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

Abstract : This paper examines how the interplay between economic incentives and social preferences transmitted by ideology plays a role in the rise and fall of communism. We introduce inequality-averse and inefficiency-averse agents and model their conflict in ideology, triggered by envy. The socioeconomic dynamics 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 as leading to the discovery of a trade-off between equality and efficiency. The model also derives conditions under which the two systems converge and become stable.
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Contributor : Isabelle Celet <>
Submitted on : Thursday, May 17, 2018 - 3:49:57 PM
Last modification on : Thursday, March 12, 2020 - 9:06:43 AM

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Etienne Farvaque, Alexander Mihailov, Alireza Naghavi. The Grand Experiment of Communism: Discovering the Trade-off between Equality and Efficiency. Journal of Institutional and Theoretical Economics, Mohr Siebeck, 2018, 174 (4), pp.707-742. ⟨10.1628/jite-2018-0003⟩. ⟨hal-01794526⟩

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