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

Farvaque, Etienne ; Mihailov, Alexander ; Naghavi, Alireza (2012) The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency. Bologna: Dipartimento di Scienze economiche DSE, p. 29. DOI 10.6092/unibo/amsacta/4463. In: Quaderni - Working Paper DSE (776). ISSN 2282-6483.
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Abstract

This paper aims to explain the rise and fall of communism by exploring the interplay between economic incentives and social preferences transmitted by ideology. We introduce inequality-averse and inefficiency-averse agents and analyze their conflict through the interaction between leaders with economic power and followers with ideological determination. The socioeconomic dynamics of our model 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 have led to the discovery of a trade-off between equality and efficiency at the scale of alternative economic systems. While our focus is on the long-run transitions from capitalism to communism and back observed in the course of the 20-th century, the model also derives conditions under which the two systems converge and become stable.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Farvaque, Etienne
Mihailov, Alexander
Naghavi, Alireza
Keywords
capitalism, communism, inequality, inefficiency, ideology transmission, economic transitions
Subjects
ISSN
2282-6483
DOI
Deposit date
26 Jan 2016 10:46
Last modified
26 Jan 2016 10:46
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