Objective: To...
- ...appreciate our harmonious American economic system by understanding the failures of a centrally planned economy (e.g., communism, socialism, totalitarianism)
- ...see how centrally planned economies suffer from an incentive problem, where people don't reap the rewards of their work, due to forced labor and the absence of property.
- ...and an information problem, where the absence of market prices makes it difficult to decide what to produce, how to produce it, and who should get it.
- ...and a corruption problem. By definition, a centrally planned economy is a statist economy, where one or a few people have complete and total control over everyone else. That rarely works out nicely.
- ...look back at historical Russia for concrete examples of the incentive, information, and corruption problems.
- ...reconsider Plato's argument for a Philosopher-King, showing why his metaphor for a ship is lacking.
A previous article discussed how captured U.S. soldiers in World War II were placed in POW camps where they received food parcels from the Red Cross containing a variety of foods; including tinned milk, jam, butter, biscuits, bully, chocolate, sugar, and cigarettes. Each parcel was the same, so initially each prisoner had the same food allotment. Not all soldiers had the same preferences for food, though, and as they traded their food items with each other a market emerged. Cigarettes were used as money, as prisoners sold the items they liked the least and used the cigareetes to buy the items they liked the most. Through this market, each soldier was able to negotiate a trade giving him a collection of food items which he valued more than the original food parcel. The market made everyone better off, even though their total allotment of food had not changed.
This market was used as a metaphor for all markets, and it will be used in this article to demonstrate why the centrally planned economies like the Soviet Union, Cuba, and [formerly] China were such disasters. Although it was previously shown why markets work well it did not discuss why central planning does not perform well. That is the purpose of the present article.
The term "central planning" will generally be used instead of words like communism or socialism, because it better portrays the source of problems in communist countries. A Central Planner is a person or community of people who make the most important decisions about where people will work, what they produce and how, and who gets the output from this work. You may have heard Karl Marx's famous phrase, "From each according to his ability, to each according to his needs!" Someone must be present with an iron fist to confiscate from the most able and give to the needy—someone must also decide who are considered "needy"—and that person is the central planner. Also, if you are to take from the most able of worker she will have little incentive to work, so the central planner might have to force people to work.
(A.1) Plan like an Egyptian
The first centrally planned economy was probably ancient Egypt under the Ptolemy Pharaohs. Egypt was under Persian control until Alexander the Great made his heroic sweep of military victories and added Egypt, along with many other nations, to his domain. When Alexander died (323 B.C.) his Generals split his empire among themselves, with Ptolemy taking Egypt, and was eventually declared a Pharaoh by the priests (Ptolemy was played by Anthony Hopkins in the movie Alexander). The Ptolemies ruled until 30 B.C., with the last Ptolemy being the most famous: Cleopatra.
The Ptolemies didn't just govern Egypt, they tightly controlled every part of the economy. The Egyptian peasants were micromanaged so intensely and forced to farm so much land owned by the Pharaoh that they were little different from slaves. The Pharaoh's administration maintained a monopoly on grain, dictated exactly how the Egyptian peasants would farm and monitored them closely, owned and/or controlled many of the farm inputs the peasants would use (e.g., tools, seed), constructed and maintained the irrigation infrastructure, and much more. Roughly half of all the arable land was owned by the Pharaoh, which meant he personally received the wealth from that land. The majority of Egypt—the peasant farmers—had to live off only 9% of the land that could produce food. The peasants were forced to work the other 91% of land, which was owned by the Pharaoh, Greek colonists, and Egyptian priests.(M1)
The justification for such micromanagement was simple: to control and confiscate. The tighter the population was controlled the easier it was to confiscate their wealth. To take wealth, one must first know the wealth was created, and that is why the entire economy was monitored and why all inputs to production came from the government. Roughly two thousand years later communists and socialists would also attempt a centrally planned economy. Vladimir Lenin took Russian peasants and forced them onto collective farms which closely mimicked the ancient Egyptian farms. The government owned the farm inputs. The government instructed them how to farm. The government took most of the farm output.
