Basic Institutions of the Soviet-Type Economy: Economic Planning
A major consequence of state ownership is that it permits the Politburo to choose the mix of outputs that is consistent with its political requirements and other preferences. Analytically, the allocation effect of state ownership is like a movement along the production frontier, from the mix of outputs preferred by individual members of the community toward the one agreed upon by members of the Politburo. In the Soviet-type economy, economic planning is the method by which the Politburo’s choice of outputs is implemented. The purpose of this chapter is to describe the mechanism of economic planning and its consequences.
KeywordsTransaction Cost State Ownership Production Frontier Economic Planning Financial Plan
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