Harashima, Taiji (2011): A Model of Total Factor Productivity Built on Hayek’s View of Knowledge: What Really Went Wrong with Socialist Planned Economies?
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Because Hayek’s view goes beyond the Walrasian framework, his descriptive arguments on socialist planned economies are prone to be misunderstood. This paper clarifies Hayek’s arguments by using them as a basis to construct a model of total factor productivity. The model shows that productivity depends substantially on the intelligence of ordinary workers. The model indicates that the essential reason for the reduced productivity of a socialist economy is that, even though human beings are imperfect and do not know everything about the universe, they are able to utilize their intelligence to innovate. Decentralized market economies are far more productive than socialist economies because they intrinsically can fully utilize human beings’ intelligence, but socialist planned economies cannot, in large part because of the imagined perfect central planning bureau that does not exist.
|Item Type:||MPRA Paper|
|Original Title:||A Model of Total Factor Productivity Built on Hayek’s View of Knowledge: What Really Went Wrong with Socialist Planned Economies?|
|Keywords:||Hayek; Market economy; Socialist planned economy; Total factor productivity; Innovation; Experience curve effect; China|
|Subjects:||P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P20 - General
J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
P - Economic Systems > P1 - Capitalist Systems > P10 - General
D - Microeconomics > D2 - Production and Organizations > D24 - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives
|Depositing User:||Taiji Harashima|
|Date Deposited:||26. Feb 2011 20:17|
|Last Modified:||19. Feb 2013 19:06|
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