Central Planning Never Works

Why do we never learn?

Tax breaks for companies to relocate to another state always sounds good.  Promises of jobs are plentiful which in turn creates a larger tax base.  More jobs means more money for people to re-invest in the local economy, which in turn creates more jobs.

Doesn’t work.  Never has.

This article is about a data center company with plans to relocate to Grand Rapids, MI.  One catch, they want some serious tax breaks from the State of Michigan.

Four reasons why Central Planning is a bad idea:

  1. It never works – in the history of the world no economy was centrally planned well.  Or said another way, the economy is too sophisticated and dynamic for a group of people to be able to manage it, grow it and regulate it.
  2. It requires picking winners and losers – Winner (in this case) the entity receiving the tax breaks.  Loser – everyone else.  No one else is getting tax break (thus far) and in all likelihood Joe Q Taxpayer is going to have pay for those tax breaks.
  3. Creates unintended consequences – Putting together points 1 and 2, the economy is dynamic and will surely respond to this type of central planning.  In fact, according to the article, it has begun to respond.
  4. Creates more Central Planning – Building off of point #2 and #3, the central planners will respond with more planning.  They will want to compensate the losers (who wouldn’t?) and make sure they correct some of the unintended consequences.  However, by planning more they continue the cycle, only bigger and more pervasive.

It just doesn’t work.  Why not lower taxes for all?  Make it more attractive for all to relocate to Michigan?


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