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

Etienne Farvaque (), Alexander Mihailov () and Alireza Naghavi ()

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

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-off 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 the two systems converge and become stable.

JEL-codes: C72 D31 D63 D74 D83 P51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth
Date: 2011-07
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Related works:
Working Paper: The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency (2012) Downloads
Working Paper: The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency (2011) Downloads
Working Paper: The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency (2011) Downloads
Working Paper: The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency (2011) Downloads
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