(A.2) Collective farms in communist Russia
It is often assumed that collective farms were created to take advantage of economies-of-scale, whereby the larger a farm becomes the smaller its average cost of production—becoming efficient by getting big. While economies-of-scale is a real concept, and is the major reason factories today are so huge, that is not why Lenin established collective farms. He did so because he found it frustrating attempting to confiscate grain from the small peasant farmer. Knowing the communists were coming, the peasants hid their grain. Knowing they hid their grain, the communists had to kill and torture peasants until they revealed the grain's location. This was a time-consuming ordeal. Confiscation is much more efficient, Lenin thought, if you force the peasants onto a state-owned farm, whereby they are employees of the government and a loyal communist closely monitors everything. Now confiscation is easy, as the peasants never "own" the grain to begin with.(F1)
(A.3) Health care and the Cheesecake Factory
There is a surprising corollary of collective farms to health care in the U.S. In 2012 Atul Gawande wrote an article in The New Yorker where he described the economies-of-scale exploited by The Cheesecake Factory restuarants, and using it as an example of where U.S. health care should be heading. He noted how headquarters of The Cheesecake Factory restaurants would devote considerable time into developing improve menus and service, identifying improvements which could be adopted by all the restaurant locations. The expenses incurred in this research could be spread over all the restaurants, and while the expenses overall might be large, on a per restaurant basis they are reasonable. This is something restaurants with a single location cannot afford, and is the major reason chains/franchises dominate the restaurant industry.
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Big chains thrive because they provide goods and services of greater variety, better quality, and lower cost than would otherwise be available. Size is the key. It gives them buying power, lets them centralize common functions, and allows them to adopt and diffuse innovations faster than they could if they were a bunch of small, independent operations.
—Gawande, Atul. August 13 & 20, 2012. “Big Med.” The New Yorker.
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Health care should follow their lead, Gawande suggested. By having one entity research ways of reducing costs without sacrificing quality, those superior methods could then be reproduced throughout the country. There is no reason why hospitals should not cooperate to lower costs and improve care. In fact, he sees is as the best way to keep health care expenditures from rising even higher than they already have. It is for these reasons Gawande is a big supporter of what we now know as Obamacare.
Gawande is wrong to support Obamacare in hopes of acquiring economies-of-scale, and his major error is confusing the differences between restaurants and government; namely, that the latter is a coercive institution while the former is not. The Cheesecake Factory is a business which voluntary sought to become big and capture economies-of-scale. Knowing they could please customers better by becoming bigger, the restaurant was able to attract the voluntary contributions of investors, believing economies-of-scale would allow them to pay back their investors and earn more money themselves.
It makes perfect sense for a private hospital to voluntarily become larger in order to lower costs and provide a better service, but there is nothing voluntary about Obamacare. Instead, it seeks to capture all hospitals under its power, and in reality, the motivation is not to capture economies-of-scale, but to establish power and confiscate wealth from doctors and nurses. The federal government established Obamacare for the same reason Vladimir Lenin established collective farms—to make controlling others easier. (Note: I voted for Obama, so please don't interpret this as a partisan piece.)
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No doubt health care could learn a lot about efficiency from a lot of industries, but to understand the core problem with assembly-line medicine, recall that ObamaCare actively promotes medical corporatism. The reason isn't to encourage business efficiency but for political control. Liberals believe in health-care consolidation because fewer giant corporations are easier for Mr. Orszag's central committee to control, and more amenable to its orders.
—Anonymous Editorial. August 27, 2012. "Cheesecake Factory Machine." The Wall Street Journal. A14.
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You see, the main mechanism by which Obamacare seeks to lower health care expenditures is not by reducing costs through economies-of-scale but through price controls—by making people and doctors pay less. Through programs for veterans, Medicare, and Medicaid, the federal government has a list of prices it is willing to pay for certain procedures like doctors visits and minor surgeries. Over the years it has lowered these prices, often to the point that doctors will no longer accept Medicare or Medicaid customers. However much power it currently has, it cannot enact price controls for every medical service—but it wishes to, and will be able to if it can place all doctors and hospitals under its control.
