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Subject Area: Political Theory

State Planning - Leonard P. Liggio, Literature of Liberty, July/September 1978, vol. 1, No. 3 [1978]

Edition used:

Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.

Part of: Literature of Liberty: A Review of Contemporary Liberal Thought, 20 vols. 19781-982

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


State Planning

Bruce R. Scott

  • Harvard Business School

“How Practical is National Economic Planning?” Harvard Business Review 56 (1978): 131–145.

Economists of nearly every persuasion are dissatisfied with the chaotic outcomes of U.S. government fiscal and monetary policies. Despite this prevalent agreement, no harmony exists regarding alternatives. Free-marketers contend that Keynesian-inspired manipulations (or any public economic intervention scheme, for that matter) must produce irrational systemic economic performance. An opposing view, however, insists that the ultimate fault lies not with the theory of macroeconomic policy, but with its inconsistent forms.

The latter viewpoint has spearheaded recent drives for alleged “consistency,” known as national economic planning (NEP). The Humphrey-Javits bill proposal embodies such ideology. Advocates claim that NEP would be as rational as managing a business.

However attractive such a businesslike analogy may be, it fails to be persuasive. Whereas a business is legally responsible only to stockholders, government is answerable to a much broader range of interest groups. And although corporate plans can be confidential, government is, at least in theory, a public servant.

The federal government currently has access to most of the information it needs to implement NEP. In addition, the Council of Economic Advisors provides a convenient skeleton structure for NEP. However, several radical economic changes would accompany national economic planning. Not surprisingly, they are viewed with disdain by free-market advocates.

Four broad approaches could be embodied by NEP. “Coherence planning” would attempt to centrally plan supply and demand by industry. This would require forecasting demand by a planning agency, followed by various degrees of economic interference. “Structural planning” would utilize the efforts of federal, state, and local regulatory agencies to restructure industries to achieve some previously-determined level of better social performance. An “incomes policy” would institute explicit guidelines of wage regulation designed to link wages more clearly to productivity increases. Finally, the “indirect approach” would generate changes to produce specific and inevitable corporate adaptations.

National economic planning, in any of its potential forms, would be a political instrument readily manipulated by national leaders for public relations purposes. The European experience illustrates how, once in place, NEP tends to remain intact despite changing economic conditions. It is questionable whether the proper prescription for current economic maladies should utilize such ingredients.