Martin Sandbu, the FT’s European economics commentator, argues that AI may revive the century-old socialist calculation debate — the argument over whether central planning can rationally allocate an economy’s resources, or whether only markets can. His case: the strongest 20th-century argument against planning was always informational, and AI is what dissolves it.

The debate Hayek “won”

  • In the interwar years, Austrian economists Ludwig von Mises and Friedrich Hayek argued markets would always beat central planning. Oskar Lange and Abba Lerner showed planning could work in theory — by mimicking markets with centrally set prices and adjusting production plans until bids matched.
  • Hayek’s 1945 “The Use of Knowledge in Society” was the killer blow: the knowledge needed to allocate resources well is dispersed, local, and mostly lives in people’s heads. Market prices carry that knowledge in a single number; no central planner could ever hope to collect it.
  • For half a century that argument stood — underlined by the material failure of socialist regimes.

What AI changes

  • The data problem is dissolving: prices can be comprehensively scraped (the Harvard–MIT “Billion Prices Project” has done it since 2008), inventories and order books are digitized, the internet of things multiplies what gets recorded — and organizing unstructured information is precisely what AI is good at.
  • AI can go beyond prices: ad algorithms already predict what people want well enough to fund Big Tech. A super-AI with access to all the data our devices record “would surely bury Hayek.”
  • Markets also get a lot wrong: externalities, addiction, bubbles and busts. Sandbu’s provocation: why would an AI asked to allocate resources merely follow the highest bids, instead of calculating the most efficient allocation it can find itself?

The political questions

  • AI removes “perhaps the strongest” 20th-century argument against central planning — not proof that AI brings socialism, but a signal that economies adopting AI for decisions will look “increasingly planned and decreasingly market-shaped.”
  • Would the libertarians who lead AI development accept AI-powered planners over the financial markets that so favor them? Could a skeptical public be won over by more “rational” economic decisions that deliver more than existing capitalism?
  • Open question: could a super-AI empowered to allocate resources overcome the coordination failures that hold back the existing economy — say, tolerate our very slow rate of decarbonisation?

Sandbu doesn’t claim AI brings socialism. He claims the Hayekian verdict was always contingent on governments lacking the informational and computational capacity for planning to outdo markets — and that AI is what ends that contingency. Whether that’s relief or disappointment, he leaves to the reader.