“Socialism Has a Future. Central Planning Doesn’t.” What a title for a Jacobin piece. For generations of socialists and anti-socialists alike, the claim would have sounded almost nonsensical. What is socialism if not politics taking command of the economy, deciding how resources are allocated and how society grows? Pull the planning out, and it is not obvious what remains. I still don’t know if the title makes sense. But it worked. It made me click a Jacobin link and read the whole thing.
As I read it, I saw something more interesting than just a semantic distinction between socialism and planning. NYU sociologist Vivek Chibber, in conversation with the democratic socialist Melissa Naschek, spends the better part of an hour teaching the left why central planning cannot work. Not why 20th-century communism was historically unlucky. He’s explaining why socialist central planning fails. That is a service, and a rarer one than it should be.
And the most interesting part is that his argument does not stop with the usual lesson about prices. Yes, without prices there is no calculation. Mises and Hayek were right that markets coordinate knowledge no planning board can possess. But Chibber points to something grittier: the incentives that make the information itself rotten.
A factory manager is ordered to produce cars without the steel, rubber, ball bearings, or labor needed to make them. So he lies. If he thinks he can produce 800 cars, he tells the planner 600. Missing an impossible target is punished, but beating a lower one may be rewarded. The planner, knowing he is being gamed, games him back. If the factory says 600, he orders 900.
At that point, Chibber says, “planning is not planning at all.” It becomes “a strategic game between two people about how much they can outthink the other.” Or, more bluntly: “It’s the opposite of planning. It’s a kind of war.”
The problem is not only that planners lack information. It is that the system manufactures falsehood. Targets become games, inputs are hoarded, local deals are cut. The economy becomes a vast theater of defensive falsification. Before central planning runs into the elegance of economic calculation, it runs into the dirt and comedy of bureaucracy.
This is where Chibber turns to the problem Hungarian economist János Kornai called the soft budget constraint. In a market economy, the response to economic nonsense is failure. But under central planning, failure cannot be punished because failure is politically embarrassing and socially disruptive. Often the planner is himself partly to blame for the failure. He promised the inputs and did not deliver them. He blames the supplier, who blames the transportation ministry, who blames the political authority that designed the plan. As Chibber puts it:
In a planned system, when the needed inputs, raw materials that every enterprise needs are not forthcoming, planners cannot be shielded from the responsibility of that enterprise or workplace not delivering and coming through. That means planners are in a difficult situation where they can’t come and say, “I’m going to let you fail.” Because now in that region, every worker, and every worker in connected enterprises who will suffer from yours being shut down is going to turn around and get really angry at that planner, at the planning bodies, and so on. You could have a constant civil war going on.
So the firm is propped up, handed more money and more resources, and told, “Look, just do better next time.” Resources keep flowing to enterprises that should release them. Managers do not need to innovate because survival is politically guaranteed. The system settles into a pact of mediocrity: everyone protects himself, everyone asks for more, and no one can afford the disruption of real change. “The aggregate outcome of all this is stagnation.”
I like that empirical storytelling because many young students who learn that central planning fails stop at the price system. But Chibber and Kornai show that the machine breaks down before it ever reaches that level. It breaks down on human psychology and incentives, on the game theory of people protecting themselves. That is closer to the public choice account of socialism’s failure.
Chibber is not trying to rescue central planning by denying its pathologies. He is trying to rescue socialism after absorbing many of the best arguments against central planning. He accepts that prices and incentives matter. He accepts that socialist failure cannot be wished away historically. Unfortunately, Chibber diagnoses the disease and then decides to prescribe a milder strain of it.
His plan is market socialism. He wants to keep prices and competition, but remove capitalists from the commanding heights. Public banks would allocate investment according to political priorities. The public sector would expand to absorb displaced workers. Firms would have autonomy, but capital would be guided by the state.
That is not central planning in the old Soviet sense. But it is still politics ordering economics at the decisive point. The state no longer tells the steel plant exactly how much steel to make. It tells the credit system where investment ought to flow. And once investment is allocated according to political criteria, the old Kornai question returns in a new form: When the socially favored enterprise fails, will the state really let it fail?
We have seen this film. In 2008, the soft budget constraint arrived inside capitalism. Firms that could not be permitted to fail, because their failure would radiate outward, were rescued instead. Chibber’s remedy does not dissolve that problem as much as it installs it one level higher. It builds on purpose what too-big-to-fail built by accident: enterprises the state cannot afford to let collapse.
The public sector carries the same gene. I worked in government, and the pathologies Chibber pins on Soviet managers are not Soviet at all. They are bureaucratic. No one is allowed to fail. Everyone wants a larger budget, more staff, a wider mandate. That is simply what bureaucracies do, and a large public sector does it at scale. Kornai’s account of the socialist firm is, in the end, the public choice account of the bureau. It is Niskanen’s budget-maximizer in a fur hat.
At the end of the day, the deeper question we have to answer as societies is this: Do you let the logic of economics govern production, or the logic of politics? Chibber, having shown what happens when politics commands production, still wants politics to command capital. He keeps the state above the economy. He fails to see that the economic order, as James Buchanan said, should be defined in the process of its emergence.
Chibber’s conclusion should not be dismissed cheaply. He is not making the cartoon case for central planning. He understands incentives and the calculation problem. He understands Kornai. He is sophisticated enough to see why Gosplan failed, and to make peace with prices, competition, and firm autonomy.
That makes his argument more interesting, and more demanding. And this is why our side has to be better than slogans. It is not enough to say, “markets work.” Chibber knows markets work. That is why he wants to keep so many of their mechanisms. This is a dispute over how societies learn and whether failure is allowed to teach us. It is about who gets to allocate capital. Whether economic order emerges from experimentation or is subordinated to political purpose.
Too much economic education today has lost the habit of asking those questions. It trains people to measure small effects with increasing technical skill, while leaving them strangely unprepared for the big questions that animated Smith, Mises, Hayek, Buchanan, and Kornai. So when a serious socialist arrives with a serious systemic argument, many pro-market Americans have little more than instinct, slogan, or nostalgia.
That is exactly the gap FEE has to fill.
As I write this, FEE is in Guatemala City running the first Americas Economics Olympiad. One hundred of the brightest high school students from across the United States and Latin America are in a single room being asked, in English, exactly the kind of systemic questions our profession too often trains people to avoid. What are prices? Where does economic knowledge come from? Who should allocate capital, and why? What happens when failure is politically impossible? They are answering these questions in front of judges who are themselves economists. No AI shortcuts.
That is how you build the muscle for big economics. You start early. You ask sixteen-year-olds to stand before economists and defend serious answers to serious questions about how societies learn, discover, and grow. The Americas Economics Olympiad is still small as a program. The bet behind it is not.
