Performance of the Soviet-Type Economy

Part of the International Studies in Economics and Econometrics book series (ISEE, volume 22)


As we have seen in chapters 11 through 14, the Soviet-type economy creates some unique incentives and transaction costs. Those incentives and transaction costs, in turn, contribute to a misallocation of resources. We have identified three sources of economic inefficiencies in the Soviet-type economy:
  1. a.

    misallocation of resources, arising from the difference between the “planned” mix of outputs and the allocation of resources toward outputs preferred by the community. The ruling elite’s economic preference includes forced industrialization, while the community’s valuation of present relative to future consumption is ignored. Analytically, we interpreted this difference as the movement along the production frontier.

  2. b.

    misallocation of resources, arising from a contraction in the social opportunity set. Negative incentives and high transaction costs are major reasons for this source of economic inefficiency.

  3. c.

    waste and inefficiency attributable to the high cost of gathering the vast amount of information required for central planning.



Consumer Good High School Graduate Production Frontier Housing Situation Farm Market 
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Suggested Readings

  1. The best source of current events in the Soviet Union is a weekly publication by Radio Liberty: Report on the USSR. Oettingenstrasse 67, D-8000 Munich, West Germany.Google Scholar

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© Kluwer Academic Publishers 1990

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