Distorted macroeconomics of central planning
DOI:
https://doi.org/10.13133/2037-3643/10822Keywords:
Central planning, Soviet-type economies, institutional differences, distortionsAbstract
There are two main pitfalls for those who analyse Soviet-type economies: the difficulty of explaining macroeconomic relationships in terms of either neoclassical or Keynesian received theory and the distorted official data. It is systemic features that make the characteristic macro effects mean something different under central planning from what is understood by Western economists and generate quantity and price distortions that cause statistics in Soviet-type economies to differ from those in market economies. This paper sets these differences and distortions into an explanatory framework and, while received theory is applied, the impact of institutional differences is also taken into account. Empirical support for the framework is given with attention drawn to distortions in prices and especially quantities, since the latter are less evident.
JEL: P21
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