A. The market as an instrument of governance: from price reforms to NEV subsidies

Although the Chinese economy is defined by state ownership, a long trajectory of economic policy reforms has accorded to the market a prominent role in allocating resources. Following Mao’s death in 1976, the new leadership of the Communist Party under Deng Xiaoping initiated a program of experimental gradualism that sought to introduce market elements in the Chinese economy.Footnote ²⁴ The pervasive influence of the neoliberal economic paradigm notwithstanding, the reform program did not aspire to orchestrate a transition to a capitalist market economy. Instead, it consciously sought to operate within existing structures of state ownership and state control of financial resources, while remaining ideologically within the framework of socialist thought and tradition.Footnote ²⁵ In theoretical terms, the view that was gaining ground was that economic planning and the market were wrongly understood as mutually exclusive, when they could possibly be synergetic.Footnote ²⁶ Production targets solely set by means of central planning were perceived as susceptible to arbitrariness and, therefore, as not sufficiently geared towards social needs.Footnote ²⁷ Introducing competition among SOEs, allowing market pricing for certain commodities and permitting a wholly private sector in small scale production, trade, and services, combined with fiscal decentralisation and openness to foreign investment became the key axes of the reform program.Footnote ²⁸

Price reform did not mean thorough price liberalisation. Contrary to the logic of the popular, at the time, ‘shock therapy’ that advocated immediate price liberalisation, People’s Republic of China (PRC) continued to plan the industrial core of the economy, setting set the prices of essential goods while liberalising the prices of surplus output and nonessential goods.Footnote ²⁹ Discussions around reform suggested that, ‘under the guidance of state planning, enterprises should consciously employ the law of value to set prices’.Footnote ³⁰ Although since then the percentage of prices that are set or guided by the government has dropped,Footnote ³¹ China retains controls for major commodities, like corn or certain metals. The conceptual disassociation of market economy from capitalism also entailed an understanding of price controls as tools that can be employed for guiding and directing the market economy. Economic theorists like Liu and Zhao, albeit welcoming the market opening, conceded that relying solely on consumer preferences (and thus demand and supply) would not necessarily lead to the optimal allocation of resources.Footnote ³²

It is in the light of such a historical understanding of the market as a malleable instrument of governance that the creation of a market for NEVs should be analysed. A crucial step for the creation of a market was a form of price engineering that would manipulate demand and supply. In the eyes of the planners, the NEV industry had to be heavily subsidised to decrease upfront purchasing costs and artificially induce consumer demand, which in turn would drive private investment. As part of its broader government-led industrial policy, the state also expanded financial support for research and development, including significant subsidies and supply chain access to critical minerals for battery manufacturing.Footnote ³³ The original NEV pilot program was launched in the period 2009–2012 and focused both on public and on private procurement.Footnote ³⁴ Financial subsidies were provided to encourage NEV procurement through direct payments to approved auto manufacturers on the basis of fuel-saving capacity and, later on, electric range.Footnote ³⁵ The subsidies were eventually coupled with further monetary incentives for consumers, including purchase tax exemptions, vehicle registration tax exemptions, and insurance discounts, as well as import duty reduction for NEV parts and equipment for producers.

Subsidies have generally been praised for their effectiveness in instigating consumer demand, driving research and development, and stimulating the development of the NEV industry.Footnote ³⁶ At the same time, it has been suggested that subsidies have led to the dependence of production enterprises, with some enterprises even resorting to fraud to benefit from such schemes.Footnote ³⁷ Other objections have been that the subsidies program has not been overall welfare maximising, as the costs exceed the benefits,Footnote ³⁸ or that the effect of subsidies for NEV diffusion is anyway significantly weaker than that of key technological breakthroughs.Footnote ³⁹

Public investment has also increasingly focused on public charging infrastructure.Footnote ⁴⁰ For this, China has not only relied on subsidies but has also involved the utility companies State Grid and China Southern Grid. The government also announced an ambitious ‘new infrastructure’ plan, which lists charging infrastructure among its top priorities, enabling administration at the local level (ie, cities) to install about 1.2 million chargers by 2025.Footnote ⁴¹ Public investment and market incentives for consumers and producers have been crucial in artificially constructing a market for NEVs. Yet, any success of market incentives has to be seen in tandem with the relevant regulatory controls deployed by China.

B. Creating the NEV market by means of regulatory controls and incentives

Regulatory controls have been not only commonplace during PRC’s history but also necessary elements for the formation of markets in post-Maoist China. A good illustration is how price reform was tied to the decollectivisation of agriculture, as households were accorded the right to sell any surplus over the required quota to the collective at market prices. The subsequent rise of agricultural production and the accrual of savings by the agricultural population led to the formation of Township and Village Enterprises (TVEs), the unexpected success of which was crucial in the embedment of market competition and entrepreneurialism.Footnote ⁴² Yet, the emergence and the success of TVEs would have likely not been possible without the mobility controls imposed by the strict household registration system that dated from 1955.Footnote ⁴³ Designed as a mechanism to maintain the gaping wealth disparities between rural and urban populations, the household registration system restricted internal mobility. This made TVEs the sole channel that could canalise the accumulated wealth that resulted from the agricultural reform.Footnote ⁴⁴ In that way, the development of a socialist market economy was built upon and made possible by a substratum of top-down regulatory controls.

Regulatory controls and immunities have also been crucial for the creation of the NEV market, even if the subsidies program has been more on the spotlight. The first and most important of such regulatory measures is the NEV immunity from car ownership and traffic restrictions that otherwise apply to ICEVs. Indeed, a number of cities in China have imposed ICEV purchase restrictions to alleviate urban congestion. Two different policies have been advanced: The license plate lottery, where residents must take part in a monthly draw to get a license plate (eg, in Beijing), and the license plate auction, where residents need to bid and pay for license plates (eg, in Shanghai).Footnote ⁴⁵ Crucially, the purchase of NEVs is exempted from such restrictions. In addition, certain cities also impose driving restriction policies, such as prohibiting ICEVs on certain days depending on the last digit of their plate number.Footnote ⁴⁶ Such restrictions are aggravated during days of heightened air pollution. Once again, these limitations do not apply to NEV drivers. According to empirical research, these regulatory incentives have been the most influential for the consumer uptake of NEVs.Footnote ⁴⁷

