> airline deregulation shows just how bad command economies are at planning and allocating resources.
I'm curious why folks think the failure of command economies in the pre-digital era carries any weight today. We have orders of magnitude more data today, and I feel like it should (theoretically) be possible to use that data to optimize for things other than maximal profit.
What matters is the incentive structure (win, get profits!) and price signals (“Shut up and take money!”) provided by markets. Improving technology is downstream of those forces.
Every business once it gets out of its rapid growth phase seems to want to become a bank. Car companies are all about loans now, "X" is an attempt to turn social media into banking (and not the first), Google and Apple are both into payments and other financial services, and the list goes on and on.
Either the market has an endless appetite for banking or capitalism does not in the end deliver what markets want.
You say that as if you cannot buy a car or an airline ticket. In fact you can, because airlines fly planes and sell tickets on them, and car manufacturers make cars and sell them.
It may be cute to say “X is a bank”, but an airline is not a bank. Besides the obvious facts that you cannot withdraw money from an account or pay your bills, if they didn’t fly planes the points would be ~worthless.
The fact that they don’t profit from those activities is a market economy working as intended*. Cars and flights are easily substitutable goods, you’d expect to see the profit competed down to ~nothing.
*Arguably there is getting to be too much consolidation in the airline industry, and also legal limits on airport gates act as a huge barrier of entry for new competition.
I suspect in the end, the financial component of any business has the highest margins, so business seeks it like a plant growing towards the sun.
To do the "actually send passengers from LAX to ORD" part of running an airline you have to pay for pilots, gate agents, planes, the world's smallest cups of flat ginger ale...
But shuffling around frequent flyer miles as a psuedo-currency? No actual tangible expenses there, just some obligations that end up on some future quarter's balance sheet.
> Either the market has an endless appetite for banking
I don’t like it but I think it’s clear this is the case. The demand for “buy now, pay later” seems to be huge, even if it costs more in the end, even for seemingly trivial amounts of money for regular purchases. But I really have no idea how much things like affirm on Amazon actually get used, maybe no one else is using it either.
Kinda? The era of technological or business innovation for large airlines may basically be over. If you take that bet you want the airline you invest in to focus on financial wheeling and dealing to ensure they save a few pennies on fuel in 2035 or earn a few more pennies on affiliate credit card spend in 2027.
So you're admitting that innovation isn't downstream from market incentives in this case, but financial wheeling and dealing is. I'm glad we are on the same page.
I'm admitting there isn't much innovation left in pure airlines. The customer has spoken, they want cheap flights. Some are willing to pay for legroom, some are willing to pay for luggage, [insert a bunch of other things] but will do without for cheaper tickets. It is very hard to find any more innovation that hasn't already been found in this space. Airlines are working on the things grandparent named because it works to consumer wants: lower prices.
I think part of the problem with air travel is it’s hard to know what you’re actually getting. The seating chart doesn’t visualize leg room or cleanliness or the details of the seat design on that particular flight. If there were reliable indicators of these things, people might choose to pay more for some of those.
One consequence of giving everything a discrete price is that it drives customers to consume all services they pay for completely.
If you say "I can take two checked bags, it's included in the fare", I'll probably only take one because I only need one for the duration of my trip. But I'll feel good knowing if I decide I see something awesome while on my vacation, I can take it home without too much care for penalty fees.
But if you say "Each checked bag is $50", people will pack everything up to and including an entire 1996 Toyota Corolla into their free carry-ons, exhaust the available space, and the airline has to say to the economy class late-boarding group 'everyone after this line has to check their bag anyway, but we won't charge you the $50."
As an added plus, the price awareness reduces the quality of the travel experience-- you end up asking "can I fit another souvenir in my little free bag", and often deciding against it, because it's insanity to spend $50 in bag fees for a $10 book.
Most of the spending of the middle class, and all of the spending of the working class, is already spoken for.
If you want to make money from the middle class, you have to do better at something than whoever is doing it now.
If you want to make money from the rich, you just have to dream up some new twist on their wants (sure, it has to be executed reasonably well, but you're not competing in the same way).
So sure, most of the money that changes hands does so via the daily/weekly/monthly spending of regular people. But that's not where the big money is unless you come up with a truly mass market new thing. The big money is in providing for the wants of the rich, because the marginal utility of what they spend on wants is so low to them.
Or you make what the middle class spends money on. This is generally an easier path. Making something unique can make money, but generally it is safe to assume if nobody else is making it, it is because nobody wants it -not that you are the first with a new idea.
If the middle class spends money on it, then in general, someone is already making it, has established customers, distributors etc. This is a high barrier to entry.
For what it's worth, I (mostly) disagree with your detractors in the other comments and agree with your sentiment (I think).
