
In Soviet Union, Optimization Problem Solves You (2012) - vezzy-fnord
http://crookedtimber.org/2012/05/30/in-soviet-union-optimization-problem-solves-you/
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rdtsc
Speaking of that I recommend watching Pandora's Box documentary. It is fun and
pretty well made (although the quality on youtube is rather low).

Here is where they start talking about Gosplan -- the central economic
planning department:

[https://www.youtube.com/watch?feature=player_detailpage&v=h3...](https://www.youtube.com/watch?feature=player_detailpage&v=h3gwyHNo7MI#t=1493)

It is funny to hear how they tried to control things. At some point during
Stalin's time they planned how many people to arrest and where. No matter if
they were guilty or not. The it talks how they tried to modulate various
controls -- they measured success by amount of raw material consumed, so all
of the sudden they ended up with oversized couches, and trains were being run
for thousands of miles empty just to burn the fuel so everyone can get a bonus
during the years' end. Then they started to fix prices for everything. That
ended in disaster of course and so on.

Then have to like the taxi driver driving past Gosplan and saying "how they
hell do they come with such ridiculous plans".

EDIT: They also mention Victor Glushkov, the father of Soviet Cybernetics.
Here is a documentary about him as well. It is putting it in good light as if
Soviet Cybernetics used in planning would be successful. It is a propaganda
film. But it is fun to watch:

[https://www.youtube.com/watch?v=lMS1hBhV2-4](https://www.youtube.com/watch?v=lMS1hBhV2-4)

He talked about paper-less office and economy back in the 60s.

~~~
digi_owl
So yet another case of Goodhart's Law, this time perhaps before Goodhart
formulated it?

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bhaugen
Cosma Shalizi'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't optimize either: 'If it’s any consolation, allowing non-
convexity messes up the markets-are-always-optimal theorems of neo-
classical/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). [...] '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. [...] '
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.

'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.'

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's not optimal, but it's
good enough. And all of that could be done without prices or money.

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pinewurst
Red Plenty (the book mentioned at the top of this) is truly great and well
worth tracking down.

~~~
Pamar
Seconded, and Backroom Boys [1] by the same author, is very enjoyable, too,
even if Red Plenty is really in a league of its own.

1: [http://www.amazon.com/The-Backroom-Boys-Secret-
British/dp/05...](http://www.amazon.com/The-Backroom-Boys-Secret-
British/dp/0571214975)

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jeremysalwen
Am I the only one suspicious of his claim "It will not do to say that it’s
enough for the planners to approximate the optimal plan...This route is
blocked."? It seems to me that in all my experience, computational complexity
even for approximations rarely matches up with practical computation required.
Computational complexity is worst case, doesn't understand the concept of
"good enough for our application" when it's not mathematically defined.

For example, what's the computational complexity of training a deep neural
network? Probably something pretty horrendous, even if you say it only has to
be approximate within a factor of the optimal weights, and you allow it to
fail some percent of the time, etc, etc. You could probably write an article
about how training neural networks in the lifetime of the universe is
impossible even in theory, if you defined "training a neural network" by
starting out with the problem of finding the optimal weights, and then
relaxing the requirements. But that entirely misses the point that training a
neural network is not fundamentally about finding the optimal weights, but
finding some weights which are good enough, which is measured in terms of real
world performance in comparison to the alternatives.

Likewise, it seems like the discovery of the mathematics of linear
optimization was mixed too strongly with the real-world problem it was trying
to solve. The question is whether it is computationally feasible to outperform
market based economies using this technique, and that's the only question
that's really make-or-break it for the math side of things.

(Of course I may have misunderstood something, feel free to correct me)

~~~
doctorpangloss
Approximation of integer programming problems (what the author is talking
about more precisely) is actually pretty well studied. From Wikipedia:

> NP-hard problems vary greatly in their approximability; some, such as the
> bin packing problem, can be approximated within any factor greater than 1
> (such a family of approximation algorithms is often called a polynomial time
> approximation scheme or PTAS). Others are impossible to approximate within
> any constant, or even polynomial factor unless P = NP, such as the maximum
> clique problem.

> NP-hard problems can often be expressed as integer programs (IP) and solved
> exactly in exponential time. Many approximation algorithms emerge from the
> linear programming relaxation of the integer program.

It turns out that shortest paths finding (via Bellman-Ford), dynamic
programming and linear programming are all interrelated. Figuring out how your
linear program can be represented as some other problem, like shortest paths
finding, directly yields to generic approximation.

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js8
I haven't read the book, but I believe one of the largest problems that
centrally-planned institutions (like large corporations) face is that the
planners tend to remove redundancy too much (in the pursuit of minimal cost).

For example, let say you have chain of 50 products that need to be made into a
product. If each of these is produced by one factory and supplied into
another, and each factory is late for a week, your new thing is one year late!

This was a frequent problem, that the planners tended to designate one
producer of some product, in order to save costs. But the product wasn't good
enough or late, and then you had a cascade of failure ending up in shortages
of goods.

So there seems to be a tradeoff between redundancy and cost. What is optimal?
Would you think it's optimal to say, send the cheapest possible rocket to the
orbit, with no backup systems?

However, in the free market, you cannot control redundancy. It just happens
through freedom. That pushes it out of the cost optimum but makes it lot more
robust, and winning in the real world. A good example of "worse is better"
indeed.

I also don't think the actual planning problem is very difficult. There are
multinationals that are larger than some state economies and still can do
that. So I think traditional economic textbook explanations of central
planning failures are wrong, because they ignore the tradeoff.

~~~
digi_owl
One example of this is the Toyota Just-in-time system, where i believe they
have a number of suppliers, some of them mom and pop producers in a basement
or loft somewhere, that are gathered up and delivered to the factory as
needed.

And i think you find a structure somewhat similar on Germany as well, where
quite a bit of the parts manufacturing is done by smaller companies dotted
around the nation.

As for traditional economic textbooks being wrong by ignorance, no surprises
there. Check out Steve Keen's book on the topic, Debunking Economics.

Also, as best i can tell the soviet system was pretty much a perversion of
what Marx was musing about back in the day. I think he even told Lenin that
the latter was barking up the wrong tree.

~~~
js8
Yeah, I agree with you, I am sure some places and configurations deal with the
problem better.

And I am fan of Steve Keen too.

