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The grand experiment of communism: discovering the trade-off between equality and efficiency

Farvaque, E., Mihailov, A. and Naghavi, A. (2018) The grand experiment of communism: discovering the trade-off between equality and efficiency. Journal of Institutional and Theoretical Economics, 174 (4). pp. 707-742. ISSN 0932-4569

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To link to this item DOI: 10.1628/jite-2018-0003

Abstract/Summary

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 to lead 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.

Item Type:Article
Refereed:Yes
Divisions:Faculty of Arts, Humanities and Social Science > School of Politics, Economics and International Relations > Economics
ID Code:74382
Publisher:Mohr Siebeck

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