Whether the track under your feet is the right one often hinges on the nature of the errand you are running.
Libertarianism gains its mystique or loses its credibility, as the case may be, by overextending true observations, so as to offer a general theory seemingly capturing everything there is to explain. The fantastic possibilities and enormous performance of markets are hyped to convince us of a utopian efficacy in areas to which they are not adapted, such as the provision of certain public goods and the replacement of politics with its variegated forms of collective decision making. One such overextension of a true observation comes along in the shape of a sharp dichotomy between unplanned market outcomes and planned economic projects.
Valid complaints with regard to politics and planning in a command economy are erroneously transferred by libertarians to politics and planning in the mixed economy of a free society. Politics and the attendant planning are discountenanced summarily as inappropriately invasive and detrimental to the spontaneous play of forces in a free society.
But politics and planning are universal dimensions of human interaction in societies of any degree of size and complexity.
They are both attempts at reducing insecurity vis-à-vis future events and other threats from unpredictability and insufficient coordination. We would renounce these efforts if we could. But we cannot. And the fact that politics and planning can have terrible outcomes, especially under a communist regime, does not warrant the presumption that these options of human conduct must be detrimental under all possible arrangements.
Here is an example of careful planning:
Good politics and good planning are feasible. They happen all the time. However, we must keep in mind, they are resorted to in the face of issues that are in large measure naturally messy and unpleasant, at least in their original form, and are likely to remain problematic, to some extent at least, after they have been transformed by political processing and the improvements which are the aim of planning.
With this in mind, I have made the following comment here:
"Urban Expansion is an exception to the usual rule that an economy does not need a plan." - See more at: http://marginalrevolution.com/marginalrevolution/2015/08/romer-on-urban-growth.html#sthash.70Vv9sGf.dpuf
I suspect, the above formulation is apt to mislead.
In the below important regard, urban expansion is no different from organising a stock exchange or other market-type institutions and processes.
A lot of planning goes into both of them ( - I have been involved in the creation of the German Options and Futures exchange, formerly DTB, now Eurex). In both cases, involved are complex social networks and contentious and contingent issues that require far more than what can be achieved by bilateral transactions of the market type. A lot of politics is needed - like it or not. And a lot of politically generated planning. Just think of the resource-pooling aspect (when many parties are to contribute to the establishment and maintenance of a market), which inevitably requires collective decision making rather than bilateral transactions.
What is misleading in the above formulation, in my reading, is the idea that planning is necessarily planning of the macro type, while, of course, even elements of such macro planning go into urban or stock exchange planning, e.g. fundamental legal changes of nationwide validity.
The misleading paradigmatic juxtaposition is market versus planning of the command economy type).
In reality, the relevant criterion of preclusion is
- (A) market against comprehensive macro planning, which latter we do not wish to have,
- (B) market versus extensive (always politically charged) market (or other project) planning, which we must engage in to achieve our goals.
Every market is exceedingly political, at its conception, its birth and throughout its further life-cycle.
This is why libertarian positions, I feel, tend to hover consistently on too high a level of abstraction, from which the political nature of markets remains invisible.
Yes, we ought to avoid the road to serfdom (which argument of Hayek's refers to the scenario that I have indicated as (A) above), but avoiding the road to serfdom is not a valid excuse not to face the mixed economy in which we actually live, where politically organised planning is extensive, inevitable and highly welcome if reasonably well conducted.
See also Red Cedars and Apple Trees - The Political Nature of Economic Processes, A Reply Concerning Ancient Trade and Trust, A Modern Story - Politics and the State in Ancient Greece, Layered Identities - The Many Lives of Markets, Two Critical Responses on Markets and Politics.