F. Hayek, Planning should serve competition

The idea of complete centralisation of the direction of economic activity still appalls most people, not only because of the stupendous difficulty of the task, but even more because of the horror inspired by the idea of everything being directed from a single centre.

If we are nevertheless rapidly moving towards such a state this is largely because most people still believe that it must be possible to find some Middle Way between “atomistic” competition and central direction.

Nothing indeed seems at first more plausible, or is more likely to appeal to reasonable people, than the idea that our goal must be neither the extreme decentralisation of free competition, nor the complete centralisation of a single plan, but some judicious mixture of the two methods. Yet mere common sense proves a treacherous guide in this field.

Although competition can bear some admixture of regulation, it cannot be combined with planning to any extent we like without ceasing to operate as an effective guide to production.

Nor is “planning” a medicine which, taken in small doses, can produce the effects for which one might hope from its thoroughgoing application. Both competition and central direction become poor and inefficient tools if they are incomplete; they are alternative principles used to solve the same problem, and a mixture of the two means that neither will really work and that the result will be worse than if either system had been consistently relied upon. Or, to express it differently, planning and competition can be combined only by planning for competition, but not by planning against competition.

It is of the utmost importance to the argument of this book for the reader to keep in mind that the planning against which all our criticism is directed is solely the planning against competition-the planning which is to be substituted for competition.

This is the more important as we cannot, within the scope of this book, enter into a discussion of the very necessary planning which is required to make competition as effective and beneficial as possible. But as in current usage “planning” has become almost synonymous with the former kind of planning, it will sometimes be inevitable for the sake of brevity to refer to it simply as planning, even though this means leaving to our opponents a very good word meriting a better fate.