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What If Stalin Had Computers? Well, He Would Still Need Human Action

When the novelist Richard Powers talks about virtual reality, he could just as easily be speaking about a certain strand of economic musing:

The reason why the public is seduced by virtual reality, why it has embraced this fantasy of the disembodied self, is the desire for the ahistorical, the disembodied will. There is something in us that loves the idea of placing ourselves into immortal space, where our wishes can be met without the drag and impediment of stuff.

Technological development since the Industrial Revolution has coevolved with a theology of liberation. In its individualistic forms, far separated from political aspirations, it manifests as radical life extension and the cure for cancer. In its communal forms, splashed with heaps of political economy and critical theory, it is revealed as a release from the bonds of business and the current “capitalist” forms.

Malcolm Harris retreads this technologically based liberation trope in a review of Paul Mason’s Postcapitalism: A Guide to Our Future. While there are some other passages in the review on pricing and consumption that deserve, the most intriguing part asks if communism might have come too soon. “What if,” both Harris and Mason wonder, “our computer processing power and behavioral data are developed enough now that central planning could outperform the market when it comes to the distribution of goods and services?”

While some might dismiss this conjecture out of hand merely because of its communist associations, there is a more nuanced version of this idea, explored by Adam Ozimek. Decentralized decision making, the hallmark of the market which was an idea first explored by Austrian economist FA Hayek, has been replaced in some domains by computers. As Ozimek explains, instead of decentralized landlords and property managers, price setting software now sets rent with far better results. The same is true with revenue management software employed by the airline and hotel industry. And of course, Uber’s prices are set by their algorithm.

He wonders,

And yet here we have companies finding that decentralized knowledge was suboptimal compared to a centralized and algorithmic mechanism. And indeed, it seems like we are seeing more and more cases of this as datasets become larger, computing power becomes greater, and econometric, statistical, and machine learning techniques advance. Are we in society seeing a diminished role for Hayek’s “man on the spot”?

But let’s not mince words here; there is a gulf between Ozimek and Harris. At no point does Ozimek deny the importance of prices. Prices convey information, which then allows for individual participants to act. Intriguingly, the Soviets knew the importance of prices as far back as 1957, since they relied on world prices to determine their artificial ones, as Adam Gurri noted. With better tools like algorithms, companies have learned how to sort out and persuade people to buy. They have learned how to better differentiate in price, but they have not upended the other side of the market. Supply has always meant very little in the absence of human action. Importantly then, communism has never been people centric. Indeed, they are the real supply siders, assuming that nothing is conveyed by the act of buying. Just as there is information imbued in prices, so too is there informational significance in consuming.

Harris tries to wrangle with this problem when he explains:

The possible socialized uses of technology is an exciting can of worms. Using large sets of behavior and population data, capitalist firms like Amazon and Google have developed predictive capacities that would make Soviet cyberneticians weep with joy. Capitalism says that the best use of this capacity is to sell people stuff, but parts of this process are so socially unproductive and unnecessary — we don’t just have clickbait sites, we have third-rate clickbait sites — that it can’t possibly be the case.

And yet, platform data exists because people act. They surf the web. They search for ideas, some of which are socially unproductive and unnecessary, like the ignorance of economics. They also look for products and then sometimes they buy those products. But these new predictive capacities cannot force people to act as Soviet cyberneticians would want. It is human action in both supply and demand that drives the market of goods, just like it drives the market of ideas. Sadly for the world of ideas, the old models don’t get designated for the rubbish bin.



Senior Research Fellow | Center for Growth and Opportunity | @WillRinehart

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Will Rinehart

Senior Research Fellow | Center for Growth and Opportunity | @WillRinehart