The Efficiency of Central Planning: A Perspective from 'Markets vs Hierarchies.'

P T Wanless

Scottish Journal of Political Economy, 1987, vol. 34, issue 1, 52-68

Abstract: Central planning of "socialist economies" is one form of nonmarket allocation of resources. Under certain circumstances, nonmarket allocation is more efficient than market allocation, largely because of the transaction costs of market contracting. The new institutional economics "markets vs. hierarchies" makes the case for the efficiency advantages of nonmarket resource allocation within firms by means of corporate planning. Similar advantages can be claimed for central planning, while economic reform of centrally-planned economies can be explained as organizational change, particularly the transaction from the "U-form" to "M-form" corporation. Copyright 1987 by Scottish Economic Society.

Date: 1987
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Scottish Journal of Political Economy is currently edited by Tim Barmby, Andrew Hughes-Hallett and Campbell Leith

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