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Soviet Union on Industrial Production - Dictionary of Arguments

Acemoglu I 129
Industrial production/Policy of the Soviet Union/Acemoglu/Robinson: Innovations/motivation/incentives/production targets: (...) paying (...) bonuses created all sorts of disincentives to technological change. For one thing, innovation, which took resources away from current production, risked the output targets not being met and the bonuses not being paid. For another, output targets were usually based on previous production
Acemoglu I 130
production levels. This created a huge incentive never to expand output, since this only meant having to produce more in the future, since future targets would be “ratcheted up.” Underachievement was always the best way to meet targets and get the bonus.
Central planning: Problems: E.g., when the plan was formulated in tons of steel sheet, the sheet was made too heavy. When it was formulated in terms of area of steel sheet, the sheet was made too thin.
Incentives/bonuses: Problems: (...) a “profit motive” was no more encouraging to innovation than one based on output targets.
Prices. the system of prices used to calculate profits was almost completely unconnected to the value of new innovations or technology. Unlike in a market economy, prices in the Soviet Union were set by the government, and thus bore little relation to value.
Innovations: To more specifically create incentives for innovation, the Soviet Union introduced explicit innovation bonuses in 1946. As early as 1918, the principle had been recognized that an innovator should receive monetary rewards for his innovation, but the rewards set were small and unrelated to the value of the new technology. This changed only in 1956, when it was stipulated that the bonus should be proportional to the productivity of the innovation.
Acemoglu/Robinson: However, since productivity was calculated in terms of economic benefits measured using the existing system of prices, this was again not much of an incentive to innovate.
Acemoglu I 131
Incentives: The fact that truly effective incentives could not be introduced in the centrally planned economy was not due to technical mistakes in the design of the bonus schemes. It was intrinsic to the whole method by which extractive growth had been achieved. (Extractive institutions: >Terminology Acemoglu.)
Institutions: (...) when Mikhail Gorbachev started to move away from extractive economic institutions after 1987, the power of the Communist Party crumbled, and with it, the Soviet Union.


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Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments
The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
Soviet Union
Acemoglu II
James A. Acemoglu
James A. Robinson
Economic origins of dictatorship and democracy Cambridge 2006

Acemoglu I
James A. Acemoglu
James A. Robinson
Why nations fail. The origins of power, prosperity, and poverty New York 2012


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Ed. Martin Schulz, access date 2021-06-20
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