(B.1) A central planner in the POW camp
How would the POW camp differ if a central planner were used to dole food rations instead of markets? One person would need to be given dictatorial power over all the food, and must make the decision of who gets which food item, and how much. The central planner might be less imposing. He might allow people to trade but sets limits on how much they can trade, what they can trade, or what prices can be set. If prisoner Corbett likes crackers more then tinned milk, he can no longer trade his milk for crackers, but is at the mercy of the central planner. I will argue that the central planner will make the prisoners less happy, compared to markets.
As the central planner receives all the food parcels and deliberates on how to allocate them, it will encounter three obstacles: an incentive problem, an information problem, and a corruption problem.
- Central planning has an incentive problem. Using markets, both John and Sam put effort into striking a favorable trade because they were the beneficiary of those trades. That is, Jim will work hard to trade food he dislikes for food he likes, because he reaps the rewards of his effort. With central planning, John and Sam are forced to produce things for each other, due to both forced labor and the inability of either to own private property they can buy and sell. People simply do not work hard when they are forced to work hard on others' behalf, with little compensation. Don't forget about the leader...the central planner is a person or a committee—a dictator! Will a dictator generally work hard to make his people happy, or make himself happy? We both know the answer to that question.
- Central planning has an information problem. Markets work well because market prices send signals regarding who the supply and demand of each food type. If Sam is willing to pay a higher price for milk than John, then John sees an opportunity to make both of them happier by buying milk and reselling it to John. The milk goes to the person who values it most. In a centrally planned economy there are no market signals, and thus no way to determine where a good is most needed, the abundance or scarcity of an item, or whether a manufactured good is valued higher than the inputs used to produce it. It is unreasonable to expect a dictator to know the personal food preferences of John, Sam, and all the other POW prisoners, and no matter how much money the central planner spends trying to learn those preferences, a dictator's ability to collect and process information very limited. Figure 1 shows a command-and-control system built in Chili to collect information about the entire economy and command the economy like a general commands an army at wartime.(W2) What they didn't understand what that there are some kinds of information that cannot be collected by a central planner, information which can only be revealed in markets. Their ignorance is revealed in this room, which could really only change slides in a presentation! Communist China had a similar experience in the 1980s, where they established a large research center with supercomputers to process information and calculate the prices the government should set. It didn't work. The prices the government set distorted the economy, and made it difficult for the economy to provide prosperity. The prices didn't reflect the scarcity of certain resources or the value people placed on certain goods. It produced too much of things people didn't want and too little of things people did want. Eventually the government gave up, and today markets set most prices in China.(B1)
- Central planning has a corruption problem. Thomas Jefferson once said, "A government big enough to give you everything you want is strong enough to take everything you have," and for those reasons argued for a system of government with serious checks on politicians' power. It is unreasonable to expect a powerful government to not become a tyrant, or for a powerful government to not eventually place a tyrant in charge. A central planner with the power to control an economy has the power to control people, and when we think of governments controlling us we rarely have pleasant thoughts (we think of Orwell's 1984). Ask John and Sam if they prefer a market for trading food or a dictator. The answer is obvious.
Figure 1—The Central Planning Authority in Chili(W2) Chili both.jpg)
Markets create value. They take resources and transform them into more valuable goods. They do so because people can gain financially by creating things that other people value. Producers sell those things of value and use the proceeds for their own pleasure. Moreover, the people who will produce the best goods—the people whom consumers choose to buy from—are obviously those who have the information necessary to produce the good, one who can see prices and know whether the good they produce is worth more than the costs of producing it.
(B.2) Just look at communist Russia!
