TY  - JOUR
AU  - Shleifer,Andrei
AU  - Vishny,Robert
TI  - Pervasive Shortages Under Socialism
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3791
PY  - 1991
Y2  - July 1991
UR  - http://www.nber.org/papers/w3791
L1  - http://www.nber.org/papers/w3791.pdf
N1  - Author contact info:
Andrei Shleifer
Department of Economics
Harvard University
Littauer Center M-9
Cambridge, MA 02138
Tel: 617/495-5046
Fax: 617/496-1708
E-Mail: ashleifer@harvard.edu

Robert W. Vishny
Booth School of Business
The University of Chicago
5807 South Woodlawn Avenue
Chicago, IL  60637
Tel: 773/702-2522
Fax: 773/834-1920
E-Mail: Rvishny@gmail.com
AB  - We present a new theory of pervasive shortages under socialism, based on the assumption that the planners are self-interested. Because the planners -- meaning bureaucrats in the ministries and managers of firms -- cannot keep the official profits that firms earn, it is in their interest to create shortages of output and to collect bribes from the rationed consumers. Unlike official profits, bribes are not turned over to the state, and so shortages enable the key decision makers who collect them to profit personally. The theory suggests that an increase in the official price of a good might reduce output. The theory also suggests that market socialism is bound to fail even without computational complexities facing the planners.
ER  -