Sunday, September 24, 2006

Wal-Mart as the new Central Planner?

Some comments snatched from here:
http://ezraklein.typepad.com/blog/2006/09/cant_say_i_favo.html


Wal-Mart is the wet dream of Communists.

Capitalism was beating Communism, because critical economic information is distributed and a central planner with a pencil and a sheet of paper can not manage it all. So you had to leave that to the local manager/business owner.

Communism did not have the informational tools for administering the whole economy. Wal-Mart increasingly has the computing power to manage a growing share. Integrated supply chain systems and electronic data interchange became popular in business in the 90s.

There was also this article a few years ago about Wal-Mart data-mining their terrabytes of information to better plan distribution and logistics.

One day it will be possible to manage it all from one single CPU farm. It's quite funny, Capitalism will die through its own capitalistic means...

Posted by: Oskar Shapley | Sep 24, 2006 7:50:35 AM



Oscar,

That is a unique observation, insomuch as I have never come cross it before (might not be unique at all, but I certainly liked reading it).

If applied to a national economy it could actually work, if the administrators stuck to efficiency in meeting the demands of their customers, in this case The People, rather than redirecting resources to the whims of how they think things should be.

I have no faith in that happening, but it could.

Posted by: Guy Montag | Sep 24, 2006 8:12:34 AM



Here are several quotes from Hayek, which to my understanding are becoming increasingly OBSOLETE:

http://www.mises.org/journals/qjae/pdf/qjae5_3_3.pdf

"A mind endowed with full information could of course choose every point on the n-dimensional surface that appeared desirable to him andthen distribute as he saw fit the product of the combination he chose. But the only point on (or at least somewhere near) that surface we can reach using a procedure known to us is the one we reach when we leave its determination up to the market."

- Wal-Mart has near full information in it's own domain.

"About many important conditions we have only statistical information rather than data regarding changes in the fine structure."

- Wal-Mart has the data.

"It means, however, that of the combination of different goods that is actually being produced [in the market economy], as much is produced as we can manufacture by any method that is known to us. That is of course not as much as we could produce if infact all the knowledge that anyone possessed or could acquire were available at a central point and from there could be entered into a computer."

Computers in Hayek's time were sloooow and user unfriendly. The data mining tools that Wal-Mart can use now are much closer to Hayek's "mind endowed with full information".


Posted by: Oskar Shapley | Sep 24, 2006 8:25:03 AM



I don't think that managing the economy from one single place is in a good political idea. It puts the responsibility for the outcome on a central planner, who would be the go-to-blame guy for anyone not satisfied by the result. Which would be everyone, because wants are infinite and resources are not. The invisible hand and markets kind of sidesteps that issue by saying that the economic outcome is the result of a uncontrolled process and not the decision of a particular planner, who decided that you are going to be poor.

People in the Central/Eastern European Soviet economies were notoriously protesting against low wages, but it is not easy to say whether the low wages were a result of the wrong system or unproductiveness of the workers. The central authority got the blame anyway.

Here's a link to the Slashdot discussion of Wal-Mart's data mining. The article was in the NYT, but it's behind the paywall now and I can't find a copy .

http://select.nytimes.com/gst/abstract.html?res=FB0C14F63D5B0C778DDDA80994DC404482

http://developers.slashdot.org/article.pl?sid=04/11/14/2057228

Wal-Mart's Data Obsession

"The New York Times covers Wal-Mart's obsession with collecting sales data. Fun fact: 'Wal-Mart has 460 terabytes of data stored on Teradata mainframes, at its Bentonville headquarters. To put that in perspective, the Internet has less than half as much data, according to experts.' That much information results in some interesting data-mining. Did you know hurricanes increase strawberry Pop Tarts sales 7-fold?"

Posted by: Oskar Shapley | Sep 24, 2006 9:01:40 AM