If the failures of central planning are not obvious to you, and if the POW camp metaphor doesn't help, let's look back at historical Russia, where beginning in the 1920's the communists sought to centrally plan the entire economy. They sought to run the economy in the same way their military operated. Russian citizens (especially those not belonging to the Bolshevik party) were basically enslaved, and were forced to work in factories for little and sometimes no pay. Just as its civil war was ending, the, "soldiers were being turned into workers, and workers were being turned into soldiers."(F1) Deserters of the factory were treated like deserters in war, and were sometimes so numerous that more workers would be sent to look for deserters than remained working in the factory. Factory workers would often spend their time not making what the factory was supposed to produce, but making tools and crafts which they could barter for food. The managers of the factories allowed this, for they needed more food also. Communist Russia had an incentive problem.
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The whole country would be one armed camp. All this was nothing but a bureaucratic dream. The peasant labour teams, like the labour armies, proved fantastically inefficient. It took fifty conscripts one whole day, on average, to cut down and chip up a single tree. Roads built by labour teams were so uneven that, in the words of one observer, they 'looked like frozen ocean waves' and to travel on them was 'worse than an amusement ride.'
—Figes, Orlando. 1996. A People's Tragedy: The Russian Revolution (1891-1924). Penguin Books: NY, NY. Page 725.
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The Bolsheviks sought to make as many of the economic decisions it could, included what each factory made, the inputs the factory was assigned, the wages the factory paid, and where the goods were shipped. It would then be decided—once again, by the Bolsheviks—who would receive the factory's production, and the price they would pay. This meant that factories could not compare the costs it paid for inputs with the price of the factory outputs to ensure the good they produced was worth more than the inputs they used. We know this because sometimes it wasn't. Whereas American automobile producers were making profits (proof the cars were worth more than their inputs), the cars exiting the assembly line in Russia would sometimes be stripped and sold as scrap metal, for the cars were so poorly made the scrap metal was worth more!(W1)
These automobile factories did not produce wealth, they destroyed wealth, and it is impossible to know if your activities increase wealth without market prices.
The formal centrally planned economy was in such shambles a large black market arose to meet the needs the formal economy could not. It was only in these black markets that prices could be seen, and that is how Russians knew about the inefficiencies of the formal economy. The managers of the factories did not know their cars were worth less than the inputs they were made from, because they did not operate on the profit system where they saw the prices the cars were sold and measured the prices of the inputs. The owners didn't know about the high black market price for scrap metal, and even if they did, the militarization of the economy prohibited them from saying, "The metal comprising the car is worth more than the car...let's either make better cars or stop making cars!" Factory owners cared only about production levels, because they were told to produce X amount of cars by party officials, and little more.
Those in the black market knew the high price of scrap metal, so using bribes they likely acquired some of these newly made cars, sold the metal on the black market, and did well for themselves. Because the black market could observe market prices it knew when an input had more value in the production of this instead of that, and when a good was valued higher over here than over there. The formal centrally planned economy used the "wisdom" of the party officials, not market prices, to direct economic activity, and consequently they were a blind man who was blind only because he refused to open his eyes. Communist Russia definitely had an information problem.
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In almost every field where rationing was introduced, from food and tobacco to clothing, fuel, and books, more time and energy were wasted distributing the product than that product was actually worth.
—Figes, Orlando. 1996. A People's Tragedy: The Russian Revolution (1891-1924). Penguin Books: NY, NY. Page 727.
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The absurdity of the communist economy reached its height when the government tried to print money. They did print lots of money, but the printing itself costs money, and the gold they used to import dyes and paper (foreigners wouldn't accept Russian money, knowing it was worthless) cost more than the value of the roubles which were printed. Yes, you heard right, the amount of money spent to print money was worth more than the money that was printed!
It wasn't just the factories who had problems. Consumers sufferred also. A diary kept by a Petrograd professors gives us an intimate look at life inside a communist economy.
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Today I got up at 9 a.am. There is no piont getting up before since it is dark and the house lights are not working. There is a shortage of fuel...I drank some coffee (made from oats) without milk or sugar, of course, and ate a piece of bread from a loaf bought two weeks ago for 1,500 roubles. There was even a little butter and in this respect I am better off than most...
