Defeated by a Maze

The Soviet Economy and Its Defense-Industrial Sector

by L. D. Badgett

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Since the 1970s, the U.S. government, academia, and research organizations have been dissatisfied with attempts to model the economy of the Soviet Union and its embedded defense-industrial sector. In this Note, principles drawn from the history of economic thought are related to some of the key features of Russian and Soviet history to define and interpret the functionally distinct character of the Soviet defense sector. The author draws a number of conclusions on which to base modifications to current models of the Soviet economy: (1) centrally administered economies differ fundamentally from market-exchange economies in where effective decisionmaking is made and, consequently, in the preferences or objectives that characterize the systems and the control mechanisms employed to realize those objectives; (2) the Soviet economy may be portrayed as dualistic; and (3) the Soviet economic system has more in common with nonmarket institutions than it has with the market-exchange systems upon which Western societies are based.

This report is part of the RAND Corporation Note series. The note was a product of the RAND Corporation from 1979 to 1993 that reported other outputs of sponsored research for general distribution.

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