Algorithmic Central Planning: Between Efficiency and Freedom

Abstract

The paper hypothesizes that due to developments in computing and data analytics technologies, an economic order based on planning might soon be feasible, and potentially more efficient than that based on individual property, contract and market exchange. I explore the consequences of this claim for the normative theory. In the areas of economy promising the highest efficiency gains, or characterized by significant inequality in the distribution of social costs of markets’ operation (like healthcare, transport or agriculture), it might be worthwhile to consider planning as the new organizing paradigm. However, if the hypothesis is plausible, we might soon be facing a question: do we prefer a liberal economic order because it leads to higher overall efficiency, or because it promotes individual liberty and autonomy? As of today the answer is “both,” but this answer is contingent upon the current state of technology. I argue that as long as efficiency is the organizing principle of private law, we risk concluding that property, contract, and markets become obsolete once planning offers a higher degree of efficiency. This conclusion would come at the cost of individual liberty. Moreover, I suggest that the societal move towards a planned economy could occur tacitly, step-by-step, without an explicit decision by the community. This move could follow the incentive structure in the law and the overall ideology of late capitalism. Without issuing a judgment on the superiority of one paradigm over the other, I argue that for the transition to be legitimate, it should result from an explicit democratic process. I conclude with some suggestions on how to achieve it.

Keywords: Central Planning, Market, Law and Economics, Hayek, Freedom, Efficiency