No Plan(ners) Required

Steve BucksteinCascade Commentary

Summary

Central economic planning suffers from the fallacy of composition: assuming that what is true of the parts is true of the whole. But there is no collective mind in a city, state or nation that can do for the whole what countless individuals and organizations can do better for themselves. Oregon should remove the central planners and let individuals and businesses make economic decisions based on real-world market and consumer signals.

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Who should plan Oregon’s economy? The short answer is no one; the market will do a better job maximizing economic benefits for all of us than any central plan ever could.

Central planning suffers from what logicians call the fallacy of composition: assuming that what is true of the parts is true of the whole. Planning is a good thing for individuals and firms. But there is no collective mind in a city, state or nation that can do for the whole what countless individuals and organizations can do better for themselves.

Business and government leaders have been busy creating overlapping and competing plans for Oregon’s economic future. The Oregon Business Plan, The Regional Business Plan, and the Four County Regional Economic Development Corporation have joined The Oregon Economic & Community Development Department and The Oregon Innovation Council, alone with myriad local government bodies, in a mad rush to seemingly plan every aspect of Oregon’s economy.

“There are good reasons why there cannot and should not be just one plan. … To the planners such contrasting talk sounds like chaos, when in reality this is how free people get things done.”

The Portland Business Journal devoted its March 9, 2007 front page to the problem of all these conflicting plans. “Myriad plans baffle, confuse” was the front-page headline, while the back-page editorial was entitled “Lack of cohesion slows progress.” Three years ago the same paper ran an editorial imploring “We need a plan, people, soon.” Apparently, it got more plans than it bargained for. With all this planning, one would expect the Oregon economy to be booming, but it’s not. If we could all just agree on one direction for economic development, everything would be fine.

Well, it’s not that simple. There are good reasons why there cannot and should not be just one plan. In Portland, for example, some people want tax incentives to attract business, while others want more business taxes to fund our schools. Some want Major League Baseball, while others want to invest in engineering schools. Some want to cut our use of petroleum products in half, while others want more roads to help diesel-burning trucks get goods to market. To the planners such contrasting talk sounds like chaos, when in reality this is how free people get things done.

On the state level the legislature is considering funding new “signature research centers” to help jump-start emerging industries that the Oregon Innovation Councilbelieves hold great promise for our state. These include ocean wave power and technologies to fight infectious diseases. A nano-technology center is already funded. Generally left out of the legislative conversations is the fact that such decisions are better left to science and economics, not to politics.

“The smartest people in the room,be they business leaders or politicians, are not able to make collective decisions for everyone … because they simply don’t have the needed information and wisdom. As individuals we all have our own interests and needs. …”

The smartest people in the room, be they business leaders or politicians, are not able to make collective decisions for everyone in our economy because they simply don’t have the needed information and wisdom. As individuals we all have our own interests and needs, and we satisfy those interests and meet those needs by voluntarily interacting with others in our society.

Just because one planning group is sure that promoting ocean wave technology over, say, hydrogen technology is best for Oregon doesn’t make it so. If the planners are using other people’s money and not their own, they simply won’t have the proper incentives to get the answers right more often than they get them wrong. For example, as recently as last year the state-sponsored Oregon Business Plan still considered the digital display industry a key priority, yet its sales have declined by one-third over the past three years due to market forces; and now most observers see its future as dim.

Of course, business leaders are free to plan among themselves and sacrifice their own companies’ interests for the “greater good” if they wish, but they should understand that such planning is not likely to fare much better than the old Soviet five-year plans. Individual businesses would do better for themselves and for society by pursuing their own economic interests and adjusting their plans based onreal-world market and consumer signals.

The best way to boost the collective fortunes of society is to remove the central planners so we can freely boost our own fortunes. We also should remove the political barriers that stand in the way of true economic development. Let’s start by repealing the corporate income tax, the capital gains tax and the estate tax. These tax barriers inhibit entrepreneurial Oregonians from starting, developing and profiting from their creative ideas. Removing them will help create the kinds of progress central planners can only dream about.

Oregon may love dreamers, but we need freedom more than dreams. And we need it soon.

Steve Buckstein is Senior Policy Analyst and Director of the Oregon Economic Opportunity Project at Cascade Policy Institute, Oregon’s premier free market public policy think tank. To read other publications of the Oregon Economic Opportunity Project, visit www.cascadepolicy.org.

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