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

  • Alireza Naghavi

    (University of Bologna)

  • Alexander Mihailov

    (University of Reading)

  • Etienne Farvaque

    (Universite du Havre)

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-off between equality and efficiency at the scale of alternative economic systems.

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Paper provided by Society for Economic Dynamics in its series 2012 Meeting Papers with number 410.

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Date of creation: 2012
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Handle: RePEc:red:sed012:410
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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