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The Politics of Market Socialism

  • Andrei Shleifer
  • Robert W. Vishny

The debate over market socialism has ignored the importance of the assumptions about the objectives of politicians in determining resource allocation. Theory and evidence suggest that totalitarian socialism does not lead to efficient resource allocation because dictators do not maximize social welfare. But democratic governments have political objectives different from social welfare as well. The authors argue that because these governments command greater resources (have more control rights) under socialism, democratic socialism (even if it could exist) is a less efficient system than democratic capitalism. Thus the political case against market socialism is even stronger than the economic case.

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

Volume (Year): 8 (1994)
Issue (Month): 2 (Spring)
Pages: 165-176

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Handle: RePEc:aea:jecper:v:8:y:1994:i:2:p:165-76
Note: DOI: 10.1257/jep.8.2.165
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  1. Pranab Bardhan and John E. Roemer., 1991. "Market Socialism: A Case for Rejuvenation," Economics Working Papers 91-175, University of California at Berkeley.
  2. Andrei Shleifer & Robert Vishny, 1991. "Pervasive Shortages Under Socialism," NBER Working Papers 3791, National Bureau of Economic Research, Inc.
  3. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
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