The Dictator’s Dilemma: To Punish or to Assist? Plan Failures and Interventions Under Stalin

Abstract:     
The implementation of his decisions is one of dictator’s main concerns. The dictator knows that his orders may fail to be carried out because agents behave opportunistically, or because his orders contain mistakes, or both. The dictator is informed about which of his orders are implemented or fail, but not about the reasons for this. Imperfect information creates his dilemma: whether to punish an gent that acted poorly, or to assist her, or both. I suggest a simple game that models the dictator’s interventions. It predicts that under imperfect information the dictator’s choices depend on plans’ priority, i.e. the dictator’s utility associated with the expected return on their implementation. For high-priority orders the equilibrium strategy is to punish and assist simultaneously; where the expected return is sufficiently low a mixed strategy may be preferable. I verify the model against the case of the Stalinist command economy, using statistics of the decisions taken by the Communist Party's control commission (KPK) from 1934 to 1951, extracted from records in the formerly secret party archives. I find that KPK decisions coincided well with the logic of the game. This contributes to explaining random nature of punishment in dictatorships in general and underlines the importance of setting the problem of soft budget constraints in such systems in the context of the dictator’s coercive policy.

Number of Pages in PDF File: 43

Keywords: dictatorship, principal-agent problem, soft budget constraints, USSR

JEL Classification: D73, P26, N44

working papers series