Full text: Study week on the econometric approach to development planning

scope to individual desires and initiatives and, like physical 
or biological systems, is regulated by means of viable governors 
set in motion by the system itself and not by any outside organ 
of control. To its other virtues, therefore, a final one is added: 
compatibility in the highest degree with human freedom. 
There was a time, not so long ago, when the rulers of the 
world wished to believe this story and, generally speaking, suc- 
ceeded in doing so. But the imperfections of laissez faire as 
a mode of economic organisation are so glaring that it has 
been either thrown out altogether, as in the socialist countries, 
or modified out of all recognition by state intervention even 
in countries devoted to the principle of free enterprise. So 
angry have men been at the abuses, injustices and waste of 
resources around them, so strong has been their desire for 
change, that they have shown very little appreciation of the 
good points of the system they were destroying and so have 
made very little effort to incorporate them in the system that 
was to take its place. 
The purpose of this paper is to discuss how economic mo- 
dels might help us to reconcile the advantages of central plan- 
ning with those of individual initiative. The basic ideas are 
simple: first, whether we consider a private firm or a govern- 
ment agency, sensible decisions cannot be reached unless there 
is an adequate amount of information flowing within the system 
and available in the right place at the right time; and second, 
since some kinds of information are expensive, if not impos- 
sible, to transfer from one decision centre to another, it makes 
a great deal of difference which decisions are taken at which 
As to the first point, private firms and government agencies 
usually try to enrich the flow of information in their neigh- 
bourhood by making special surveys, projections and so on. 
But just because the economy is a system, because, that is, its 
different parts are interdependent, the task is very difficult for 
any institution acting in isolation. Without a centralised ser- 
[1] Stone - pag. 

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