Could Information Technology Enable Efficient Central Economic Planning?
18 Pages Posted: 17 Nov 2014
Date Written: October 14, 2014
Information technology has played an ever increasing role automating, optimizing and managing modern economic activities. These developments call into question what was once an obvious truth — that centrally planned economies are necessarily very inefficient and given to suboptimal performance due to their inherent information problems. This article examines the feasibility of using modern information technology to enable a centrally planned economy by evaluating the arguments made against central planning by Nobel Prize winning economist Friedrich Hayek in light of recent developments in information technology. Hayek identified two information problems that can preclude the development of an efficient centrally planned economic system: the problem of local information such as knowledge about individual preferences and the problem of global information including an accurate knowledge of relative scarcities. This article argues that the problem of local information has largely been offset by the growth of personal information as a commodity and that the emergence of the Internet of Things has the promise of allowing an accurate knowledge of global relative scarcities. The benefits of an IT-enabled centrally planned economy include improved efficiency and the ability to optimize economic activities around goals other than just profit maximization, while the limitations would include an elevated potential for corruption and abuse due to the centralization of economic decision making.
Keywords: Information Technology, Information Systems, Central Planning, Internet of Things, Big Data, Supply Chain Management, Command Economy
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