C. The role of foreign investment

While public investment and regulation have been the primary drivers of China’s NEV market, an important piece of the planning puzzle is reliance on foreign investment. Foreign investment has been a consistent driver of growth for China’s economic policy. The reform period that ended Maoist policies of self-reliance first signaled a recognition that foreign investment provided an access to global capital that was necessary for the modernisation of science and technology – what Deng called ‘the primary force of production’.Footnote ⁴⁸ While the first openings were tentative and concentrated in Special Economic Zones (SEZs), their early success eventually led to their acceptance and diffusion in the late 1980s and early 1990s.Footnote ⁴⁹ Besides the low cost of labor, foreign investors were lured by preferential tax regimes, facilitation of licensing, and exemptions from import/export duties in SEZs.Footnote ⁵⁰ Investment inflows have been particularly large in the manufacturing industry.Footnote ⁵¹ At the same time, investors have been subject to restrictions regarding the ownership structure.Footnote ⁵² Initially, the expectation was that foreign investors would furnish machinery and resources which, combined with low-cost Chinese labor, would generate output destined for export.Footnote ⁵³ However, and despite worries that reliance on imports might create relations of dependence, export-led industrialisation never meant that there was no space for this output in the internal market.Footnote ⁵⁴ Already from the outset of the reform era, and increasingly ever since, China has allowed selected joint ventures to target the domestic market – among other reasons, to enhance local competitiveness and to facilitate technology transfer.

Unsurprisingly, when it comes to NEVs, China has not departed from the strategy of attracting foreign investment. This was initially marked by the cooperation with Tesla, Inc., which was itself coupled with an ad hoc liberalisation of the foreign investment regime for automobile manufacturing. The agreement with Tesla Inc. was reached in 2018, while China introduced the ‘Special Administrative Measures for Foreign Investment Access (Negative List)’, officially enabling wholly foreign-owned enterprises to build NEV plants in China.Footnote ⁵⁵ Besides gaining access to a market with enormous potential, Tesla Inc. benefits from the regime established for NEVs, including financial subsidies and preferential tax rates. For China, Tesla Inc. could constitute a catalyst that enhances local competitiveness, as domestic companies must now face an established brand name in the quest for a NEV market share.Footnote ⁵⁶ At the same time, as Tesla Inc. increasing sources key components locally,Footnote ⁵⁷ the spillover effect it can cause is projected to deepen the Chinese electric vehicle supply chain. Besides this economic rationale, it has been suggested that Tesla models could function as a status symbol for the urban elite, thus energising the domestic market and increasing demand.Footnote ⁵⁸

Another example of how China has been attempting to utilise foreign investment to construct a NEV market is offered by the recently ‘in principle’ concluded (but not yet ratified) Comprehensive Agreement on Investment with the EU (CAI). The CAI provides for a special regime of market liberalisation with regards to NEVs. It specifies that NEVs do not fall under the general reservations assumed by China against national treatment obligations in the automotive sector. ^{Footnote 59} While it retains certain specific limitations on market access for new NEV investors to prevent overcapacity, ^{Footnote 60} these limitations are lifted when the total investment amount for the NEV investment project is no less than USD 1 billion. ^{Footnote 61}

What transpires from China’s eagerness to grant market access to established and internationally renowned foreign-owned manufacturers is that the national priority remains the achievement of the set developmental goals through the establishment of a leading market for NEVs, even if this does not necessarily coincide with the protection of domestic companies. This is consistent with the turn to ‘market dominance’ and the guideline that promotes ‘the survival of the fittest’ companies as part of the future strategy for NEVs.

D. Transition to ‘Market Dominance’?

The role of government intervention and planning within the construction of the NEV market in China was never meant to be static. Rather, the creation of this essentially new market was conceived already from its inception as an evolutive process of guiding private investment and increasingly relying on market-based coordination. As such, it should not come as a surprise that the recent, future-oriented New Energy Vehicle Industrial Development Plan for 2021 to 2035 (‘Plan 2021–2035’) sets ‘market dominance’ as its first basic principle. The Plan’s predecessor – the Energy-Saving and New Energy Vehicle Industry Plan for 2012 to 2020 (‘Plan 2012–2020’) – outlined a commitment to a combination of ‘government guidance and market driving’, while highlighting the crucial role of planning for the development of NEV industry and the need for regulatory incentives to create consumer demand. Yet, it also laid out that once the industry entered its mature stage, it must be the market that occupies the driver’s seat in allocating resources and promoting the large-scale commercial application and diffusion of NEVs. As the NEV industry indeed expanded at a fast pace during the first Plan’s duration, the current Plan of 2021–2035 accords a more pronounced role to the market mechanism, while still operating within the ideological framework of ‘Socialism with Chinese Characteristics’.

The goal of the current Plan is now to unequivocally prioritise market coordination and strengthen the dominant position of enterprises in production. The redrawn role of the state for the future is imagined along almost ordoliberal lines. Its tasks are primarily limited to creating a unified regulatory environment along the lines of ‘delegating power, regulating services’,Footnote ⁶² securing market competition and promoting ‘the survival of the fittest’Footnote ⁶³ enterprises, and supporting the industry through infrastructure development, building capacity for technological innovation, and preferential tax policies. A central aspect of the plan that contrasts with its predecessor’s emphasis on government-induced demand is the phasing out and ending of subsidies. ^{Footnote 64} Instead, the current plan shifts to taxation exemption, while maintaining subsidies for charging infrastructure. This showcases the shift of focus away from directly instigating consumer demand and on advancing the general infrastructural and regulatory conditions for the NEV industry to flourish.

Part of the Plan is to enhance the NEV mandate policy, which was introduced in 2018. This policy assigns to NEVs a specific number of credits depending on metrics (eg, electric range, energy efficiency, power of fuel cell systems) and sets annual mandatory requirements of NEV credits for auto manufacturers.Footnote ⁶⁵ At the same time, and in line with the transition to a more predominant role for the market mechanism, it allows auto manufacturers to sell NEV credits to other companies or to use them to offset corporate average fuel consumption credit deficits – thus integrating NEV mandate policy with the carbon trading mechanism. Following the phasing-out of subsidies, credit revenues are projected to be the main financial benefits for NEV producers.Footnote ⁶⁶ Failure to meet NEV credit requirements (or fuel consumption credits) will result in denial of model approval and constrained market access. This ‘dual-credit policy’ is partially modeled after California’s Zero Emission Vehicle (ZEV) program. Choosing this program to model the dual-credit policy after is no accident. As will be discussed in the next section, the ZEV program constitutes one of the most ambitious USA policies of central coordination for the achievement of set objectives, in a market where otherwise coordination is entrusted to price signals and consumer preferences. Similarly, China’s ‘transition to market dominance’ with regards to NEVs is not imagined as the abandonment of planning altogether but rather as a change in the register of planning. Considering the level of maturity of the NEV industry, it is henceforth not necessary to plan a market but only to plan within the market.

