To understand this, let’s start with a famous libertarian story: “ The Pencil.” The idea is that no one person can make a pencil. After all, a seemingly simple pencil is composed of wood, graphite, yellow paint, the metal that contains the eraser, and the eraser rubber itself. But creating each of these things in-house would require running a variety of different agricultural and mining operations. So instead of having one person do all of that, the capitalist system makes a pencil in a “networked” way. We use prices as an API, so that different organizations can spin up, produce components in a cost-effective way, use their profits to grow or maintain themselves, and adapt without coordinating with each other. But that was then. Maybe Chinese Communism with the digital yuan is different. What happens if you have a computer system which really does know about every vendor, that has every record of every payment, that can actually see the global supply chain, and that knows every single person (or robot) required to make that pencil? It is a large, but finite problem after all. Maybe such a system can solve Hayek’s calculation problem. We already have proof points for this. If you run a two-sided marketplace, you’ll find contra Hayek that not all knowledge is local. For example, Sidecar lost to Uber because drivers set prices themselves, as opposed to setting them centrally. Hayekians would agree that Sidecar’s approach was optimal: drivers have local knowledge and central planning can’t work. But Uber’s central planning did work. They had a global view of supply & demand. And riders wanted speed, not price shopping. So, that’s what this win scenario contemplates. If China integrates AI with the digital yuan, and makes their entire economy computable, at their scale they might actually be able to make a pencil. And everything else.
Link:: The Network State