IDEAS home Printed from https://ideas.repec.org/a/sae/ratsoc/v16y2004i4p371-397.html
   My bibliography  Save this article

A Rational Theory of Socialist Public Ownership

Author

Listed:
  • Mario Ferrero

    (Department of Public Policy and Public Choice (POLIS), University of Eastern Piedmont, Via Cavour 84, IT-15100 Alessandria, Italy ferrerom@sp.unipmn.it)

Abstract

This paper asks why socialist economies were historically centered on public ownership of industry, despite its many drawbacks, and offers an explanation founded on rational individual choice. It first shows that the Marxian program of state socialism was subject to intense competition from alternative blueprints by the turn of the 20th century. It then argues that the superiority of the Marxian program lay in the contract enforcement property of an arrangement in which a politicized bureaucracy in charge of production was accountable to a party controlled by the workers. Formally, in a setting in which all participants are selfish and rational, the workers’ sole objective is redistribution, and an initial system choice has to be made. Party-state control of enterprises turns out to be the optimal contract between a principal (the workers) and its agent (the party) for a one-time transaction plagued by extreme informational asymmetry. Finally, modifications of this choice setting and implications for the decline of, and transition from, communism are discussed.

Suggested Citation

  • Mario Ferrero, 2004. "A Rational Theory of Socialist Public Ownership," Rationality and Society, , vol. 16(4), pages 371-397, November.
    • Handle: RePEc:sae:ratsoc:v:16:y:2004:i:4:p:371-397
    DOI: 10.1177/1043463104046693
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/1043463104046693
    Download Restriction: no
    File URL: https://libkey.io/10.1177/1043463104046693?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Andrei Shleifer, 1998. "State versus Private Ownership," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 133-150, Fall.
    2. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    3. Ferrero, Mario, 2001. "Political exchange in mass party regimes and the transition from socialism," Economic Systems, Elsevier, vol. 25(4), pages 365-379, December.
    4. Michael Keren, 1993. "On the (Im)possibility of Market Socialism," Eastern Economic Journal, Eastern Economic Association, vol. 19(3), pages 333-344, Summer.
    5. Wintrobe,Ronald, 2000. "The Political Economy of Dictatorship," Cambridge Books, Cambridge University Press, number 9780521794497.
    6. Cugno, Franco & Ferrero, Mario, 1984. "Individual incentives by adjusting work hours: Bellamy's egalitarian economy," Journal of Comparative Economics, Elsevier, vol. 8(2), pages 182-206, June.
    7. Chilosi, Alberto, 1986. "Self-managed market socialism with "free mobility of labor"," Journal of Comparative Economics, Elsevier, vol. 10(3), pages 237-254, September.
    8. Murrell, Peter & Olson, Mancur, 1991. "The devolution of centrally planned economies," Journal of Comparative Economics, Elsevier, vol. 15(2), pages 239-265, June.
    9. Oliver Hart & Andrei Shleifer & Robert W. Vishny, 1997. "The Proper Scope of Government: Theory and an Application to Prisons," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1127-1161.
    10. Keren, Michael & Levhari, David, 1992. "Some capital market failures in the socialist labor-managed economy," Journal of Comparative Economics, Elsevier, vol. 16(4), pages 655-669, December.
    11. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    12. Breton, Albert & Wintrobe, Ronald, 1992. "Freedom of speech vs. efficient regulation in markets for ideas," Journal of Economic Behavior & Organization, Elsevier, vol. 17(2), pages 217-239, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mario Ferrero, 2020. "A theory of revolutionary organizations," Economics of Governance, Springer, vol. 21(3), pages 245-273, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bergman, Mats A. & Johansson, Per & Lundberg, Sofia & Spagnolo, Giancarlo, 2016. "Privatization and quality: Evidence from elderly care in Sweden," Journal of Health Economics, Elsevier, vol. 49(C), pages 109-119.
    2. Vlassopoulos, Michael, 2009. "Quality, reputation and the choice of organizational form," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 515-527, August.
    3. David Sappington & J. Sidak, 2003. "Incentives for Anticompetitive Behavior by Public Enterprises," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 22(3), pages 183-206, May.
    4. Torben Pedersen & Steen Thomsen, 2003. "Ownership Structure and Value of the Largest European Firms: The Importance of Owner Identity," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 7(1), pages 27-55, March.
    5. Henrekson, Magnus & Johansson, Dan, 2010. "Firm Growth, Institutions and Structural Transformation," Ratio Working Papers 150, The Ratio Institute.
    6. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, February.
    7. Fu, Tong & Jian, Ze, 2020. "A developmental state: How to allocate electricity efficiently in a developing country," Energy Policy, Elsevier, vol. 138(C).
    8. Christopher Hansman & Jonas Hjort & Gianmarco León-Ciliotta & Matthieu Teachout, 2020. "Vertical Integration, Supplier Behavior, and Quality Upgrading among Exporters," Journal of Political Economy, University of Chicago Press, vol. 128(9), pages 3570-3625.
    9. Darlene Chisholm, 2004. "Two-Part Share Contracts, Risk, and the Life Cycle of Stars: Some Empirical Results from Motion Picture Contracts," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 28(1), pages 37-56, February.
    10. Martin Gaynor, "undated". "What Do We Know About Competition and Quality in Health Care Markets?," GSIA Working Papers 2006-E62, Carnegie Mellon University, Tepper School of Business.
    11. Walsh, Patrick Paul & Whelan, Ciara, 2001. "Firm performance and the political economy of corporate governance: survey evidence for Bulgaria, Hungary, Slovakia and Slovenia," Economic Systems, Elsevier, vol. 25(2), pages 85-112, June.
    12. Paul H. Jensen & Robin E. Stonecash, 2004. "The Efficiency of Public Sector Outsourcing Contracts: A Literature Review," Melbourne Institute Working Paper Series wp2004n29, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    13. Milan Zafirovski, 2022. "Some dilemmas of economic democracy: Indicators and empirical analysis," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 43(1), pages 252-302, February.
    14. De Fraja, Gianni, 2008. "Market and public provision in the presence of human capital externalities," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 962-985, June.
    15. Eduardo Levy Yeyati & Alejandro Micco & Ugo Panizza, 2004. "¿Debe el gobierno participar en la actividad bancaria? El papel de la banca propiedad del Estado y de la banca de fomento," Research Department Publications 4380, Inter-American Development Bank, Research Department.
    16. Schmitz, Patrick W., 2013. "Job design with conflicting tasks reconsidered," European Economic Review, Elsevier, vol. 57(C), pages 108-117.
    17. Alberto Cavaliere & Simona Scabrosetti, 2008. "Privatization And Efficiency: From Principals And Agents To Political Economy," Journal of Economic Surveys, Wiley Blackwell, vol. 22(4), pages 685-710, September.
    18. Frisell, Lars & Roszbach, Kasper & spagnolo, giancarlo, 2008. "Governing the Governors: A Clinical Study of Central Banks," Working Paper Series 221, Sveriges Riksbank (Central Bank of Sweden).
    19. Jason Coupet & Abagail McWilliams, 2017. "Integrating Organizational Economics and Resource Dependence Theory to Explain the Persistence of Quasi Markets," Administrative Sciences, MDPI, vol. 7(3), pages 1-13, August.
    20. Arrunada, Benito & Paz-Ares, Candido, 1997. "Mandatory rotation of company auditors: A critical examination," International Review of Law and Economics, Elsevier, vol. 17(1), pages 31-61, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ratsoc:v:16:y:2004:i:4:p:371-397. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.