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The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency

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  • Etienne Farvaque

    (Equippe -University of Lille 1, Faculté des Sciences Economiques et Sociales)

  • Alexander Mihailov

    (University of Reading and University of Warwick, Department of Economics)

  • Alireza Naghavi

    (University of Bologna, Department of Economics)

Abstract

This paper aims to explain the rise and fall of communism by exploring the interplay between economic incentives and social preferences in different economic systems. We introduce inequality-averse and inefficiency-averse agents responding to economic incentives and transmitting their ideology as they are affected by evolving outcomes. We analyze their conflict through the interaction between leaders with economic power and followers with ideological determination. The socioeconomic dynamics of our model generate a pendulum-like switch from markets to a centrally-planned economy abolishing private ownership, and back to restoring market incentives. The grand experiment of communism is thus characterized to have led to the discovery of a trade-o¤ between equality and efficiency at the scale of alternative economic systems.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2011.70.

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Date of creation: Sep 2011
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Handle: RePEc:fem:femwpa:2011.70

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Keywords: Capitalism; Communism; Inequality; Inefficiency; Ideological Transmission; Economic Transitions;

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Cited by:
  1. Ticchi, Davide & Verdier, Thierry & Vindigni, Andrea, 2013. "Democracy, Dictatorship and the Cultural Transmission of Political Values," IZA Discussion Papers 7441, Institute for the Study of Labor (IZA).

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