Why communism doesn’t work

Most people think that the problem with communism is that people aren’t perfectly altruistic, or central planners aren’t smart enough, but neither of these is the real issue. The real bottleneck is data, not intelligence.

See, economics is the study of choice. Specifically, it’s about the choice of how you allocated limited resources that have alternate uses. Do you make desks out of wood, or steel? How much water do you allocate to filling swimming pools vs growing almonds? In a communist system, there tends to be some kind of central planning entity that makes these kinds of decisions.

In capitalism, the decisions are spread out, with many individual actors making small decisions about what THEY will do, based on what affects THEM. The advantage of distributed and emergent decision making is not only that it makes far more neurons (and lately CPUs) available to this decision making process. It really has orders magnitude more processing power.

But the real, insurmountable advantage of capitalist distributed decision making is that it brings those decisions close to the information they are based on. A communist central planning committee is many layers removed from the guys in the forest cutting trees, and the guys smelting steel, and the guys making and selling furniture. They truly can’t figure out how many desks to make out of steel, and how many of wood, no matter how smart they are. They just don’t have the data.

Capitalist decision makers are closest to the data that corresponds to their specialty, and they get an aggregate of other data from prices, which emerge from other people’s decision making. The dudes cutting trees know fucking everything about wood, but nothing about furniture. They set the price of wood (based on their abilities and needs and expenses), and the guys who make furniture can work out how many wooden desks to make based on that price, because they know how many desks people buy, whether they prefer wood or steel, how much it will cost them to make each based on prices, etc. In other words, capitalist systems farm out decisions to domain experts, while communism relies on bunch of isolated generalists. This is why communism doesn’t work.