Economic Planning - Criticisms

Criticisms

The most notable critique of economic planning came from Austrian economists Friedrich Hayek and Ludwig von Mises. Hayek argued that central planners could not possibly accrue the necessary information to formulate an effective plan for production because they are not exposed to the rapid changes in the particular time and place that take place in an economy, and are unfamiliar with these circumstances. The process of transmitting all the necessary information to planners is therefore inefficient.

Central economic planning has also been criticized by proponents of de-centralized economic planning. For example, Leon Trotsky believed that central planners, regardless of their intellectual capacity, operated without the input and participation of the millions of people who participate in the economy, and would therefore be unable to respond to local conditions quickly enough to effectively coordinate all economic activity. Proponents of technocratic planning have responded by saying democratic planning would be inefficient due to the time it takes to deliberate and vote on action in a direct democratic setting. Democratic planning would also be ineffective because various economic decisions require specialized knowledge, which the majority of voters lack.