Dwarkesh Patel: evaluation

Transcript context

…Well, first of all, it’s a war economy, essentially. You’re putting all your money into having a big military. Russians define greatness—this is part of it—as being a big power, and its a military power with territory. Most countries in wartime mobilize for the military. This country did it in World War II. All kinds of rationing, we’re not using market prices. You’re setting different prices, giving people ration cards and things. The thing about the Soviets is they kept it forever. They never got rid of it. So that’s one piece. Another problem with the Soviet Union is all of the data. So I don’t know what data you’ve seen, and I know the data I’ve seen. It’s hard to know because the Ruble is a non-convertible currency and a lot of things they measured in weight and other things. Like they’re the greatest TV producer in the world, they said. Why? Because they made the heaviest TVs in the world. I’m serious, when I was there this was it. They would spontaneously combust, which is not the normal thing a TV should do for you, burn down the apartment building. So they’re going to measure their heavy TVs as a positive, and the Ruble is non-convertible. So there was a guy named Murray Feshbach, and I can’t remember which part of the US government he was in, but he was really good at looking at their statistics and then adjusting them. But people didn’t know. I gave you the CIA ones. The CIA, they’re not stupid people. They’ve got the best data they could find and they’re coming up with 20% of the Soviet budget is probably devoted to the military. After the Cold War is over, they’re going, “Whoops, we missed.” It’s at least double that and maybe triple. So it’s really hard to know even with the statistics you’re getting. Certainly what Paul Samuelson had wouldn’t be accurate. It’s just a guess. My favorite example of this is that there were top-down commands that you had to produce a certain amount of steel. A steel factory would then be incentivized to make thicker bars of steel rather than thinner bars because that would count as greater production, except a lot of inputs actually do require the thinner sheets. So then the other factories have to thin down the steel, but that also counts towards GDP. So producing the inefficient steel and then cutting it down to size is both being double-counted towards GDP. Oh, and just the whole waste of it. Like the heavy TVs, they probably have four times the inputs that they need to make them that would be good for other things. It’s this notion that you can actually plan an economy. Prices are a miracle. Good old Adam Smith, the invisible hand. Prices are the way to go and markets, it’s more efficient.…

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