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The Fundamental Problem of Command: Plan and Compliance in a Partially Centralised Economy

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  • Mark Harrison

    ()
    ([1] Department of Economics, University of Warwick, Coventry CV4 7AL, UK. [2] Centre for Russian & East European Studies, University of Birmingham, Birmingham B15 2TT, UK)

Abstract

When a principal gives an order to an agent and advances resources for its implementation, the temptations for the agent to shirk or steal from the principal rather than comply constitute the fundamental problem of command. Historically, partially centralised command economies enforced compliance in various ways, assisted by nesting the fundamental problem of exchange within that of command. The Soviet economy provides some relevant data. The Soviet command system combined several enforcement mechanisms in an equilibrium that shifted as agents learned and each mechanism's comparative costs and benefits changed. When the conditions for an equilibrium disappeared, the system collapsed. Comparative Economic Studies (2005) 47, 296–314. doi:10.1057/palgrave.ces.8100110

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal Comparative Economic Studies.

Volume (Year): 47 (2005)
Issue (Month): 2 (June)
Pages: 296-314

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Handle: RePEc:pal:compes:v:47:y:2005:i:2:p:296-314

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Cited by:
  1. Markevich, Andrei, 2007. "The Dictator’s Dilemma : to Punish or to Assist? Plan Failures and Interventions under Stalin," The Warwick Economics Research Paper Series (TWERPS) 816, University of Warwick, Department of Economics.
  2. repec:cge:warwcg:46 is not listed on IDEAS
  3. Peter Foldvari & Bas van Leeuwen & Dimitry Didenko, 2013. "Capital formation and economic growth under central planning and transition: a theoretical and empirical analysis, ca. 1920-2008," Working Papers 0048, Utrecht University, Centre for Global Economic History.
  4. Harrison, Mark, 2011. "Secrecy, Fear and Transaction Costs: The Business of Soviet Forced Labour in the Early Cold War," CAGE Online Working Paper Series 47, Competitive Advantage in the Global Economy (CAGE).

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