The latest episode of 99% Invisible (a podcast that you definitely ought to be subscribed to) describes a project carried out by the Chilean government under Allende to manage the state’s economy using the tools of control theory. The episode is a little light on the details of what they did in their control room; it is, after all, a podcast about design, and less about control theory.
It did, however, light up a bunch of neurons in my head related to longstanding interests of mine. The big, vague picture I have is that at one point people believed economies were machines which could be controlled by appropriately skilled engineers. This connects to a few threads, all of which I know in vague outline:
- The early Technocracy movement.
- Cybernetics, as pioneered by Norbert Wiener and Warren McCulloch (he of McCulloch-Pitts neuron fame).
- Control theory, specifically as applied to economies — and as I understand it, specifically pursued at the RAND Corporation.
- Macroeconomic work from around the World War II era, including input-output matrices of the sort that won Leontief his Nobel Prize; and even Kuznets’ Nobel for measurement of GDP.
- The socialist calculation problem: how to replace a decentralized economy with disinterested bureaucrats who put data into their input-output matrices and output the appropriate level of every price in the economy. Specifically the debate between Hayek and Lange, which conventional wisdom has decided in favor of Hayek (specifically after he wrote The Use Of Knowledge In Society). I’ve not read the full debate, except as filtered through Stiglitz; I’d like to read the whole thing.
- Pursuing formal analogies of economies as distributed computers, with all the formal consequences that would entail (e.g., deadlocks and race conditions).
- Keynesian demand-side stimulation of the economy during recessions.
- The later disillusion with the idea of controlling economies — including Milton Friedman’s famous observation that the economy responds to monetary interventions with “long and variable lags”
The big arc I have (again vaguely) drawn out in my head runs from a time when people seemed optimistic that an economy was something which humans created and humans could control, to a time when people seem to believe that economies are natural systems that we couldn’t possibly control even if we wanted to.
Does anyone know of a book that ties these strands together? Or do I need to write it myself?