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Was the establishment of a Planned Economy in USSR a success?

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From the perspective of an economic organization, one can distinguish two major basic modalities of coordination of individual decisions: the market and the plan. Until the early 1990s the world was divided between these two major blocks: capitalist countries with market economies, and centrally planned or socialist countries, including the USSR. It is in the early 1990s, that the experience of central planning was abandoned in the former USSR.

The purpose of this experiment was to attempt an assessment of planning, which amounts in asking whether it has successfully established itself here as a surrogate market; or to put it in other way, if it has evidence of a performance at least equal to the market, allowing it to replace it entirely as a form of organization.

This is what the Soviet leaders think that they can achieve, while implementing a planned economy. But the reality turned out to be just the opposite of their expectations, leading to the maintenance of several market mechanisms within the planned economy.

For a given product, the market is the best mechanism for coordination of individual intentions (analysis of the classics, in particular Smith and his invisible hand, taken up by the neo-classical, particularly Marshall and partial equilibrium): a comparison of individual intentions supply and demand in the market to find a balance spontaneously, without government intervention. In case of imbalance, competition and a rising price flexibility allow self-adjusting (stability of market equilibrium).

This mechanism is found in the global economy: there can be no lasting crisis of over production (according to a Law formalized later by the neo classical, as competitive general equilibrium exists and is stable (Walras), is a Pareto optimum).

This position, refined by the contributions of Marshall and Pigou in the 1920s, is synthesized at the macro economic level, the neoclassical model: the market mechanism provides a satisfactory balance in all markets (real economy and monetary sphere ).

Tags: USSR; planned economy; establishment of this economy

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