A. Relying on existing markets?

The USA has the second largest NEV market after China. Yet, contrary to China’s approach of heavy subsidising, regulatory controls, and committed support to research, development, and infrastructure, the USA had until recently refrained from setting the expansion of the NEV market as an economic and social objective. While a limited range of policies have attempted to provide market incentives that would support growth of the industry, the sector has not benefited from the type of coordinated planning as has been the case in PRC. Federal subsidies have been relatively weak, with only 30 per cent of electric cars sold in the USA in 2020 benefiting from federal tax credits.Footnote ⁶⁷ Furthermore, the recent efficiency and carbon dioxide emissions standards that regulate the USA market – the Safer Affordable Fuel-Efficient (SAFE) Vehicle Rules – while in principle still favouring the uptake of NEVs, in fact, set weaker energy efficiency targets than the previous Corporate Average Fuel Economy (CAFE) standards.Footnote ⁶⁸

At a state level, NEV-supporting policies have been more ambitious.Footnote ⁶⁹ Numerous states have adopted a range of purchase subsidies, supplemented by more minor consumer incentives related to vehicle operation (exemptions from or reductions in state license and registration fees and emissions inspections), parking incentives, or access to high-occupancy vehicle lanes. What stands out as an example of planning, in principle comparable to the Chinese policies, is the ZEV regulation of California, subsequently adopted by a number of USA states and used as a model for China’s NEV mandate policy.Footnote ⁷⁰ The ZEV regulation requires auto manufacturers to produce a certain number of NEVs as a quota of their overall production.Footnote ⁷¹ This is also a credit system on the basis of electric driving range, where credits above compliance can be traded in secondary markets. The ZEV program was recently followed by Executive Order N-79-20, according to which all sales of passenger vehicles must be NEVs by 2035, with the goal of reaching carbon neutrality by 2045.Footnote ⁷²

A similar regulatory model for the promotion of NEVs has been followed until now in Europe. At an EU level, broader commercialisation of NEVs has been supported through mandatory CO2 emission standards for passenger cars, first introduced in 2009 and expanded in 2014 with Regulation No 136/2014.Footnote ⁷³ The manufacturing of NEVs is incentivised, with low emission vehicles counting as a form of ‘super credits’ in meeting the targeted fleet average set for the manufacturer.Footnote ⁷⁴ At a national level, certain European states have also significantly supported the establishment of NEV markets. Some of the most ambitious incentivising policies have been adopted in Norway – in many ways an outlier case of tailoring NEV policy to the achievement of desirable targets, making it the country with the largest NEV fleet per capita. As part of numerous monetary incentives, Norway has exempted NEVs from its otherwise high purchase taxes, while also setting the goal of all passenger vehicle sales to be NEVs by 2025.Footnote ⁷⁵ Although with less intensity, NEVs have been promoted through different policies in other European countries.Footnote ⁷⁶

What transpires from these instances is an intention of public authorities to curb CO₂ emissions and support the establishment of a NEV market. However, with the exception of Norway, the promotion of the NEV industry did not extend far beyond emission standards regulation. Contrary to China that explicitly sought to establish a NEV market by means of strong subsidising and heavy-handed regulatory policies, in the USA and the EU the promotion of the NEV market was conceived as an adjunct to emission standards regulation. Presumably, and besides the influence of lobbying and corporate interests,Footnote ⁷⁷ this indicates a reluctance to engage in demand-side economics that would distort prices, relying instead on technology progress as the safest avenue for eventual NEV diffusion. The leading position in the global NEV market assumed by China, as well as the rising awareness of climate change and the need to orchestrate sustainability transitions at a pace that exceeds change in consumer preferences, has led both the USA and the EU to partially revise their strategies, enhancing elements of planning and central coordination.

B. Elements of market planning in the EU Green Deal and the USA infrastructure and inflation reduction acts

In both the USA and the EU, addressing the socio-economic effects of the COVID-19 pandemic, combined with increased awareness of climate change, has meant a partial turn to the state and more ambitious forms of central economic coordination. Increasing the uptake of NEVs by means of deliberate policies has been, even if in different degrees, part of that turn.

In the USA, the Biden Administration released an EV Charging Action Plan as part of the Infrastructure Investment and Jobs Act.Footnote ⁷⁸ The plan involves an investment of $5 billion up to $7.5 billion funding for states with the goal to build a nationwide charging network. This is considered a critical move for the achievement of the overarching objective of 50 per cent NEV sales out of all car sales by 2030. The more recent Inflation Reduction Act includes a tax credit for NEVs but only under conditions related to the automobile’s assembly location and battery sourcing.Footnote ⁷⁹ Not unlike China, the USA introduces conditionalities that are meant to strengthen and support domestic industry and national strategic autonomy.

Although the Infrastructure Law and the EV Charging Action Plan do not outline further measures to support the industry, such as subsidies and public investment, they signal the intention to develop a new, centrally coordinated strategy with regards to battery manufacturing. Outlined in the 100-day reviews of the White House on ‘Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth’, a key component of the NEV strategy is to ‘reshore’ production and manufacturing of NEV batteries and components. The report repeatedly refers to China and, to a lesser extent, to the EU as examples of government-led industrial policies, signalling the risk that the USA is left behind in international competition if it does not take ‘swift and coordinated action’.Footnote ⁸⁰ For example, as the USA lacks domestic processing capacity, raw materials have to be shipped abroad for processing – a segment of the value chain where China consistently invested and now has a globally leading role. Referring to its ‘massive subsidies’ for raw material processing and cell production, as well as to the direct subsidies of the NEV industry, the Report underlines that ‘China in particular has created a distorted supply chain landscape through non-market or government intervention from state-controlled firms, both domestically and in developing economies’.Footnote ⁸¹ Among its recommendations, the Report stresses supporting demand for EV batteries (eg, by supporting the building of a charging network or by electrifying federal vehicles), enacting new Federal grant programs to catalyse private capital to invest in processing capacity of raw materials, and turning to domestic extraction of critical minerals, while also using content requirements under trade agreements, like the United States–Mexico–Canada Agreement, that offer incentives to localise battery production. Acting upon the aspirations enclosed in this report, the government released funding for battery materials refining and production plants as part of the Infrastructure Law, passed the conditionalities related to the NEV tax credit in the Inflation Reduction Act, while it is poised to invoke the Defense Production Act to increase the availability of critical minerals.Footnote ⁸²

The EV Charging Action Plan, the conditional tax credit of the Inflation Reduction Act, and the recommendations of the Report regarding battery manufacturing mark a shift from earlier federal policies that largely relied on decentralised market outcomes for the development of the NEV industry. There is a distinct aspiration for centralising economic coordination and outlining a forward-looking, government-led industrial policy, drawing inspiration from China and the EU. Yet, considering the reliance on private funding and the relative absence of substantial public investment it is questionable whether the strategy of reshoring battery production could eventually lead to its aspired outcomes.

