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What Did the Study of the Soviet Economy Contribute to Mainstream Economics?

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Abstract

This paper is an overview of the contributions made by economic Sovietology to mainstream economics. The long debate about the universal applicability of mainstream economics is reconsidered in the light of Soviet experience. Information is provided on the contribution of the study of the Soviet economy to the fields as diverse as the measurement of economic growth, institutional economics, economic administration, the economics of property rights, the economics of the informal sector, the economics of famines, the Austrian critique of general equilibrium theory, and incentives. The implications for economic methodology are also considered.

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Notes

  1. This paper is concerned primarily with contributions made by Western economists (‘economic Sovietologists’). It does not consider such topics as long waves, linear programming, the prehistory of input–output, Feldman's growth model, Preobrazhensky's analysis of accumulation, etc. Their analysis belongs to a separate topic – the influence of Soviet economics on mainstream economics. Nor does it consider the influence of Soviet policies on economic policy in the Western world (eg in the fields of education, healthcare, infrastructure development, cosmic exploration, and economic planning). Nor does it consider work, such as that of Hurwicz and others on economic mechanism design, that may have been (partly) inspired by Soviet economic institutions but in which there are no explicit references to the Sovietological literature. However, Hurwicz (1979, p. 207) did acknowledge his ‘tremendous’ debt to Lange, whom he described as ‘a pioneer in the design of a decentralized socialist economy, a great scholar and teacher, and a generous, idealistic human being’. Similarly, it does not consider the work of Marschak and others on the theory of teams and incentive-compatible mechanisms, and the work of Malinvaud, Weitzman, Heal and others on efficient decentralised planning algorithms, because this too does not explicitly refer to the Sovietological literature and does not appear to have learned anything from it. Nor does it attempt an all-round assessment of economic Sovietology, its achievements and failures.

  2. Hedlund (1999, p. 112). For the repetition of this view by the then Russian Minister for Foreign Economic Relations, see ibid.

  3. This was a reference to the strikes and riots in Novocherkassk in 1962 in response to food price increases. For Pavlov's use of the term ‘Novocherkassk syndrome’, see Pavlov (1995, p. 97). For what actually happened at Novocherkassk in 1962, see Kozlov (2002, pp. 224–287).

  4. Podkaminer's argument was confirmed by relative price movements in Poland after price liberalisation in 1989–1990 (Bell and Rostowski, 1995).

  5. ‘… a partial decentralization of planning and management in a command economy may do more harm than good; it may impair balance without yielding sufficient benefit from the shortening of the lines of communication. A virtually complete decentralization, in the sense of a virtually full devolution of the major production decisions to the firm level, would be disastrous from the standpoint of balance’.

  6. However, if more attention had been paid to the theory of the second best the outcome would not have seemed so strange. Besides Grossman, another economist who did expect economic reform to lead in the short run to a worsening of the economic situation and a reduction in living standards was Birman (1983, pp. 205–207). The present author disagreed with this (Ellman, 1989) but it turned out that Birman was right and I was wrong. Birman's analysis was based not on the theory of the second best, nor on Grossman's theory of the command economy, but on a good understanding of how the Soviet economy worked, gained from having lived and worked within it for decades.

  7. However, in a later work, when analysing investment priorities, Kornai (1992, p. 174) did recognise the priority of the arms industry. Another weakness of Kornai's analysis was its stress on the ‘expansion drive’ of managers. Actually, many managers preferred a quiet life and a reduction in output, as Soviet experience in 1988–1991 confirmed. It was mainly pressure from above which produced growth, and when that pressure disappeared the system collapsed. Retrospectively, Kornai (2006, p. 356) recognised that in his 1989 policy-oriented book (English translation – Kornai, 1990) he had been mistaken in not anticipating that the transition from socialism to capitalism would lead initially to a fall in output. However, he does not seem to have considered the implications of this for his earlier theoretical writings.

  8. For an overview, see Gregory and Stuart (1990, Chapter 13) and the literature they refer to (pp. 422–423).

  9. For information about the background to the creation of this journal, see Editor's Foreword, Journal of Comparative Economics 1977 1(1): 1–3.

  10. Rodrik's paper consciously followed in the footsteps of, inter alia, Gerschenkron, who was both a specialist in Russian economic history and an early economic Sovietologist. Like Gerschenkron, Rodrik attempted the inductive distillation of lessons from historical experience – a currently very unfashionable methodology among mainstream economists. However, it does have some adherents, for example, Chang (2002).

  11. For a study of the Soviet 1947 famine, see Ellman (2000).

  12. There were two reasons for this. First, the stocks were not necessarily used for famine relief. Instead they might be used as a reserve against a possible military conflict, or part of them might be exported. The Sen policy of large state grain stocks assumes that during a famine the main objective of state policy is to fight the famine, but this was not so in the USSR in the Stalin period. Second, the Sen policy of large state grain stocks assumes that state grain stocks are the results of commercial purchases, whereas Soviet grain stocks in the Stalin period were a result of coercion against the peasantry.

  13. Nutter was also the author of the Sovietological monograph (Nutter, 1962).

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Acknowledgements

I am grateful to Marcel Boumans, Josef Brada, Richard Ericson, Geoff Hodgson, Mark Harrison, Ruud Knaack, Vladimir Kontorovich, and Harro Maas, for helpful comments and suggestions. The author alone is responsible for the choice of topics considered, the interpretations offered, and for any errors.

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  1. Amsterdam Business School, University of Amsterdam, Plantage Muidergracht 12, Amsterdam, 1018, TV, Netherlands

    Michael Ellman

  2. Tinbergen Institute, The University of Amsterdam, Amsterdam, Netherlands

    Michael Ellman

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Ellman, M. What Did the Study of the Soviet Economy Contribute to Mainstream Economics?. Comp Econ Stud 51, 1–19 (2009). https://doi.org/10.1057/ces.2008.42

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