Markets care about "aggregate
demand". Rich people can be lucrative individual customers because they have more to spend and often less price sensitivity. But they have limited capacity for consumption in many areas; they only eat three meals a day and only fill so many airline seats at once. The middle class and even lower classes have much higher capacity for consumption and are worth targeting - think McDonald's or even Google (advertisers want all the eyeballs they can get, even if they prefer wealthy ones)
Wealth (i.e. net worth) isn’t the relevant statistic for how much the market “cares” about a particular demographic. Aggregate disposable income is.
A young doctor with $100k in med school loan debt is part of that “bottom 50%” of wealth but nonetheless an extremely attractive target for “the market”.
By default, company executives are beholden to the shareholders (i.e. the wealthy).
In a healthy competitive market, they're also reactive to customer desires, but when they're presented with the opportunity to decrease competition through consolidation or other means, it's blatantly obvious where their true loyalties lie.
The amount of data is irrelevant. Data by itself isn't actionable. We don't have a proven theoretical framework that could be used to turn data into good decisions in a command economy. Plus it is nearly impossible to command innovation; command economies have occasionally produced innovations by throwing enormous resources at particular problems, but for the most part they are stuck with copying innovations from free market economies.
I mostly agree with this sentiment, but I think it goes too far.
> command economies have occasionally produced innovations by throwing enormous resources at particular problems, but for the most part they are stuck with copying innovations from free market economies.
Hmm. This seems unfair to the military during wartime? WW1 feels like a huge example.of advancement driven from very command-ey institutions; from the idea of the tank to deal with machine guns and barbed wire to nitrogen-ating fertilizer in Germany to withstand the British blockade. (Never mind DARPA and the internet or the moon missions during the Cold War, or the Manhattan Project)
(Yeesh, not that I'm suggesting it would be preferable to pursue this as a full-time model - it's literally fascism, but it's important to understand why these systems were pursued in the first place - the point is that there do at least appear to be high profile success stories)
We could have oodles of data and yet not have the data that matters to making distributed decisions, which is price signals.
A modern digital command economy wouldn't have price signals, but even if it did it wouldn't make decisions like the individuals would precisely because the point of a command economy is to deny individuals freedom. And that is a reason that digital command economies wouldn't have price signals: there's little point when the point of the command economy is to ignore those price signals.
> the point of a command economy is to deny individuals freedom.
This is an unsupported generalization. Command systems exist to mandate production and distribution of goods, e.g. to ensure sufficient food production and equitable food distribution. They eliminate the "overhead" of competition and the need for marketing. Look at any self-sufficient commune and tell me their internal economy has anything to do with imposing limits on freedom. Don't let your negative feelings toward certain historical examples cloud your understanding of the matter at hand.
> > the point of a command economy is to deny individuals freedom.
> This is an unsupported generalization. Command systems exist to mandate production and distribution of goods [...]
This is exactly denying individuals freedom. It's right there in the word "mandate". If you want to produce some thing or service at some price, you don't get to unless that's what the planners want. If you don't want to produce some thing or service at some price, you may be forced to by the planners. You don't have freedom of agency, and you can't have freedom of agency, in a planned economy.
> I own all factories that can produce X, and am by some benefit of scale now the only one reasonably able to make an X-factory. If I didn't do it, probably nobody could.
> I have command of the X-economy and can mandate the production and distribution of these goods
> The intended point of all this is somehow to deny individuals their freedom to fail to create an X factory, rather than to ensure that X gets created and distributed at all
This problem always resolves itself naturally. Competitors arise. Disruptive innovators arise. It's a great problem to have precisely because it leads to innovation. Everyone salivates at a cut of what the 800lb gorilla is taking, and the gorilla grows slow as it grows large, and it sits on its laurels extracting rent (vendor lock-in), and then the gorilla gets out-innovated.
Regardless of whether this is a "problem" that gets "resolved," surely you understand you have failed to support your conjecture that my command of the economy is purpose-built to limit freedom.
What if there is no profit? What if I operate at 100% loss, year after year, propped up by the subsidy of a fiat currency, to provide something everyone needs, and don't think the goods and services which sustain life should come at any cost? I am overwhelmingly popular. Nobody is going to seriously compete with me, although they're free to try. Nobody is forced to work for me. Whose freedom have I limited? Doesn't this sound like a lot of things we take for granted every day which are centrally planned?
If you pointed out any contradiction, you did an unfortunately poor job of elucidating exactly where that contradiction occurred. Furthermore, you failed to support your claims even a little bit.
But I hope you sleep well! It's crucial for proper brain function.
Claiming that you've made an unsupported generalization, and then making one, is not a contradiction; it's hypocrisy.
In any case, your statement still fails to hold water. Consider the ISS: there is central planning and command of the entire economy of the vessel, from its air, water, and food to its electricity and the time of the astronauts themselves. But the 'point' of this command economy is not to limit freedom; it is to keep the astronauts alive. This is the most extreme example, but obviously there are other situations (ships at sea, camping trips with a group, military operations) where centralized control of the goods produced and services performed serve the goods of the group's goals, and have nothing to do with intentional limits on freedom.
