Lange and Hayek Revisited: Lessons from Czech Voucher Privatization
CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)
Randall K. Filer
City University of New York, CUNY Hunter College - Department of Economics; Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); University of Michigan at Ann Arbor - The William Davidson Institute; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
November 1, 2009
CERGE-EI Working Paper Series No. 166
A fundamental question in economics since the 1930s has been whether an administrative price system could simulate the results of perfect competition even without a true market for the means of production. The theoretical possibility of such a system has been known since the introduction of market socialism by Oskar Lange. We have used the artificial bidding market involved in the Czech voucher privatization process to test whether a sequential process of trial-and-error can set administrative prices close to equilibrium. It would appear from this natural experiment that Robbins and Hayek were correct in doubting the real-world feasibility of market socialism.
Number of Pages in PDF File: 12
Keywords: bidding scheme, Oskar Lange’s model, privatization, price setting, voucher scheme
JEL Classification: P00, P22working papers series
Date posted: December 7, 2009
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