—Figes, Orlando. 1996. A People's Tragedy: The Russian Revolution (1891-1924). Penguin Books: NY, NY. Page 727. From the diary of Petrograd professor Vasili Vodovozov.
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Things did improve in Russia, partly because the communists were forced to allow some room for markets. An example is the market for labor. The government learned it could not set whatever prices it wanted for labor. Surrendering some control, they allowed factories to pay higher wages to better skilled labor, thereby giving workers incentives to acquire skills and help a factory run more efficiently.(H2) The centrally planned economy had no hope of catching up to the U.S. in terms of living standards, though. They couldn't even make televisions that didn't explode, as exploding televisions were the second-biggest cause of Moscow fires in the 1980s.(H1)
Finally, there is no denying that communist Russia sufferred from a corruption problem. The best goods were devoted to leaders of the Bolshevik party, and these leaders were allowed to take bribes and reserve some factory production for themselves to sell on the black market. Although the communists ostensibly overthrew the Tsar for the good of the people and appeared to pursue equality for all, the truth is that they replace a Tsar and his nobles with Vladimir Lenin and his Bolsheviks. The palaces and manors that were once home to nobility were now home to communists. Once again, the workers and the peasants starved while the leaders dined and attended the opera with their courtesans, then left for their palaces where they were served by the same people they promised to save.
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...power was breeding corruption...The Bolsheviks...were more like a ruling class, similar in many ways to the nobility, with which Lenin himself often compared them...party members needed higher salaries and special rations, subsidized housing in apartments and hotels, access to exclusive shops and hospitals, private dachas, chauffeured cars, first-class railway travel and holidays abroad, not to mention countless other privileges once reserved for the tsarist elite.
—Figes, Orlando. 1996. A People's Tragedy: The Russian Revolution (1891-1924). Penguin Books: NY, NY. Pages 682-683.
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Video 1—Scene About Corrupt Communist Leaders from movie We The Living (1942)
(must use Internet Explorer)
The reason for America's great wealth, and Russia's great poverty, is surprisingly simple and obvious. A nation's wealth is determined by the quantity and quality of goods and services it produces. For people to produce wealth, it must be in their interest to do so, which means they should receive a considerable portion of the wealth they create. This necessitates the existance of property and low levels of government corruption. For people to produce wealth, they must know what it costs to produce a good and what other people will pay, otherwise it is impossible to know whether the production of a good actually results in an increase in wealth. To know these things requires market prices.
The failures of a centrally planned economy are thus obvious: the suffer incentive, information, and corruption problems. Every economy has these problems to some extent, but in America they are tempered. In historical Russia and present day Cuba, they are the norm.
(B.3) Just look at Venezuela after Chavez!
Although Hugo Chavez rose through democratic channels to lead Venezuela, since then he has diverted his country towards the centrally planned economy and only concerned himself with retaining his power. Much of the country has been nationalized, where private businesses are confiscated by the government and run by the government. It is a communist takeover, one sectory at a time, and agriculture has especially come under government supervision.
This has resulted in only scarcity. Economist Milton Friedman once remarked, "Put the federal government in charge of the Sahara desert, and in five years there'd be a sand shortage. Because no one has much of an incentive to produce food for others, as they can't make money from doing so, little food is produced. The graph below shows how crop production has changed since Hugo's nationalization of agriculture, and one thing is clear: Friedman was right.
Figure 2—The Wealth Destruction of Victor Hugo's Central Planning(M2)
 chavez.jpg)
(C.1) Plato's Philosopher-King
Plato hated democracy. It was the majority of the mob that killed his beloved teacher, Socrates. No, such a brutish and atavistic people could not rule themselves. They were neither wise nor compassionate enough to rule by majority-rule. What ancient Greece needed, Plato argued, was a dictator— a Philosopher-King, to be precise.
