Counter‐Intelligence in a Command Economy

Abstract

This article provides the first thick description of the counter‐intelligence function in a command economy of the Soviet type. Based on documentation from Soviet Lithuania, the article considers the KGB (secret police) as a market regulator, commissioned to prevent the disclosure of secret government business and forestall the disruption of government plans. Where market regulation in open societies is commonly intended to improve market transparency, competition, and fair treatment of consumers and employees, KGB regulation was designed to enforce secrecy, monopoly, and discrimination. One consequence of KGB regulation of the labour market may have been adverse selection for talent. Here it is argued that the Soviet economy was designed to minimize costs.