From “The Road to Serfdom“:
The idea of complete centralization of the direction of economic activity still appalls most people, not only because of the stupendous difficulty of the task, but even more because of the horror inspired by the idea of everything being directed from a single center.
If we are, nevertheless, rapidly moving toward such a state, this is largely because most people still believe that it is must be possible to find some middle way between “atomistic” competition and central direction.
Nothing, indeed, seems at first more plausible, or is more likely to appeal to reasonable people, than the idea that our goal must be neither the extreme decentralization of free competition nor the complete centralization of a single plan but some judicious mixture of the two methods.
Yet mere common sense proves a treacherous guide in the field. Although competition can bear some admixture of regulation, it cannot be combined with planning to any extent we like without ceasing to operate as an effective guide to production. Nor is “planning” a medicine which, taken in small doses, can produce the effects for which one might hope from its thoroughgoing application.
Both competition and central direction become poor and inefficient tools if, they are incomplete; they are alternative principles used to solve the same problem, and a mixture of the two means that neither will really work and that the result will be worse than if either system had been consistently relied upon.
Or, to express it differently, planning and competition can be combined only by planning for competition but not by planning against competition.
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