Figure 3—Greek Philosopher, Plato (424-348 BC)
 Plato.jpg)
To demonstrate the desirability of a Philosopher-King, Plato used the metaphor of a ship, and asked who should pilot the ship: the captain, or a majority-vote of everyone aboard the ship? Certainly the untrained sailors would do a horrible job of piloting the ship, for they have no navigating skills or experience! At the same time, these sailors would never ask the true navigator to command the ship instead, for they do not have the capacity or wisdom to understand the true navigator, and will dismiss him.
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[How a ship is piloted under democracy or rule by the masses:]
Socrates: Imagine then a fleet or a ship in which there is a captain who is taller and stronger than any of the crew, but he is a little deaf and has a similar infirmity in sight, and his knowledge of navigation is not much better. The sailors are quarrelling with one another about the steering — everyone is of opinion that he has a right to steer, though he has never learned the art of navigation and cannot tell who taught him or when he learned, and will further assert that it cannot be taught, and they are ready to cut in pieces anyone who says the contrary. They throng about the captain, begging and praying him to commit the helm to them; and if at any time they do not prevail, but others are preferred to them, they kill the others or throw them overboard, and having first chained up the noble captain's senses with drink or some narcotic drug, they mutiny and take possession of the ship and make free with the stores; thus, eating and drinking, they proceed on their voyage in such manner as might be expected of them. Him who is their partisan and cleverly aids them in their plot for getting the ship out of the captain's hands into their own whether by force or persuasion, they compliment with the name of sailor, pilot, able seaman, and abuse the other sort of man, whom they call a good-for-nothing;…
[How the ship would be piloted by a trained navigator, and why the navigator will not be chosen by the masses:]
…but that the true pilot must pay attention to the year and seasons and sky and stars and winds, and whatever else belongs to his art, if he intends to be really qualified for the command of a ship, and that he must and will be the steerer, whether other people like or not — the possibility of this union of authority with the steerer's art has never seriously entered into their thoughts or been made part of their calling. Now in vessels which are in a state of mutiny and by sailors who are mutineers, how will the true pilot be regarded? Will he not be called by them a prater, a star-gazer, a good-for-nothing?
Adeimantus: Of course, said Adeimantus.
Socrates: Then you will hardly need, I said, to hear the interpretation of the figure, which describes the true philosopher in his relation to the State; for you understand already.
Adeimantus: Certainly.
Socrates: Then suppose you now take this parable to the gentleman who is surprised at finding that philosophers have no honor in their cities; explain it to him and try to convince him that their having honor would be far more extraordinary.
Adeimantus: I will.
[Why the Philosopher-King who is most capable of ruling will never be asked to rule:]
Socrates: Say to him, that, in deeming the best votaries of philosophy to be useless to the rest of the world, he is right; but also tell him to attribute their uselessness to the fault of those who will not use them, and not to themselves. The pilot should not humbly beg the sailors to be commanded by him — that is not the order of nature; neither are "the wise to go to the doors of the rich"— the ingenious author of this saying told a lie — but the truth is, that, when a man is ill, whether he be rich or poor, to the physician he must go, and he who wants to be governed, to him who is able to govern. The ruler who is good for anything ought not to beg his subjects to be ruled by him; although the present governors of mankind are of a different stamp; they may be justly compared to the mutinous sailors, and the true helmsmen to those who are called by them goodfor-nothings and star-gazers.
Adeimantus: Precisely so, he said.
Socrates: For these reasons, and among men like these, philosophy, the noblest pursuit of all, is not likely to be much esteemed by those of the opposite faction; not that the greatest and most lasting injury is done to her by her opponents, but by her own professing followers, the same of whom you suppose the accuser to say that the greater number of them are arrant rogues, and the best are useless; in which opinion I agreed.
—Plato in The Republic. Book VI.
