Chinese economists say Big Data can replace markets in planned economies

In a paper in the World Review of Political Economy, economists from Sichuan University propose a model for an efficient planned economy that uses a hybrid of managed, two-sided "platform" markets (modeled on Ebay, Alibaba and various app stores) and central planning informed by machine learning and big data to fairly and efficiently regulate production in a system in which all substantial assets are owned by the state.

Some of the Sichuan researchers' thinking echoes the arguments raised by western left-wing thinkers in defense of high-tech planned systems, such as Peter Frase in "Four Futures" and Paul Mason in "Postcapitalism."

A notable difference between these writers and the Chinese economists is that the latter confront the surveillance dimension head on, stating that ubiquitous surveillance of participants in this planned economy would be a necessity; by contrast writers like Mason proposed that the behavioral data that drove the centralized decision-making apparatus could be anonymized -- a fraught technological problem that is nowhere near convergence on a solution.

As David Graeber incisively observed, capitalism has converged on all the sins laid at the feet of bureaucratic, authoritarian socialism. Under contemporary capitalism, markets and states participate in total surveillance, produce malls and stores that sell the same monotonous goods, and mire participants in the economy (especially poor and vulnerable people) in bureaucratic red-tape that involves endless queueing, forms in triplicate, and high-handed, unaccountable "justice" from petty martinets.

This opened an ideological space for a vision of a cooperative, nonmarket future in which the benefits claimed for capitalism are realized at last. The socialized medical systems of the rich world (apart from the USA), for example, require far less red tape, bureaucratic wrangling, and surrender of individual freedom than the "market" system the US labors under, which has all the worst characteristics of a Soviet enterprise.

But replacing Zuboffian Surveillance Capitalism with "Surveillance Communism" feels like a pretty bad trade.

How can big data become the technical condition of the plan-oriented market economy system? This is mainly dependent on the following characteristics: 1. Big data can find and use tacit knowledge. Hayek believes that fragmentation is the main form of knowledge, and there are a lot of tacit knowledge, such as local customs and consumption habits, which are unorganized and implied in social life (Hayek 1937). Accordingly, he attacks whether the highly centralized planned economy can furthest master necessary economic information so as to make a scientific plan of the national economic system (Hayek 1935, 208–9). While the “interconnection” of the Internet has built up a huge network information pool, which partly solves the problem of “Division of Knowledge,” but at the same time, it produces more tacit knowledge in the individual network interaction process. This kind of tacit knowledge has individual characteristics, and frequently has group effect and self-evidence prophecy effect, which seems very complex. As a kind of data set, big data have the characteristics of large capacity, many types, fast access speed and high application value. It can collect, store and analyze the data with large quantity, scattered sources and diverse formats. Today, e-commerce sites can carry through network custom marketing on the basis of customers’ purchase records, browsing records, travel trajectory and so on over the years, which is on account of customers’ consumption habits forecast for big data technology. Along with the developmental logic of big data, the full data revolution will be realized in the future (F. Wang 2015). It is expected that the information will be sequenced, obtained complete sample, stored, and analyzed, which will create conditions for discovery and utilization of tacit knowledge.

2. Big data make Now Casting be possible. In addition to the completeness of the information the plan relies on, the time lag of the plan has also been widely criticized. This time lag makes the plan fall behind the development of economic activities, and even produces errors due to the loss of information in the transmission of information. Compared with traditional technology, big data greatly reduce the time of information collection and treatment on the basis of massive information storage, cloud computing and Internet applications. More importantly, big data do not emphasize the prior theoretical setting, do not rely on the high quality requirements of information, do not pay attention to the causal relationship between variables, the internal logic is “data-driven theory” (D. Wang 2015), “data is fact,” “data is decision” (Zhou 2013), which can find problems, amend to plans, macro-forecast (Liu and Xu 2015) and strengthen supervision in real time.

3. Big data can promote personalized, diversified supply and demand. Hayek’s artificially design and compulsory preference of criticizing traditional planned economy deny human freedom, and consider that the market is compatible with human reason (Hayek 1944, 91–104). In fact, in the era of small data, consumer preferences can only be subdivided into certain groups and cannot be accurately quantified to individuals, companies often implement mass production for the target, and provide homogeneous products, and the market is flooded with wave consumption. So the so-called “freedom of choice” is relatively limited, a large number of personalized, small, fragmented “singularity” consumer demands are annihilated in the “long tail” of the demand curve (Ren and Xin 2015), and ignored by the “cost-benefit law.” True preferences are forced to abandon; there are limited choices in a number of homogeneous products “supplied” by the market. The rise of big data gets rid of the technical bottleneck of solving the demand “long tail.” Once the production and supply can be planned according to individual preferences, the blindness of the market itself can be overcome and the advantages of rational allocation of resources in the planned economy can be brought into full play.

Big Data, Platform Economy and Market Competition: A Preliminary Construction of Plan-Oriented Market Economy System in the Information Era [Binbin Wang and Xiaoyan Li/World Review of Political Economy] (Sci-Hub Mirror)

(via 3 Quarks Daily)