Cosma Shalizi&#x27;s article is correct, as far as it goes (as far as I know). But some of the commenters here did not read the whole thing. He adds, capitalist free markets can&#x27;t optimize either:
&#x27;If it’s any consolation, allowing non-convexity messes up the markets-are-always-optimal theorems of neo-classical&#x2F;bourgeois economics, too. (This illustrates Stiglitz’s contention that if the neo-classicals were right about how capitalism works, Kantorovich-style socialism would have been perfectly viable.) Markets with non-convex production are apt to see things like monopolies, or at least monopolistic competition, path dependence, and, actual profits and power. (My university owes its existence to Mr. Carnegie’s luck, skill, and ruthlessness in exploiting the non-convexities of making steel.) Somehow, I do not think that this will be much consolation).
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&#x27;Both neo-classical and Austrian economists make a fetish (in several senses) of markets and market prices. That this is crazy is reflected in the fact that even under capitalism, immense areas of the economy are not coordinated through the market.
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&#x27; The conditions under which equilibrium prices really are all a decision-maker needsto know, and really are sufficient for coordination, are so extreme as to be absurd.(Stiglitz is good on some of the failure modes.) Even if they hold, the market only lets people “serve notice of their needs and of their relative strength” up to a limit set by how much money they have. This is why careful economists talk about balancing supply and “effective” demand, demand backed by money.<p>&#x27;This is just as much an implicit choice of values as handing the planners an objective function and letting them fire up their optimization algorithm. Those values are not pretty. They are that the whims of the rich matter more than the needs of the poor; that it is more important to keep bond traders in strippers and cocaine than feed hungry children. At the extreme, the market literally starves people to death, because feeding them is a less”efficient” use of food than helping rich people eat more.&#x27;<p>The article has another weakness, which is that Shalizi does not seem to understand how capitalist corporate planning works in real life. Increasingly, whole supply chains are balanced to point of sale events and other signals of incipient demands. And those whole supply chains do not do open market exchanges, the members are contractually bound. It&#x27;s not optimal, but it&#x27;s good enough. And all of that could be done without prices or money.