy bureaucrats hundreds
of miles away simply cannot compete.
But your point is, of course, about the future. What about the case
when AIs become so vast and so omniscient that they know all about
the clientele at Joe's liquor store, and can figure out (just like
Joe does) what will please his customers? Well, I submit that by
that time, they'll be so smart that Joe will be completely unneeded.
Moreover, his customers will be unneeded too.
This archive was generated by hypermail 2b30 : Fri Oct 12 2001 - 14:40:11 MDT