> Claiming that you've made an unsupported generalization, and then making one, is not a contradiction; it's hypocrisy.
It's not just claiming I made an unsupported generalization and then making one, it's the the one you made was the same as the one you claimed I was making! Strictly speaking it's not a contradiction, I suppose, but if you did it unthinkingly then I think calling it a contradiction is fair. Though if you want to call yourself a hypocrite, don't let me stop you!
(EDIT: Ah, you weren't contradicting yourself. You were agreeing with my "unsupported generalization"! Heh.)
As for the ISS, it's not exactly comparable to the subject in this thread (airlines) in scale. The ISS is the only destination for the "airlines" that service it, and there's only two of those "airlines", and they both fly very rarely, and the passengers are 99% not tourists. Nor is there much of a business in sending tourists to space at this time. But if ever there is such a business, it will be because companies like SpaceX and Blue Origin make it so, not because the government "regulated" space travel before "like airlines". The comparison is not apt is just not apt.
As to central planning reducing freedom, that is most certainly true, though if a government imposes central planning only for a very small part of the economy, then the reduction in freedom is not very great and maybe barely noticeable. At the limit central planning definitely eliminates a lot of individual freedom. We've seen this many times with Soviet communism, Cuban communism, Eastern European communism, Chinese communism, East Asian communism, etc. They don't just eliminate much individual freedom -- they kill a lot of people on purpose, and then even more via famines caused by their vaunted central planning.
Beginning to think you're actually incapable of understanding what I'm saying so I'll be as clear as possible.
You said, "the point of a command economy is to reduce individuals freedom." I have provided numerous arguments that a command economy could serve another purpose -- survival in extremis, provision of public goods at a loss, and creation of a communal sense of obligation.
I made no argument about the specific context of this thread. I made no argument that it does not decrease individual freedom. It does, as does any situation where the principal decision maker and executive agent are not the same person. But that is not always the purpose. Your inability to understand your own words and their implications astounds me.
There have never been any self-sufficient communes. They always depend on external inputs. Over the long run, command economies always collapse into famine. It's impossible to command most people to work hard over a long career without free market incentives.
Over time, all systems collapse eventually. That sentiment is worthless.
Furthermore, nobody said anything about working hard.
Surely you're not about to claim that all pre-colonial civilizations with functional governments either somehow had free market incentives or collapsed into famine.
"There have never been X" is always an extraordinary claim and you've done a poor job making it.
The problem is that too much of the innovation in our system targets ways of becoming a new middleman in existing economic exchanges, because collecting 1% of "all X" is much more valuable than collecting 100% of "a few Y".
The incentives to innovate in ways that actually benefit people are weak in our system, because the disincentives to innovate in ways that just make you a bit wealthier are small to non-existent.
That's not a real problem worth worrying about. Look outside the tech industry bubble. There is a huge amount of innovation happening in sectors beyond of finance and software, but they don't get much attention on HN. Of the IPOs this year, what percentage are just middlemen?
The US military's many labs, test sites, software foundries, federally funded research and development companies, and research institutes are laughing at this sentiment. Innovation is routinely commanded -- look at Skunkworks, JPL, heck even the USSR's space program.
This is an interesting point that I hadn't thought of. A counterpoint would be that the economy has also grown more complex since then, but I don't think it has to the same extent that computational power has increased.
It doesn't matter how much data you have, it's computationally impossible to centrally plan an economy. Having individual agents plan their own economic choices is much more efficient and elegant (and more importantly, actually possible).
> Having individual agents plan their own economic choices is much more efficient
There's a great deal of inefficiency in our current system as well, though.
I suppose I'm talking more about the "how much grain should we grow this year" sorts of questions that the Soviet Union failed at. It's almost certainly impossible with early 20th century tech, but with modern computing it seems like it might be more efficient to solve by one party with great resources, rather than by many parties with more primitive predictive tools.
When it comes to the discussion at hand, transportation infrastructure is one of the few areas that's inarguably more efficient when centrally conducted, which is why our roads and subways are government-operated, and why the airlines have an insatiable desire to consolidate.
> with modern computing it seems like it might be more efficient to solve by one party with great resources, rather than by many parties with more primitive predictive tools
I'm not sure what technology we have now that the Soviets didn't have that would allow for successful central planning of agriculture. Local boots-on-the-ground conditions vary so much, even from one end of the field to another.
That aside, even if we had technology sufficiently advanced so as to be indistinguishable from magic, there's the other great problem that central planning couldn't overcome, which is the problem of human nature and incentives. Many parties with primitive tools who have a direct incentive that their crop is bountiful will beat out the one central party with great resources that nevertheless lacks skin in the game.
I'm curious why folks think the failure of command economies in the pre-digital era carries any weight today. We have orders of magnitude more data today, and I feel like it should (theoretically) be possible to use that data to optimize for things other than maximal profit.