The European Green Deal seeks to transform the EU into a resource-efficient economy, with a goal of carbon neutrality by 2050.Footnote ⁸³ Encompassing a set of proposals on climate, energy, transport, and taxation, the Green Deal is currently the most ambitious EU policy package. Its financing will rely on both public and private funding, including the EU’s seven-year budget, the stimulus package of the Next Generation EU Recovery Plan, and the mobilisation of private capital.Footnote ⁸⁴ NEVs constitute an important piece of the puzzle for the planned energy transition. As part of a series of legislative proposals adopted in July 2021 to deliver on the goals of the Green Deal, the Commission has outlined its plans to cut vehicle CO2 emissions by 55 per cent by 2030, eliminating them completely by 2035.Footnote ⁸⁵ To support this thorough transition to NEVs in under 15 years, the Commission has proposed a Regulation that would require Member States to install public charging points no more than 60 kilometres apart on major roads by 2025.Footnote ⁸⁶ As the Proposal contemplates the EU’s non-exclusive competence and, in a way, the limits of centralisation, it concludes that ‘without Union intervention, it would be very unlikely that a coherent and complete network of fully interoperable alternative fuels infrastructure would develop across all Member States’.Footnote ⁸⁷ Sustainability transition programs, including the installation of charging infrastructure, will be partly financed by the European Green Deal Investment Plan.Footnote ⁸⁸ However, this does not change the overall strategy for growth, which relies primarily on mobilising private investment and integrating capital markets for the transition to a ‘green, digital and resilient economy’.Footnote ⁸⁹

In addition, in the effort to stimulate innovation in zero-emission technologies, the EU has also targeted the battery sector as a strategic part of Europe’s clean energy transition and crucial for global competitiveness. In 2017, the Commission launched the European Battery Alliance as a public-private initiative, and in 2018 a Strategic Action Plan that aims to secure access to raw materials, support European battery cells manufacturing at scale, and support research and innovation for new technologies in the batteries sector.Footnote ⁹⁰ While once again primarily relying on private investment, the Commission also commits to make public funding or financing for battery cells manufacturing and research and innovation projects available through various financing instruments.Footnote ⁹¹

C. Recapping the comparative analysis

As highlighted above, even in the context of outlining an industrial policy, the USA most clearly relies on and supports private market outcomes. The EU grants a more important role to coordination, increasingly adopting policies that seek to shape a market that delivers state-desired outcomes. This observation is in line with the literature on varieties of capitalism.Footnote ⁹²

However, this prima facie conclusion needs to be further qualified. Overall, both the USA and the EU have, in different degrees, shown signs of aspirations for centralising economic coordination and advancing agendas of unilateral, government-led industrial strategies for sustainability transitions, including the transition to NEVs. Unlike China these aspirations have not been substantially coupled with proportionate public funding and investment in research, development, and infrastructure, or with pervasive disciplining mechanisms. Yet, not unlike China, the advanced or proposed industrial strategies in the USA and the EU reflect the implicit recognition that the legal infrastructure of markets can be used to constraint and guide market activity in a politically determined way to achieve social objectives. As I will also show in the next section, the differences between these modes of planning are differences of degree. For comparativists, seeing law as indeed a form of social engineering is hardly a novelty.Footnote ⁹³ This engineering dimension of law is increasingly apparent and relied upon, as congruence leads to converge of the regulatory and policy frameworks in transportation sustainability transitions.Footnote ⁹⁴ While the present case study cannot support a broad conclusion of a growing appeal of coordinated economies, the – at least in principle – turn to industrial policies should be seen within a broader context of linking trade and security, shifting to unilateralism, and seeking to reshore production and enhance supply chain resilience.Footnote ⁹⁵

For example, the EU mandate to eliminate the internal combustion engine by 2035, while coordinating relevant infrastructure development and industry financing, showcases the state-led undertone of the current industrial strategy. A similar instance of planning within markets is the development of the EU Taxonomy, as part of the Green Deal. Recognising that orchestrating sustainability transitions requires defining the content of ‘sustainability’, the European Green Deal involves the establishment of a classification system – a Taxonomy – about the activities that count as environmentally sustainable. As the Taxonomy primarily establishes criteria for investment, it illustrates the dependence on the financial sector for sustainability projects and does not detach from the paradigm of finance-led decarbonisation. Yet, at the same time, and regardless of the eventual content of the Taxonomy,Footnote ⁹⁶ the development of a list is, in itself, a move of injecting public standards and political determinations in market processes. The definition of sustainability is henceforth not dependent on contingent market determinations but rather becomes politicised and decided by public authority.Footnote ⁹⁷ The politicisation of the market in these examples indicates that there is potential in planning within markets beyond what is currently manifesting in regulatory policies of the USA and the EU. This does not contradict the critique that the Green Deal eventually relies on price signals to ensure sustainability transitions and, as such, does not go beyond neoclassical economic rationalities.Footnote ⁹⁸ Yet, as the case of China also demonstrates – despite its unique political and historical background – markets otherwise structured along neoclassical economic rationalities can still be used to do more. The reason is that behind price signals lies an expansive regulatory infrastructure that can steer the functional and coercive power of market processes and exert centralised control over the economy to direct it towards sustainability or developmental goals. I turn to the question of the role of law in planning within markets in the next section.

A. Planning is ubiquitous

One possible lens through which to approach the policies adopted in the EU and, less so, in the USA is that of state ‘intervention’ in the economy. Indeed, even commentators who are sceptical of the Green DealFootnote ⁹⁹ or who lament the emphasis on ‘regulatory enforcement’ and ‘centralisation supported by conformity’Footnote ¹⁰⁰ implicitly recognise that relying on market coordination and green investing will not be sufficient to deliver the magnitude of socio-economic shifts required to address climate change. It is, indeed, tempting to read the developments in the EU and the USA through the lenses of a type of functionalism that would see the legal system adapting to external social processes as it was bound to do.Footnote ¹⁰¹ However, ‘intervention’ is a misnomer. While the pronouncement that ‘planning is back’ captures an essential element of the current developments, it also obscures how planning and central economic coordination are inevitably taking place in the background of economic activity.Footnote ¹⁰² What changes is the content, the intensity, and the normative direction of planning.