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It was is true navigator who should be guiding the ship—he is the only one who can pilot it skillfully. The only person who should pilot the ship is identically the person who want be asked. This could be interpreted as a desire for a central planner, for it is an economic system that will not emerge from in a democracy—it must be forced onto a society, as every socialist government has—and it presumes that one wise and kind planner can coordinate the economic activities of everyone better than they could interacting in markets and democracy. Philosophy students in communist Russia never studied Aristotle, but they studied Plato intensely, and now you know why. While communist philosophy was most profoundly shaped by Karl Marx, Plato is a close second.
The idea of the perfect politician being the very one who doesn't ask to rule is ironic, and comical—so much so that The Onion did a farce on that very thing. Plato's ideas are still alive, indeed (just not how he would have preferred).
Video 2—No Qualified Politician Would Ever Seek Office, So We Must Make Him
(The Onion, S1 E8)
(must use Internet Explorer)
Plato's story about the ship is not controversial. We would all prefer a skilled captain to pilot a shop, rather than the sailor selected by a vote of other sailors. This doesn't mean a Philosopher-King—a central planner, that is—should guide an economy. Why would we presume an economy to be like a ship? There are some salient differences between a ship and an economy, differences that cause us to quickly discard Plato's metaphor as one that might have been relevant in ancient Greece, but not modern America.
First, on a ship everyone is presumably heading in the same direction, but in an economy we all want different things. Some people want to study economics for moderate pay, some want to be a CEO for spectacular pay, and some are happy earning a low teacher's salary in their hometown. In some ways the ship is an apt metaphor because forcing everyone towards one goal is exactly what a central planner does. If the dictator says we turn this ship towards a different direction, and begin industrializing in preparation for war rather than growing enough food to feed everyone (what the citizens prefer), it is preparation for war that will take place.
Second, a navigator may have all the information needed to pilot a ship, but it is absurd to believe that President whoever knows exactly how much sugar should be imported, sugarcane should be raised in Florida, and sugarbeets to be planted in Michigan. Nor should we expect the President / Tsar / Dictator / Communist Party to know how much sugar Nevada consumers want at the current price and how much more they want if prices fall 5%. These are all pieces of information that are dispersed throughout an economy and can only be brought together to coordinate economic activities through markets.
Third, just because Plato believes a dicator will be benevolent doesn't mean his belief is true. There are very few cases where a leader with considerable political power displayed sincere compassion for his subjects. Gandhi is one, though he was never a politician or ruler. Maybe the Fourth King of Bhutan, who advocated the pursuit of "gross national happiness" instead of "gross national product," but I confess to know little about him. Anyway, even if a ruler is benevolent, that does not imply his/her successor will be, and any ruler who wants her people to be happy and takes the time to learn about the economics of prosperity will know this can only be achieved by allowing markets to provide much of the goods her subjects consume. It doesn't mean she cannot be active, or that her government must be miniscule. It means she should dedicate all her efforts towards the things government is best at, and leave to markets the rest.
References
(B1) Bhattacharya, Abheek. October 13-14, 2012. "China's Anti-Keynesian Insurgent: Interview with Zhang Weiying." The Wall Street Journal. A11.
(F1) Figes, Orlando. 1996. A People's Tragedy: The Russian Revolution (1891-1924). Penguin Books: NY, NY.
(H1) Chang, Ha-Joon. 2012. 23 Things They Don't Tell You About Capitalism. Bloomsbury Press.
(H2) Hoffman, David L. 1994. Peasant Metropolis: Social Identities in Moscow, 1929-1941. Cornell University Press: Ithaca, NY.
(M1) McInerney, Jeremy. 2000. "Lecture 6: Egypt Under the Early Ptolemies." Alexander and the Hellenistic Age. The Teaching Company.
(M2) Munoz, Sara Schaefer. October 6-7, 2012. "Chavez's Stamp Most Keenly Felt on Farms." The Wall Street Journal. A7.
(W1) Wheelan, Charles. 2002. Naked Economics. W. W. Norton & Company.
(W2) Mangu-Ward, Katherine. April, 2012. "Socialist Cybernetics." Reason magazine.
