Central planning Quote by Daron Acemoğlu
““The fact that bonuses were paid monthly also kept everyone focused on the present, while innovation is about making sacrifices today in order to have more tomorrow. Even when bonuses and incentives were effective in changing behavior, they often created other problems. Central planning was just not good at replacing what the great eighteenth-century economist Adam Smith called the “invisible hand” of the market. When the plan was formulated in tons of steel sheet, the sheet was made too heavy. When it was formulated in terms of area of steel sheet, the sheet was made too thin. When the plan for chandeliers was made in tons, they were so heavy, they could hardly hang from ceilings. By””
About This Quote
Source Speech: Economic Policy Lecture, 2020
Short‑term incentives can distort long‑term innovation, and rigid planning cannot replicate market coordination.
In simple terms: Bonuses focus on now, hurting future progress.
Key Takeaway
Balance incentives with future goals.
Themes
economics
innovation
incentives
planning
market dynamics
Mood
reflective
analytical
Type
theoretical
critical
When to use this quote
- corporate strategy
- public policy
- R&D management
- budgeting
Key Concepts
principal‑agent problem
invisible hand
resource allocation
Questions to Reflect On
- How can we design rewards that promote both present performance and future innovation?
- What planning methods better mimic market signals?
A Different Perspective
Over‑reliance on bonuses may reduce intrinsic motivation.
