74 



U. S. and Calirornla generally (■ nowhcro noar aa Intrutlvo as It la In Iho collapsing 

 CcntrrJl/-plannc<l economics, but poHcy-makorB ahould laJto bcod of iho dangrra thia 

 colIopM illaatralca. A comparloon of Iho Inconllvoa Inherent In each iyatem and the 

 InjpIicatlonB of iho djoloo for offidoncy and dJatributlonal equity la badly noodod. 

 /^LawB In tlio market oicciianlsm aro woll-known to cconomlaLa, having been 

 oxiiaualivcly aludJcd for more than two hundred yoara. In aomo caooa tho frco market 

 hoa been mia-iaonttlied oa liie cuJprit rosponsibio for probloma of economic porfor- 

 monco when the true cauao la roaJIy political failura But oOon it haa boon osaumod 

 tliat political intervention la aufndenllyjuatiriod by tho meroidontincation of market 

 [Iowa without pauaing to comparo them with flawa that inhcro In tho political 

 aubstltutea for market mochanisma. Careful comparatlvo analysia of political 

 economizing mcchaniamB la relatively now, but It la clear that tho chdco betwoon 

 tho two is not a chdoa between a deeply flawed market and a flawlcaa political 

 proccaa. TTio choice is subject to objective comparison of thdr relative cfTidondea 

 on the basis of real evidence. Proper analysis also enables the Implementation of 

 public policy dcdslons so aa to take forms which con minimize bureaucratic flawa 

 v^hlcholhorwjseproducoproblomaworBothan tho market flawa that Intervention 

 Bcoka to correct. 



Tlio attempt has been made In ccntrally-plannod "command" economies louso 

 Input-output models or other Bophisticatod mathematical aystoma aa a bade 

 framowork for oomprchonalvo coordination of thoactivillosof aeparato, linked 

 sec tors. But theso attorn pta ha vo generally fallod precisely bccauBo the Informa- 

 tion and Bignalling functions performed by market pHcca cannot bo dmulatcd 

 and acoommodatod within tho I/O framowork, or for that matter by tux model. 

 Input-output analyds is useful In forecasting tho impact of Independent 

 events, such aa the impact of a change In final demand for tho output of one 

 or more 'cxport-baao' sectors, on Lho entiro economic structure where tho 

 stakes In therobuat'ncaa of tho forecast are not too high and where approxi- 

 mations arosuflidcnt.But neither thia nor any other model can perform the 

 task of central economic planning cfTidontly because tho Information r«>- 

 quJromonta and tho raalhematlca become unmanageably complicated long 

 before they aro eumdcntly comprohcnalva to allow for ita use In directing 

 all economic activity, Tho collapse of lho So vie tsyatem bo arawitnoas to this 

 point. 



Tho Irony of these recent ovcnta is that the oxpcrlonce of the world'a 

 centrally-planned cconomica do not soom to have regiilerod In tho United 

 Stales. Milton Friedman recently observed that dospito the evidence that 

 central planning doea not work and that tho frco market Ib a neocsaary 

 (but perhaps hot sufndcnt) condition for a free 6odety, many In the U. S. 

 assort tho need for "induatrial policy" that Involves more government 

 intrusion and tho very mochanloms that tho people of oontral and 

 coatorn Europo aro now trying to abandon. It la not yet clear whether 

 tlioy will auoccod against a dooply-ontronchod bureaucracy and a 

 truculent political ollto. Tho appropdato level of government Involve- 

 ment In tho economy and tlio full range of consequonoos {lowing form 

 more Inlorvcntlon Is an issue that nooda to bo faced squarely by pollcy- 

 makors. Economic impact analysis con servo as a starting point for 

 the examination of Ihcao larger trado-ofTs involved in tho direction 

 that forest policy seems to bo taking in California. But analysis also 

 must address lho political consoquencca of more govbrnmont Intru- 



