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Market Socialism: A Case for Rejuvenation

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  • Pranab Bardhan
  • John E. Roemer

Abstract

In this paper, we will outline a feasible economic mechanism of "competitive socialism." Our claim is that competitive markets are necessary to achieve an efficient and vigorous economy, but that full-scale private ownership is not necessary for the successful operation of competition and markets. Contrary to popular impression, this claim has not yet been disproved by either history or economic theory. It is the failure of both the political right and the left to disentangle the concepts of private ownership and the competitive market that has led to the premature obituaries for socialism. In the second section, we look at the question of the "soft budget constraint" as an agency problem under market socialism. We then propose two variants of a bank-centric system of insider monitoring as a viable solution to the agency problem. The next section discusses the essential problem of political accountability and the difficulty of credible pre-commitment in avoiding the soft budget constraint problem, and suggests ways of minimizing this problem in our proposed system. We then conclude by addressing some of the other standard objections to a proposal for market socialism.

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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 6 (1992)
Issue (Month): 3 (Summer)
Pages: 101-116

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Handle: RePEc:aea:jecper:v:6:y:1992:i:3:p:101-16

Note: DOI: 10.1257/jep.6.3.101
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Cited by:
  1. Chun Chang Yijiang Wang & Brian McCall & Yijiang Wang, 2000. "Incentive Contracting versus Ownership Reforms: Evidence from China's Township and Village Enterprises," William Davidson Institute Working Papers Series 365, William Davidson Institute at the University of Michigan.
  2. Alejandro Agafonow, 2007. "Los límites de la eficiencia económica en una sociedad democrática," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 9(16), pages 89-119, January-J.
  3. Fikret Adaman & Yahya M. Madra, 2012. "Understanding Neoliberalism as Economization: The Case of the Ecology," Working Papers 2012/04, Bogazici University, Department of Economics.
  4. Chong-en Bai & Yijiang Wang, 1997. "Agency in Project Screening and Termination Decisions: Why Is Good Money Thrown After Bad?," William Davidson Institute Working Papers Series 43, William Davidson Institute at the University of Michigan.
  5. Hart G, 1993. "Regional growth linkages in the era of liberalization: a critique of the new agrarian optimism," ILO Working Papers 298744, International Labour Organization.
  6. Pelikan, Pavel, 2006. "Markets vs. Government when Rationality Is Unequally Bounded: Some Consequences of Cognitive Inequalities for Theory and Policy," Ratio Working Papers 85, The Ratio Institute, revised 03 Sep 2006.
  7. Chi, Wei & Wang, Yijiang, 2007. "Ownership, Performance and Executive Turnover," MPRA Paper 3545, University Library of Munich, Germany.
  8. Dic Lo & Russell Smyth, 2004. "Towards a re-interpretation of the economics of feasible socialism," Cambridge Journal of Economics, Oxford University Press, vol. 28(6), pages 791-808, November.
  9. Yahya Madra & Fikret Adaman, 2013. "Neoliberal reason and its forms:Depoliticization through economization," Working Papers 2013/07, Bogazici University, Department of Economics.
  10. Paul Cockshott & Allin Cottrell, . "Socialist Planning after the Collapse of the Soviet Union," Papers deposited by Authors _015, Post-Keynesian Archive.
  11. Carlos D.Ramírez & Ling Hui Tan, 2004. "Singapore Inc. versus the Private Sector: Are Government-Linked Companies Different?," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 510-528, November.
  12. Francis O'Toole & Eric Strobl, 1995. "Compulsory Voting And Government Spending," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 271-280, November.
  13. George C. Bitros, 2003. "Firm Ownership and Economic Efficiency," Microeconomics 0303002, EconWPA.
  14. Pelikan, Pavel, 1999. "Institutions for the Selection of Entrepreneurs: Implications for Economic Growth and Financial Crises," Working Paper Series 510, Research Institute of Industrial Economics, revised 15 Feb 2000.
  15. Chong-en Bai & Yijiang Wang, 1995. "A Theory of the Soft-Budget Constraint," Boston College Working Papers in Economics 298., Boston College Department of Economics.
  16. Pelikan, Pavel, 1997. "Allocation of Economic Competence in Teams: A Comparative Institutional Analysis," Working Paper Series 480, Research Institute of Industrial Economics.
  17. Chi, Wei & Wang, Yijiang, 2009. "Ownership, performance and executive turnover in China," Journal of Asian Economics, Elsevier, vol. 20(4), pages 465-478, September.
  18. Bertero, Elisabetta & Rondi, Laura, 2002. "Hardening a Soft Budget Constraint Through 'Upward Devolution' to a Supranational Institution: The Case of Italian State-Owned Firms and the European Union," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).

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