The lens of state ‘intervention’ frames the law as exogenous to the economy. As such, and contrary to current law and political economy perspectives,Footnote ¹⁰³ the ‘intervention’ discourse implicitly exonerates law for the status quo, which is instead presented as a naturalised outcome of societal interactions. From the ‘exogeneity’ perspective, legal rules, such as carbon emission mandates that force manufacturers into the production of NEVs, would be portrayed as external interventions in an otherwise self-executing market and ‘free’ societal sphere of economic activity. In other words, whereas prior to the adoption of such legislation car manufacturers were free to produce any type of cars subject only to the laws of demand and supply, regulatory controls and carbon emission mandates interject a form of top-down coercion that limits the otherwise free association of private individuals. However, as legal realists have shown, the previous condition of ‘free’ market activity was itself a product of legal entitlements.Footnote ¹⁰⁴ The right to produce any type of car despite, for example, the detrimental effects of carbon emissions, is itself an entitlement defined and guaranteed by law. The previous market condition was as much a result of regulation and political will as the one following the introduction of production-related mandates. It was a condition that bestowed upon car manufacturers the right to produce any type of car and, thus, the power to ‘coerce’ third-parties in accepting the environmentally detrimental effects of such activity.Footnote ¹⁰⁵ This is based on the Hohfeldian insight of the legal character of even implicit rules of permission – a recognition that denaturalises and exposes the politically contingent underpinnings of markets.Footnote ¹⁰⁶ Considering, therefore, that either version of the car market is a legal (and thus political) construct, new limitations of manufacturers’ capabilities should not be understood as an ‘intervention’ but rather as a restructuring of the rights and capabilities of the different parties – this time in favour of third-parties that do not form part of the contractual transaction.

The ubiquity of planning does not transpire solely through the – inevitably political – allocation of legal entitlements, which is performed by background rules of prohibition and permission. Rather, exposing the legal dimension of the market also destabilises the notion of ‘market-determined’ prices as the instruments of rational allocation of goods in a market economy. As Hockett and Kreitner show, the price system is an ‘immense engineering project’, generated by ‘institutional design, legislative action, and judicial decision’.Footnote ¹⁰⁷ Not only do public employment and procurement benchmark prices for certain goods but it is also legal decisions that give value to ‘fictitious commodities’Footnote ¹⁰⁸ – including, for example, real estate or intellectual property.Footnote ¹⁰⁹ While the engineered character of prices becomes conspicuous in the case of subsidies, such as in the case of the NEV industry in China, it reaches its apogee in cases of direct price controls – which, as recent scholarship does not fail to underline, have been a persistent feature not only of China’s path to reform but, in many instances, also of liberal capitalism.Footnote ¹¹⁰

Going from the macro to the micro, Andrew Lang argues that, even under the neoclassical paradigm of prices as the measure of subjective value reflecting preferences and individual utility, price formation does not happen in a vacuum. Instead, it necessarily entails certain legal priors.Footnote ¹¹¹ Any act of valuation of a particular good or service depends on a nexus of institutional conditions: one’s disposable income or set of opportunities and alternative options are crucial for the formulation of subjective preferences in the first place – and, at the same time, they remain a function of legal arrangements. This inevitably means that legal changes that rearrange social relations in production and exchange eventually register within prices.

Planning is not a privilege of public authorities; private actors also engage in planning. Warning against a simplified understanding of the economic system as coordinated by the price mechanism that ‘works itself’, Ronald Coase identified corporations as ‘islands of conscious power’.Footnote ¹¹² Within firms, the coordinating role of the price mechanism is substituted by an internal hierarchy, with the entrepreneur directing production as they see fit. In fact, Coase underlines, the main reason for establishing a firm is that relying on the price mechanism entails costs related to discovering the relevant prices.Footnote ¹¹³ Building on this thesis, Katharina Pistor suggests that the transformation of digital technologies and the expansion of informational capacities could mean that hierarchical orderings are the most efficient organisational form, even when transactions costs associated with price discovery are low. The reason for this is that hierarchical orderings enable the centralised control of data and information associated with consumer preferences.Footnote ¹¹⁴ Indeed, data-driven processes are also increasingly employed in global value chains coordinated by lead firms.Footnote ¹¹⁵ As platforms in control of vast arrays of supply chains successfully employ predictive analytics and forecasting technologies both to control supply but also to shape demand, they may progressively replace markets with algorithmic authority.Footnote ¹¹⁶ Such instances of private planning supported by big data have fuelled critiques of market capitalism and inspired reimaginations of centralised planning.Footnote ¹¹⁷ I will return to this point in the next section.

B. Planning as a spectrum

While markets are permeated by planning in the broader sense of the inevitable central coordination performed by the legal and institutional infrastructure, planning within markets unfolds in a spectrum. At the one end of the spectrum coordination of production and investment could be entrusted to business and atomised decision-making, where public authority restricts itself to guaranteeing property rights, competition rules, and price stability. This ‘ordoliberal’ form of planning consciously seeks to depoliticise markets by insulating fundamental market structures from democratic contestation and by reducing legal relationships to their formal components.Footnote ¹¹⁸ As such, it concentrates political coercion (eg, for protecting property rights, competition, or ensuring contract enforcement) and it maximises market coercion. Yet, even an ordoliberal design involves a political decision on the direction of production and investment that precedes any contingent, atomised, profit-driven decision-making – even if it eventually only institutionalises precisely the mode of production that secures the conditions for such atomised, profit-driven initiative. At the other end of the spectrum, there are models of market socialism similar to contemporary China or such as the one suggested by Brus and Laski, where state ownership of means of production dovetails with the existence of capital, product, and labour markets.Footnote ¹¹⁹ Presumably, this corresponds to a maximisation of political coercion and a concentration of market coercion. And in between, planning within capitalism involves different degrees of public and conscious shaping of economic activity in the pursuit of social objectives – with industrial policies being an example. This means varying levels of reliance on profit-driven private initiative for the organisation of production and allocation of investment. For instance, the emergence of green industrial policies – itself a move towards more political coercion in the organisation of production – does not negate that previous modes of organisation of production relying more heavily on profit-driven private initiative also constituted a deliberate design of the economy. In other words, planning within capitalism may take the form of varying industrial policies, relying on strategic subsidising and the distributive effects of regulatory activity – the focus of this article – but may also involve macroeconomic designs, comprehensive fiscal and monetary policies, tax-and-transfer systems, wage and credit instruments, etc. Fundamentally, the extent of planning within capitalism is determined by the coordinated subsuming of legal rationalities (eg, those associated with entrepreneurial freedom) to overarching objectives set by public power.

