Tuesday, 21 September 2010

Is anyone surprised by this?

This paper investigates the institutional causes of China’s Great Famine. It presents two empirical findings: 1) in 1959, when the famine began, food production was almost three times more than population subsistence needs; and 2) regions with higher per capita food production that year suffered higher famine mortality rates, a surprising reversal of a typically negative correlation. A simple model based on historical institutional details shows that these patterns are consistent with the policy outcomes in a centrally planned economy in which the government is unable to easily collect and respond to new information in the presence of an aggregate shock to production.
This is the abstract of a new paper: The Institutional Causes of China's Great Famine, 1959-61 by Xin Meng, Nancy Qian and Pierre Yared.

The authors note that,
Our third contribution is to add to studies on the efficiency of central planning and the trade-off between quantity and price controls. Our model generally builds off of arguments made during the historic Socialist Calculation Debate, when Austrian economists such as Von Mises (1935) and Hayek (1945) argued that it was practically impossible for central planners to aggregate necessary information in a timely fashion.
The paper's conclusion begins,
Our study points to inflexible government policy for food distribution as an important factor in causing the largest famine in history. We show that even if a government is not obviously malevolent or incompetent, an ideological commitment to central planning, together with practical constraints for gathering and responding to information, result in an inflexible policy that can cause a famine when aggregate production falls.
So central planning doesn't work. Like I said, Is anyone surprised by this result?


Eric Crampton said...

I'll have to read the paper, but I'm skeptical that the calculation problem was more important than the "Mao was a murderous horrible monster" problem.

Paul Walker said...

Eric: I think an important point is made in this sentence: "We show that even if a government is not obviously malevolent or incompetent ..." The "even if" bit matters.

Anonymous said...

http://www.literaryreview.co.uk/mirsky_09_10.html - HT: marginalrevolution

A non-econ, spine chilling.