Lange and Hayek Revisited: Lessons from Czech Voucher Privatization
CERGE-EI Working Paper Series No. 166
12 Pages Posted: 7 Dec 2009
Date Written: November 1, 2009
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: Suggested Citation