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A Comprehensive Incentives Analysis of the Potential Performance of Market Socialism

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  • James Yunker

Abstract

This article evaluates the performance of contemporary capitalism relative to that of a hypothetical alternative designated 'profit-oriented market socialism.' In most respects, profit-oriented market socialism would closely mimic contemporary market capitalism. The major difference would be that most profits and interest generated by the operations of publicly-owned business enterprises would be distributed to the general public as a social dividend proportional to household wage and salary income rather than in proportion to household financial assets. The basis of the comparison is a small-scale but comprehensive computable general equilibrium model, termed the 'els model' because it encompasses three primary factors of production: capital management effort e, labor l and saving s. Numerical solutions of the model suggest that the critical issue is the numerical value of a parameter (ν) representing the output elasticity of total capital management effort in the aggregate production function. If this parameter value is relatively low, then profit-oriented market socialism out-performs capitalism. If this parameter value is relatively high, then capitalism out-performs profit-oriented market socialism. The fundamental implication of the research is that the relative performance of a profit-oriented market socialist economy is an empirical question and not a theoretical question.

Suggested Citation

  • James Yunker, 2007. "A Comprehensive Incentives Analysis of the Potential Performance of Market Socialism," Review of Political Economy, Taylor & Francis Journals, vol. 19(1), pages 81-113.
    • Handle: RePEc:taf:revpoe:v:19:y:2007:i:1:p:81-113
    DOI: 10.1080/09538250601080669
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    References listed on IDEAS

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    1. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766.
    2. John E. Roemer, 1994. "A Future for Socialism," Politics & Society, , vol. 22(4), pages 451-478, December.
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    Cited by:

    1. Douglas W MacKenzie, 2018. "Social Dividends, Entrepreneurial Discretion, and Bureaucratic Rules," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 44(1), pages 30-48, January.
    2. Yunker, James A., 2016. "Economic inequality and optimal redistribution: A theoretical and empirical analysis," Journal of Policy Modeling, Elsevier, vol. 38(3), pages 528-552.
    3. Yunker James A., 2013. "The Basic Income Guarantee: A General Equilibrium Evaluation," Basic Income Studies, De Gruyter, vol. 8(2), pages 203-233, December.

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