Lange and Hayek Revisited: Lessons from Czech Voucher Privatization

CERGE-EI Working Paper Series No. 166

12 Pages Posted: 7 Dec 2009

See all articles by Jan Hanousek

Jan Hanousek

CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute); Charles University in Prague; Academy of Sciences of the Czech Republic; Centre for Economic Policy Research (CEPR)

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)

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Date Written: November 1, 2009

Abstract

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.

Keywords: bidding scheme, Oskar Lange’s model, privatization, price setting, voucher scheme

JEL Classification: P00, P22

Suggested Citation

Hanousek, Jan and Filer, Randall K., Lange and Hayek Revisited: Lessons from Czech Voucher Privatization (November 1, 2009). CERGE-EI Working Paper Series No. 166, Available at SSRN: https://ssrn.com/abstract=1517215 or http://dx.doi.org/10.2139/ssrn.1517215

Jan Hanousek (Contact Author)

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Randall K. Filer

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