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The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency (Previously titled: Cultural Transmission and the Pendulum of Economic Systems: The Case of Communism)

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  • Farvaque, Etienne
  • Mihailov, Alexander
  • Naghavi, Alireza

Abstract

This paper aims to explain the rise and fall of communism by exploring the interplay between economic incentives and social preferences transmitted by ideology. We introduce inequality-averse and inefficiency-averse agents and 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. While our focus is on the long-run transitions from capitalism to communism and back observed in the course of the 20-th century, the model also derives conditions under which each of the systems can remain stable.

Suggested Citation

  • Farvaque, Etienne & Mihailov, Alexander & Naghavi, Alireza, 2011. "The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency (Previously titled: Cultural Transmission and the Pendulum of Economic Systems: The Case of Communism)," Economy and Society 116909, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemso:116909
    DOI: 10.22004/ag.econ.116909
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