This paper examines how the interplay between economic incentives and social preferences transmitted by ideology plays a role in the rise and fall of communism. We introduce inequality-averse and inefficiency-averse agents and model their conflict in ideology, triggered by envy. The socioeconomic dynamics generate a pendulum-like switch from markets to a centrally planned economy abolishing private ownership, and back to restoring market incentives. The grand experiment of communism is thus characterized as leading to the discovery of a trade-off between equality and efficiency. The model also derives conditions under which the two systems converge and become stable.
The Grand Experiment of Communism: Discovering the Trade-Off between Equality and Efficiency / Farvaque, Etienne; Mihailov, Alexander; Naghavi, Alireza. - In: JOURNAL OF INSTITUTIONAL AND THEORETICAL ECONOMICS. - ISSN 0932-4569. - STAMPA. - Early View:(2018), pp. 1-36. [10.1628/jite-2018-0003]
The Grand Experiment of Communism: Discovering the Trade-Off between Equality and Efficiency
Naghavi, Alireza
2018
Abstract
This paper examines how the interplay between economic incentives and social preferences transmitted by ideology plays a role in the rise and fall of communism. We introduce inequality-averse and inefficiency-averse agents and model their conflict in ideology, triggered by envy. The socioeconomic dynamics generate a pendulum-like switch from markets to a centrally planned economy abolishing private ownership, and back to restoring market incentives. The grand experiment of communism is thus characterized as leading to the discovery of a trade-off between equality and efficiency. The model also derives conditions under which the two systems converge and become stable.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.