A ‘Recoupment Period’ Model of Investment and Pricing in a Socialist Economy

  • Haim Barkai
Part of the International Economic Association Series book series (IEA)


The tremendous investment effort of the ‘Socialist Economies’ is one of the outstanding features of their economic history. This process required, inevitably, decisions on the size of resources to be channelled into capital formation and on their allocation. Yet, beyond some vague generalities, not much is known positively about the economic criteria on the basis of which the strategic decisions on investment were taken. Economic factors per se were not presumably of major significance in determining the size of the investment effort. Nor, so it seems, were the decisions on the allocation of this investment, or the closely related decisions on production methods, much affected by purely economic considerations.


Investment Decision Demand Curve Socialist Economy Standard Coefficient Central Authority 
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  1. See M. Bornstein, ‘The 1963 Soviet Industrial Price Revision’, Soviet Studies, 1963, p. 50. Bornstein mentions several Soviet writers who referred to it in similar vein.Google Scholar
  2. See also S. Stolianov, ‘The Price of Industrial Output’, Ekonomicheskaia Gazeta, 1963, reprinted in Problems of Economics, Vol. 6, No. 5, 1963. This paper, which Bornstein could not have seen before writing, supports his interpretation of the significance of the price revisions.Google Scholar
  3. 1.
    For details on the history of the concept in Soviet practice and the ups and downs of the debate on investment choice in the literature, see G. Grossman, ‘Scarce Capital and Soviet Doctrine’, Quarterly Journal of Economics, 1953, pp. 311–343. (Also reprinted in F. D. Holzman (Ed.), Readings on the Soviet Economy, 1962).Google Scholar
  4. A survey of the related debate on pricing in the fifties is given in A. Zauberman, ‘The Soviet Debate on the Law of Value and Price Formation’, in G. Grossman (Ed.), Value and Planning, 1960, pp. 17–36.Google Scholar
  5. 2.
    See D. Stepanov, ‘On Recoupment Periods and Standard Methods’ in a symposium ‘Economics Must Meet the Tasks of Communist Construction’, in Problems of Economics, Vol. V, No. 2, 1962, p. 10.Google Scholar
  6. Western students of Soviet Economics have, as a matter of fact, always underlined the similarity of the two concepts. The formal relationship between the Soviet and Western concepts is discussed in N. M. Kaplan, ‘Investment Alternatives in Soviet Economic Theory’, Journal of Political Economy, 1952, pp. 133–144. See also his Table 1 where he refers to Soviet economists who were, even before the new resurgence of the investment and pricing debate, in favour of compound interest calculations.Google Scholar
  7. This is the most plausible interpretation of his claim that thermal power stations are preferable to hydro-electric power stations, made in a speech in Kuibyshev (August 1958), on the occasion of the inauguration of the Kuibyshev hydro-electric power station, and in another speech in Smolensk. See A. Nove, The Soviet Economy, London, 1961, pp. 209–210, and footnote 1 on p. 210. The speeches were published in Pravda, on August 11 and 24, 1958, respectively.Google Scholar
  8. See Report, p. 77. This is a repetition and powerful formulation of his position to which he consistently adhered for about two decades. See, V. V. Novozhilov, † Methods of Comparing Economic Effectiveness of Alternative Processes of Production’ 1939, and ‘Methods of Determining Minimum Costs in a Socialist Economy’ (1946), as reprinted in International Economic Papers, 1956.Google Scholar

Copyright information

© International Economic Association 1966

Authors and Affiliations

  • Haim Barkai
    • 1
  1. 1.Hebrew UniversityJerusalemIsrael

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