by Dalibor Rohac
Institute of Economic Affairs
March 06, 2013
Economic Affairs
The mainstream of the economics profession has yet to fully acknowledge that planned economies failed principally because they placed unrealistic epistemic and motivational demands on policymakers. In other words, socialism failed because it required too much wisdom and too much benevolence on the part of the planners. Similarly, many of the popular prescriptions for economic reforms implicitly assumed that policymakers did not face knowledge constraints and that their motives were purely benevolent. Hence these policy recommendations were unlikely to withstand less-than-ideal assumptions about policymakers’ knowledge and incentives.

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