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

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

No 2011.70, Working Papers from Fondazione Eni Enrico Mattei

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.

Keywords: Capitalism; Communism; Inequality; Inefficiency; Ideological Transmission; Economic Transitions (search for similar items in EconPapers)
JEL-codes: C72 D31 D63 D74 D83 P51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cwa
Date: 2011-09
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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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