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Institutional Failures Of Socialism

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  • Panagiotis Evangelopoulos

Abstract

An effective economic system enlists the co‐operation of all production factors, increasing welfare and reducing transactions costs. The co‐ordination mechanism is activated through decentralisation that shifts decisions on resource control from a higher to a lower level in the institutional hierarchy. Failure to incorporate successful decentralisation into the structure of socialist economies ultimately leads to collapse. Real socialism collapsed because it did not involve decentralisation. Worker‐managed socialism collapsed because of its own inherent contradictions and the absence of properly functioning decentralised price mechanisms.

Suggested Citation

  • Panagiotis Evangelopoulos, 2009. "Institutional Failures Of Socialism," Economic Affairs, Wiley Blackwell, vol. 29(4), pages 72-77, December.
    • Handle: RePEc:bla:ecaffa:v:29:y:2009:i:4:p:72-77
    DOI: 10.1111/j.1468-0270.2009.01950.x
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    References listed on IDEAS

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    1. János Kornai, 2014. "The soft budget constraint," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 64(supplemen), pages 25-79, November.
    2. Oskar Lange, 1936. "On the Economic Theory of Socialism," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(1), pages 53-71.
    3. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766.
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