PRODUCTIVITY PARALYSIS AND THE COMPLEXITY PROBLEM - WHY DO CENTRALLY PLANNED ECONOMIES BECOME PREMATURELY GRAY

We develop a theory of the Soviet productivity growth slowdown that attributes it to difficulties encountered by systems of central planning as the economy becomes more complex. Shortages become more disruptive as the economy modernizes, forcing the economy to operate at an increasing distance from its production possibility frontier. The model also supports the widely held notion that consumer welfare suffers in Soviet-type economies as consumers' needs become increasingly sophisticated. © 1991.