Insofar as there are markets for capital, labour, and commodities (ie, excluding command-type economies), the differences between these modes of planning are differences of degree, without a necessary qualitative break even between different regimes of ownership of the means of production. For example, comparing market socialism, as described by Brus and Laski, to industrial policies within economies with private ownership over the means of production indicates that the degree of democratisation of the allocation of resources and the overcoming of the profit motive is dependent upon the contingent institutional formations. For Brus and Laski, the state must abstain from being involved in enterprises’ activity, other than exerting control over financial performance to ensure the return on and growth of assets. This presupposes a separation of ownership and management of the enterprise, not unlike the shareholder model of private enterprises. The difference is then between, on the one hand, state-owned but profit-motivated corporations that give part of their revenues to the state from and, on the other hand, private corporations where the state sets rules of corporate governance and taxes profits. Along these lines, Brus’ and Laski’s attempt to deconstruct the ‘indivisibility’ of public ownershipFootnote ¹²⁰ and to ‘privatize the public’ mirrors, in a way, contemporary strategies of ‘publicizing the private’ in sustainability transitions, for example by dictating that directors’ duties involve a duty of care for ‘sustainability matters’.Footnote ¹²¹ Leaving aside, as beyond the scope of this article, questions about the legitimacy or moral value of different regimes of ownership (public vs private) and concentrating, instead, on the issue state control over the economy reveals that the extent of political/market coercion is not built in the original setup but rather depends upon the contingent regulatory mix.

Assuming, then, that the extent of reliance on profit-driven private initiative for the allocation of resources in market economies is a spectrum of political possibilities inevitably raises the question what we want markets for.Footnote ¹²² Seeing the market as a ‘political project’Footnote ¹²³ means that defining the purpose and shape of markets is itself an object of political contestation and legitimises democratic planning for directing market processes towards collectively determined priorities. Framing market economies as ‘planned’ through the allocation of legal entitlements and coercive powers, as well as based on the degree to which decisions around production and investment are entrusted to political sovereignty, highlights the artificial and political character of market economies and, thus, their amenability to the kind of politics that democratises production and investment. Yet, as I will show in Section 6, seeing markets as legally constructed political instrumentalities should not be overstated to the point of obfuscating the structural limits inimical to the market as a mode of social organisation.

The construction of industrial policies, including NEV policies, involves directing market operations to the service of social objectives. The tools for this type of planning are not limited to top-down regulatory controls. Rather, market mechanisms deliberately designed to generate specific social effects may also have a planning effect. Zooming in the NEV case study highlights that planning within markets may be achieved both by administrative decisions and market mechanisms. Assuming the position of legal ‘exogeneity’ and state ‘intervention’ in the economy, as discussed above, could lead to the argument that planning is, by definition, only conceivable as the employment of administrative decisions to regulate the market economy. However, from the perspective argued here, the use of market mechanisms could be nothing more than an extra arrow in the quiver of the planner – not necessarily qualitatively different than regulation by administrative decision and democratic fiat. Looking into the case of NEVs, China’s and Norway’s heavy subsidising of the industry as a demand-side policy has been crucial for the uptake of NEVs. In fact, as China’s Industry Plans reveal, the use of market mechanisms, such as consumer subsidies and incentives, was framed as a ‘planning’ intervention, while the recent NEV production mandate – an administrative decision that forces NEV quotas regardless of demand and consumer preferences – was part of the ‘transition to market dominance’.Footnote ¹²⁴ As Dani Rodrik correctly points out, green industrial policy should be understood as a process of discovery, rather than a list of specific policy instruments.Footnote ¹²⁵ If market mechanisms are used to steer production and investment towards directions that would be impossible to reach through entrepreneurial, profit-oriented decision-making, then they operate in the same instrumental register as top-down regulation. In between them, there is only a difference in the degree of coercion exerted by public authoritiesFootnote ¹²⁶ – while production mandates are a direct threat for ICEV manufacturers’ operational licenses, subsidies are a threat that competitive production will undercut them.

The same is the case when looking into how prices are engineered. How ‘market determined’ prices are, becomes a question of the degree to which they incorporate social effects. It is argued that while markets can provide information about a range of economic choices to individuals functioning as isolated economic agents, they are incapable of providing meaningful information about the social effect of private economic transactions.Footnote ¹²⁷ This is blatantly true when considering, for example, the disjunction between prices of goods at end markets of the Global North and social effects of global regimes of production at the Global South.Footnote ¹²⁸ However, it is not necessarily true. As Oskar Lange pointed out in his contribution to the economic calculation debate, prices may be understood in a narrow sense as the exchange ratios of commodities on a market, and in a wider sense as the ‘terms on which alternatives are offered’.Footnote ¹²⁹ For Lange, it is only prices in the latter sense that are required to solve the problem of allocation of resources. Therefore, for advocates of planning as only an alternative to markets, devising prices outside marketsFootnote ¹³⁰ would then allow entering costs (‘externalities’) directly into the price calculation – in a form of ‘non-market’ or ‘planning prices’.Footnote ¹³¹ However, there is nothing that prevents the planner from incorporating social costs within the price calculation already within markets. In fact, as shown above, market prices are anyway engineered by the legal and institutional infrastructure in which they assume a coordinating role. Subsidising NEVs, mandating emission standards, introducing NEV production quotas, excluding NEVs from car purchase restrictions: all these measures inject, to some degree, the social costs of automobile carbon emissions into the price of the commodity. The degree to which social costs are incorporated in prices remains a matter of political contestation. However, this is not to say that pricing externalities is necessarily a strategy that will lead to progressive outcomes: Carbon pricing has been largely ineffective, while it is poised to lead to violent structural readjustments in the Global South when coupled with ‘green’ conditionality lending by the IMF or institutional investors.Footnote ¹³² Pricing externalities could also disadvantage the poor, whose low willingness to pay places lower value on their preferences, while it could also deepen commodification.Footnote ¹³³

The example of China shows how a multifaceted instrumentalisation of market processes, involving diverse incentives and regulatory controls, goes beyond the paradigm of pricing externalities. The construction of the NEV market was not only mediated by market prices as the sole drive of investment and consumption. Rather, public investment through subsidies, infrastructure, and research and development; command-and-control urban and environmental regulations; attracting foreign investment and know-how; expanding geopolitical control over the supply of critical minerals; and promoting domestic battery manufacturing by making the allocation of NEV subsidies dependent upon domestic procurement were some of the means employed to steer market dynamics towards the politically set goal of a sustainability transition in the transportation sector. Although it is, eventually, market dynamics that are supposed to deliver the transition – in this case, the uptake of NEVs – the generation of these dynamics is the result of multifaceted public planning. Indeed, addressing climate change as a simple market failure and an externality to be priced in cannot possibly account for the deep interconnections among carbon intensive activities. The purpose of analytical insight into ‘market determined’ prices as planned prices, only differentiated by the degree to which they incorporate social effects, may dispel the naturalised character of prices, and empower planners to use prices as a planning tool. Yet, whether it can deliver the desired outcomes is a matter of strategy and dependent on the breadth of planning and the contingent social and political context. However, the argument that ‘market determined’ prices are, in fact, planned prices encounters a powerful and enduring epistemological opposition. To this I turn in the next section.

