On The One Single Lesson

Central economic planning cannot work. Period.

If there is One Single Lesson we can draw from the works of Ludwig von Mises and his student, the Nobel laureate Friedrich Hayek, then this is it.

Any economist who has absorbed this One Single Lesson will refuse to work for any planning body.

So who, or what, is Montek?

And who, or what, are these other bozos who have joined Montek at the Planning Commission?

Bozos, nothing else.

Read the news here.

Now, if this One Single Lesson is to figure in the curricula of India’s schools and colleges, secondary and higher education both must be taken out of State control. Today, the doctrines of central planning occupy centre stage in school and college curricula, with an entire paper on “Indian Economics” being devoted to this nonsense.

Which brings me to the other bit of news today, on noises emanating from the ministry of human resource destruction. The news says that the UGC and the AICTE will be abolished, and that our The State will:

“… create an independent National Council for Higher Education (NCHE), which will take over the academic, accreditation and financial functions of the [existing] regulators…”

Methinks all that will happen is that the bozos of the UGC and the AICTE will take over this new body, which can never be truly “independent.” Since this body will oversee academic curricula, the One Single Lesson mentioned earlier will never be taught to any Indian student.

Actually, this is the real legacy of Chacha Manmohan: the continued legitimacy of socialist economics and its institutions, like the Planning Commission. The most useful function Chacha performs for the Nehru-Gandhi dynasty is this: He keeps their overall ideology respectable. This is done by keeping the One Single Lesson out of the syllabus.

In a nutshell, the One Single Lesson goes as follows:

From Mises: Socialist planners can never perform “economic calculation” because they do not deal with market prices. It is interesting that Deepak Lal started off as an estimator of “shadow prices” in our Planning Commission. The experience told him that he was attempting the impossible – and it is this experience that made him a confirmed classical liberal. He is currently president of the Mont Pelerin Society.

From Hayek: Socialist planners can never centralise knowledge, which is “fragmented” in nature, with every actor in the social division of labour possessing his little bit. The market economy works for this precise reason: it allows society to use all the knowledge that each participant possesses. The central planner can never centralize this knowledge and replace The Market. He will always fail. He will fall victim of the “fatal conceit of reason.” It is interesting that Nehru’s chief planner, PC Mahalanobis, whose portrait hangs in the LSE, was a statistician. Read Hayek’s brief paper here.

This is about all the “knowledge” planners possess: statistics without prices. Thus, for example, the planner can say how much electricity was produced or how much coal was mined – without any indication of profit and loss. He can then advise on how much more coal should be mined, so that even more electricity can be produced – but once again without any idea of profit and loss.

This is the failed knowledge Montek & Co. rely on.

This is the failed knowledge that the ministry of human resource destruction peddles in order to kill the intellects of our bright youth.

So there, at least YOU know the One Single Lesson.