As Joe Biden starts to roll out his plans outlining what he intends to do when he assumes the presidency in January (barring some kind of judicial miracle on Trump’s behalf), there is considerable cause for worry. Apart from his enthusiastic support for more COVID lockdowns, perhaps the most concerning statement from the Biden camp calls for a Supply Commander to coordinate the distribution of essential medical resources among the states.
According to Biden’s website, the job of the Supply Commander, whose very title brings to mind the central command economies of the Soviet Union and Venezuela, will be “to take command of the national supply chain for essential equipment, medications, and protective gear. We can no longer leave this to the private sector. The Supply Commander should work with every governor to determine their needs, and then coordinate production and delivery of those needs in a timely and efficient manner. And, the Supply Commander should direct the distribution of critical equipment as cases peak at different times in different states or territories. That goes for ventilators, masks, gowns, face shields, lab equipment, tests and testing components, medicines, and all other critical materials.”
We can learn a couple of things from this statement. The first is that Biden lacks knowledge and understanding either of economics or history.
The second is that, belying his reputation as a moderate, he apparently intends to tack left to please the more radical factions in his party. Let me briefly explain why everything about this statement is wrong, and why it should worry you.
The main point is that we already have a system that coordinates supply of needed materials around the country: it’s called prices. When prices are allowed to freely fluctuate with changes in supply and demand, they send signals to producers, consumers, and distributors about which products are needed and where. A high price not only shows that something is needed, it also provides and incentive for someone to provide it. A low price, on the other hand, indicates that resources could be better directed elsewhere. Because prices are not set by one individual, but are instead the product of millions of daily interactions between individuals, they are able to respond to changing conditions with unbelievable rapidity, impossible for a central authority to match.
What Biden wants to do is substitute a regulatory Czar for this tried and true process. Instead of allowing individuals to respond to incentives, this Supply Commander will simply decide where goods go, based on whatever metrics he chooses. The most obvious problem with this is that such a position will inevitably be incredibly susceptible to corruption and bribery, directing goods in ways that will maximize his personal benefits like some Soviet commissar dealing out political favors to friends and patrons. But this isn’t the worst problem with a command and control system of distribution. That dubious honor lies in the fact that no one, no matter how smart or public-spirited, can possibly hope to have enough information to make decisions on so large a scale. One man, even backed with an army of staffers and underlings, cannot effectively choose how to distribute medical supplies to thousands of hospitals around the country, because he simply isn’t capable of knowing a fraction of the information about local circumstances captured in the price system.
F.A. Hayek called this the Knowledge Problem, and it’s at the core of why planned economies have always failed throughout history.
When the Soviet Union emerged as the world’s first major experiment in communism, the government attempted to abolish prices and direct resources “from each according to his ability, to each according to his need.” The result was such a disaster that starvation and deprivation quickly swept across Russia, with authorities abandoning their plans and quickly bringing prices back, albeit with heavy regulation. When Hugo Chavez nationalized agriculture in Venezuela, believing that he could direct farm resources more efficiently than the private sector, food production dried up and the result was once again starvation. In China, Chairman Mao Zedong thought he could rapidly industrialize his country by directing farmers to move into cities and work in factories instead. Again, millions of people starved. Are you beginning to sense a pattern?
I’m not suggesting that we’re on the brink of a famine in the United States, and so far Biden is only floating the Supply Commander idea for supplies related to the coronavirus, not food. We’re more likely to see something akin to President Franklin Roosevelt’s National Recovery Administration, which fixed prices, stifled competition, and prolonged the Great Depression by at least a decade. But medical equipment being correctly allocated is pretty essential to saving lives, so it’s concerning that he thinks a process that has never been shown to work is a good idea. If he thinks a Supply Commander can beat the market in medicine, why not in food, housing, energy, and other major sectors of the economy?
The worst part of all of this is that politicians who believe in this sort of centralized power have historically been immune to evidence that it doesn’t work. When things start to fall apart, they never reverse course, they just double down. If the Supply Commander idea is actually put into practice, we can confidently expect it to grow in size and scope, as all government programs inevitably do, even as shortages and rationing deprive patients of needed care.