A. The spectre of Hayek

Perhaps the most known, ardent opponent of planning has been F. A. Hayek. Hayek saw planning as a pathway to totalitarianism, involving ‘deliberate discrimination between particular needs of different people’.Footnote ¹³⁴ As the state engages in valuations of different needs and imposes its perspective across society, it ‘ceases to be a piece of utilitarian machinery intended to help individuals in the fullest development of their individual personality and becomes a “moral” institution’Footnote ¹³⁵ – in the sense that it imposes on citizens moral valuations. Yet, Hayek’s most enduring critique against planning is the epistemic deficit of central planners: the impossibility, in other words, for central authorities to collect and act upon the dispersed knowledge and localised knowledge that is necessary for the allocation of productive resources.Footnote ¹³⁶ This powerfully resonates in current critiques of industrial policy that ‘governments do not have the information needed to make the right choices as to which firms or industries to support’.Footnote ¹³⁷

The launch of the so-called ‘economic calculation debate’ (or, sometimes, ‘socialist calculation debate’) can be attributed to Ludwig von Mises, who in 1920 argued that rational economic calculation under conditions of socialist central planning is technically impossible.Footnote ¹³⁸ For Mises, only prices guarantee the commensurability of different values and provide a metric for rational calculation among different options in social choices.Footnote ¹³⁹ This position was rebutted by Oskar Lange, who accepted Mises’ premise about the necessity of prices but rejected that prices can only be formed in markets.Footnote ¹⁴⁰ Hayek advanced Mises’ position, shifting the discussion from one of commensurability to one of epistemology. For Hayek, even if central planners could use a process of trial and error to discover relevant prices, it would be impossible to replicate the dynamic nature of the price mechanism with its automatic adjustments following changes in supply and demand.Footnote ¹⁴¹ In fact, the assumption of pre-existing knowledge about society’s needs and valuations is mistaken, as ‘which goods are scarce goods, or which things are goods, and how scarce or valuable they are is precisely one of the conditions that competition should discover’.Footnote ¹⁴² Instead, for Hayek, prices can coordinate the separate actions of different people because they convey information that is otherwise dispersed in society.Footnote ¹⁴³ Prices reflect particular information possessed by the participants in the market process, which, in their totality, could not be known to an outside observer.Footnote ¹⁴⁴

This fits Hayek’s broader normative view of the market as a ‘spontaneous order’, which is not governed by a single end or purpose and instead ‘serves the multiplicity of separate and incommensurable ends of all its separate members’.Footnote ¹⁴⁵ Framing the notion of common purpose as an instinct inherited from tribal society,Footnote ¹⁴⁶ Hayek advocated for the establishment of abstract rules of conduct as opposed to substantive rules that prioritise specific groups and individuals. A placeholder for different attempts at planning and social engineering, ‘social justice’ attracted Hayek’s critique as meaningless in a market order, where impersonal processes of allocation of goods determine the different fates of its members.Footnote ¹⁴⁷ This would also exclude attempts to plan within markets. The epistemological paradigm that Hayek ushers us into is one of impenetrable complexity of social phenomena. From this perspective, as in any kind of ball game, where knowing the rules and the relative skills of the players is not sufficient to allow predicting with certainty the outcome, so is the case for any social phenomena of organised complexity – we are limited to pattern prediction and cannot deliberately generate outcomes in the pursuit of overarching purposes.Footnote ¹⁴⁸ In the face of complexity, we must show humility and appreciate the limits of reason and knowledge, resisting the ‘fatal striving to control society’.Footnote ¹⁴⁹

Hayek’s epistemological challenge to planning and centralisation has had a long-lasting appeal in legal and social theory, even among those who reject his normative stance on issues around social justice. In Europe, and particularly in Germany, systems theory has relied on the premise that in a functionally differentiated society, comprised of multiple communicative systems, there is neither an apex nor a position of omniscience.Footnote ¹⁵⁰ Partly an explanation and partly a remedy to the planning crisis of the 1970s, systems theory saw direct communication between systems as in principle impossible. This meant that the political system does not occupy a privileged position in the coordination of society, which makes not only planning but also command-and-control regulation bound to fail.Footnote ¹⁵¹ Systems have their own innate logic and code of communication, and it is only within them that solutions to social problems can be conceived and operationalised. As it is impossible to achieve some form of comprehensive centralised knowledge, concrete limitations on the destructive expansion of social systems can only result from a system-specific logic. It was this conceptual premise of ‘unknowability’ of the economy that generated the long legacy of reflexive law as a project of decentralisation, reflexivity, and pluralism.Footnote ¹⁵² Instead of dictating objectives and the regulatory means for achieving them, the goal became to enhance the self-limiting capacities of social systems, including the economy, and to embed social values in their operations as a means to achieve decentralised social transformation – in short, to politicise them.Footnote ¹⁵³ A long progeny of (especially continental) critical approaches – some indebted to systems theory and some not – ultimately endorse the epistemological standpoint of ‘complexity’ and ‘unknowability’ of the economy, foregoing centripetal social engineering and transformation in favour of agendas of decentralisation and bottom-up mobilisation for sustainability transitions.Footnote ¹⁵⁴

B. Rebutting the epistemic deficit thesis

However, the thesis of ‘epistemic deficiency’ of public authorities can be rebutted, as it is analytically problematic in at least two ways: First, as an axiomatic statement in itself and, second, as a foundational premise for political action and institutional designs.

