Etienne Farvaque, Alexander Mihailov, Alireza Naghavi

The Grand Experiment of Communism: Discovering the Trade-Off between Equality and Efficiency

Volume 174 () / Issue 4, pp. 707-742 (36)

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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.

Etienne Farvaque No current data available.

Alexander Mihailov No current data available.

Alireza Naghavi No current data available.