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Quantity Versus Quality in the Soviet Market for Weapons

Author

Listed:
  • Mark Harrison

    (Department of Economics, University of Warwick; Centre for Russian and East European Studies, University of Birmingham; and Hoover Institution on War, Revolution, and Peace, Stanford University)

  • Andrei Markevich

    (Department of Economics, University of Warwick, and the Center for Economic and Financial Research, New Economic School, Moscow)

Abstract

Military market places display obvious inefficiencies under most arrangements, but the Soviet defense market was unusual for its degree of monopoly, exclusive relationships, and intense scrutiny (in its formative years) by a harsh dictator. This provided the setting for quality versus quantity in the delivery of weapons to the government. The paper discusses the power of the industrial contractor over the defense buyer in terms of a hold-up problem. The typical use that the contractor made of this power was to default on quality. The defense ministry’s counter-action took the form of deploying agents through industry with the authority to verify quality and reject substandard goods. The final compromise restored quality at the expense of quantity. Being illicit, it had to be hidden from the dictator.

Suggested Citation

  • Mark Harrison & Andrei Markevich, 2007. "Quantity Versus Quality in the Soviet Market for Weapons," Working Papers w0109, New Economic School (NES).
    • Handle: RePEc:abo:neswpt:w0109
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    File URL: https://www.nes.ru/files/Preprints-resh/WP109.pdf
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    References listed on IDEAS

    as
    1. Markevich, Andrei, 2007. "The Dictator’s Dilemma : to Punish or to Assist? Plan Failures and Interventions under Stalin," The Warwick Economics Research Paper Series (TWERPS) 816, University of Warwick, Department of Economics.
    2. Oliver Hart & John Moore, 2008. "Contracts as Reference Points," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(1), pages 1-48.
    3. Schmitz, Patrick W, 2001. "The Hold-up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," Bulletin of Economic Research, Wiley Blackwell, vol. 53(1), pages 1-17, January.
    4. Mark Harrison, 2014. "Soviet Industry and the Red Army Under Stalin: A Military-Industrial Complex?," World Scientific Book Chapters, in: THE ECONOMICS OF COERCION AND CONFLICT, chapter 6, pages 153-173, World Scientific Publishing Co. Pte. Ltd..
    5. R. W. Davies, 1996. "Crisis and Progress in the Soviet Economy, 1931–1933," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-05935-5, December.
    6. R. W. Davies, 1980. "The Industrialisation of Soviet Russia 2," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-04524-2, December.
    7. Gordon, Robert J, 1969. "$45 Billion of U.S. Private Investment Has Been Mislaid," American Economic Review, American Economic Association, vol. 59(3), pages 221-238, June.
    8. Andrei Markevich & Mark Harrison, 2006. "Quality, experience, and monopoly: the Soviet market for weapons under Stalin," Economic History Review, Economic History Society, vol. 59(1), pages 113-142, February.
    9. William P. Rogerson, 1994. "Economic Incentives and the Defense Procurement Process," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 65-90, Fall.
    10. Victor P. Goldberg, 1976. "Regulation and Administered Contracts," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 426-448, Autumn.
    11. Mark Harrison & R. W. Davies, 1997. "The Soviet military‐economic effort during the second five‐year plan (1933–1937)," Europe-Asia Studies, Taylor & Francis Journals, vol. 49(3), pages 369-406.
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    Cited by:

    1. Dieter Balkenborg & Todd Kaplan & Timothy Miller, 2012. "A Simple Economic Teaching Experiment on the Hold-Up Problem," The Journal of Economic Education, Taylor & Francis Journals, vol. 43(4), pages 377-385, October.
    2. Olivier Meier & Aurélie Sannajust, 2021. "The smart contract revolution: a solution for the holdup problem?," Small Business Economics, Springer, vol. 57(2), pages 1073-1088, August.
    3. Olivier Meier & Aurélie Sannajust, 0. "The smart contract revolution: a solution for the holdup problem?," Small Business Economics, Springer, vol. 0, pages 1-16.

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    More about this item

    Keywords

    Contracts; Dictatorship; Hold-Up Problem; Soviet Economy;
    All these keywords.

    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • N4 - Economic History - - Government, War, Law, International Relations, and Regulation
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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