With regards to the epistemic deficit of public authorities as an axiomatic statement, a first counterargument can be drawn from current patterns of centralised private control over global production. The notion that markets function as spontaneous generators of knowledge – with economic outcomes supposedly dependent on the inadvertent convergence of individual self-interest – is challenged by the ways in which transnational corporations employ rationalisation and informational tools to direct and control production in global value chains. For example, companies that ‘lead’ global value chains streamline production in a top-down fashion through their contractual governance, as well as through the employment of delivery-on-demand, certification, and open-costing systems – while retaining exclusive access to innovation and know-how.Footnote ¹⁵⁵ Similarly, the employment of predictive technologies makes possible the elaboration of accurate ‘demand plans’, leading eventually to ‘closed-loop planning’, wherein supply is arranged based on accurate demand forecasts.Footnote ¹⁵⁶ Forecasting technologies may go as far as Amazon’s ‘anticipatory shipping’, in which orders are packaged and pushed into the delivery network before customers even order them. Current applications of digitalisation reveal the dangers that underlie concentrations of private economic, surveillance, and informational power.Footnote ¹⁵⁷ At the same time, they also destabilise the ‘unknowability’ thesis, highlighting that framing global markets as spontaneous, self-organising economic activity constitutes an idealised and misleading account of global production.Footnote ¹⁵⁸

Furthermore, the ‘epistemic deficiency’ thesis is problematic in itself because it – counter-intuitively – reduces the spectrum of knowledge-formation. In the Hayekian epistemological paradigm, knowledge is conceptualised as something that is by default dispersed in the anonymous, horizontal operations of society. While the complexity of societal operations and the knowledge captured therein must indeed be conceded, there are forms of knowledge that are necessarily mediated by some instance of collective and political determination. Knowing what is a ‘need’ is not a result of individual epiphany but is inextricably linked to the social and political bonds that make up the polity in which an individual lives.Footnote ¹⁵⁹ Price signals might convey dispersed knowledge, but they themselves depend on certain knowledge priors that stem from the values and guiding norms that underpin the institutional infrastructure of a polity. Even in Hayek’s minimalist model, where the state only sets abstract rules of conduct for its members, these abstract rules convey certain values and understandings that determine derivative forms of knowledge. Whether, for instance, these rules advance unlimited contractual freedom or clear-cut moral limits of markets constitutes a knowledge prior. Such priors set by legal and political infrastructure change the preferences of individuals, provide varying sets of incentives, etc. As the political process of will-formation by definition generates knowledge, there is no conceptual reason not to expand the realm of knowable needs by means of the political process. Sustainability transitions depend all the more on the primacy of the political as a means of articulating collective needs, especially considering that such transitions are particularly relevant in areas of market ‘externalities’. For example, while price signals may indeed convey knowledge as to which materials may be increasingly necessary for the shift in production required for NEVs, they would not, by themselves, signal to car manufacturers that they need to change production targets.

With regards to the epistemic deficit being an insurmountable impediment to centralised coordination of economic activity, the first counterargument follows the logic outlined just above and relates to the omnipresence of such central coordination. As illustrated in the previous section, any structuring of the economy involves an element of planning, at least through the allocation of legal entitlements and a measure of price engineering. If planning is indeed ubiquitous and inevitable, then there is again no conceptual argument as to why public authorities should restrain themselves to a minimum of planning – the difference between minimum and extensive planning is one of degree, not of substance. Rather, the argument can only be political, ie, extensive planning is too restrictive of individual freedom of choice, or practical, ie, planning that involves extensive price fixing works only ‘on paper’.Footnote ¹⁶⁰

Finally, a more radical proposition against the epistemic deficit thesis as a restraint against planning is that comprehensive knowledge (which might be, indeed, impossible to attain) is not necessarily a prerequisite for planning and regulation of social and economic activity. Knowledge could instead be the outcome of regulatory activity. One aspect of economic planning where this could be relevant is price engineering. As discussed, the question is not whether but to what extent public policy is involved in the determination of prices. On this issue, market socialists, the analysis of which became particularly relevant during China’s economic reforms, suggested that price formation is possible through a process of trial and error, which, in fact, follows the same general equilibrium models and is not substantively different from competitive markets.Footnote ¹⁶¹ While currently far from orthodox, comprehensive price planning within the dual-track economic system was employed in China until 1989. Yet, as the example of NEV subsidies illustrates, targeted policies of price planning remain common and effective, even if they distort the ‘interplay of individual valuations’.Footnote ¹⁶²

More broadly, planning within markets can cut through complexity by allocating resources and attributing responsibility regardless of the conflicting logics of social systems and the dispersed knowledge that constitutes societal operations. In turn, such market regulation could lead to systemic adaptation and generation of new knowledge. In that direction, it appears that the European Green Deal and its employment of cross-cutting rules to achieve carbon neutrality take some distance from paradigms of ‘new governance’ that rely on induced self-regulation and organisational change.Footnote ¹⁶³ A similar trend can also be detected in the field of corporate sustainability, where recent transparency and human rights due diligence legislation forces lead firms to abandon their deliberate ignorance about production methods in supply chain operations.Footnote ¹⁶⁴ This, in turn, burdens lead firms with regulatory authority, responsibility, and possibly liability for misconduct across supply chains.Footnote ¹⁶⁵

A final argument that could suggest that comprehensive knowledge is indeed not a prerequisite for centralised coordination of economic activity comes from China’s ‘experimentalism under hierarchy’.Footnote ¹⁶⁶ The anti-planning argument that lies behind the Hayekian epistemological challenge is that institutions are better developed through long processes of evolutionary development rather than through deliberate designs. The relative success of Chinese attempts for economic and institutional innovation challenge this position. Beyond trial and error, experimentation is a purposeful and coordinated activity that seeks to produce policy options from an initially controlled implementation. The experimentation process is facilitated by the central government’s power to bypass legislative bodies in formulating interim regulations on structural economic reform.Footnote ¹⁶⁷ While this raises rule of law issues that appear incompatible with liberal democracies, discretionary experimentation through implementation in advance of legislation is crucial for the success of the model.Footnote ¹⁶⁸ At the same time, experimentation allows new economic policies and institutional formulas to be tested in a controlled environment and to draw from local knowledge and bottom-up initiative. This indicates that tapping on dispersed knowledge and centripetal transformative energy can exist in a dialectical relationship, where the former can only inform the latter after the latter has already been launched – in other words, political voluntarism and ambition could possibly unleash new ways of utilising decentralised societal knowledge in the design of economic policies. Overall, while such processes of legal and social engineering may entail a degree of indeterminacy, this does not constitute an argument against subsuming legal instruments – among which also those fundamental to market-building – to political rationalities. However, while central planning within markets can withstand the epistemological critique, it inevitably encounters certain structural limits that circumscribe its potential for socio-ecological transformation.