Why (was?) the Soviet economy during the Cold War era such a failure?

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I want to point out that what you quoted was in the part about market economies, not planned ones. Planned ones would be short and wouldn’t meet their quotas, throwing everything else out of kilter.

I’m reminded of something… I have a book on my Kindle that is basically a historical artifact and illustrates a lot of what we’re discussing here.

It’s a book of the approved sausage recipes from communist Poland. Apparently ALL sausage producers were required to produce sausage according to this list of approved recipes, which date back to just after WWII and are old-school, traditional sausage recipes. And as such, are great for present-day artisanal sausage makers and hobbyists as a sort of time-capsule as to how sausages were made traditionally.

But it points out another aspect of things- there was zero flexibility. Didn’t matter if you lived in Bialystok, Gdansk, Krakow, or Szczecin, if you were a sausage producer, you were using the recipes on this list. There was no allowance for rise in ingredient prices, shortages, abundance, or anything like that- if you were making a certain kind of kielbasa, you had very limited options about how you could make it. And AFAIK, you couldn’t just freestyle and come up with a new type if for some reason you had a lot of something, and less of something else.

The author (re-publisher?) has a foreword where he extols the virtues of this system- guaranteed quality, known recipes, and so forth, and decries the changes in modern day sausage due to cost-cutting actions. Which is valid, but at the same time, he omits the downsides to it - if there wasn’t enough of something under the communits system, everyone did without, rather than allowing the manufacturers to pivot.

@Odesio

One of the problems with a planned economy is the price of goods isn’t connected to consumer demand.

Largely all the feedback loops you have in a market economy don’t function in a planned economy, and that’s the overriding problem. Retail sales and prices are just the most obvious ones. But all the rest of it contributes, and when those feedback loops aren’t in place, the expectation is that the central planning is replacing those. Which works fine if things are static, but when/where they’re not, you get under/over production, inefficient distribution, and so forth. All of which compounds over time to cause it to just not work very well.

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@msmith537

There is some fair amount of truth in that. Businesspeople often try to run things as “efficiently” as possible. Government isn’t really meant to be “efficient”. It’s meant to create services and infrastructure everyone uses. Theoretically they have to do it within budgets. But they can’t be like “let’s only provide busses and schools to our most profitable customers.”

I actually work in the public sector now, and it’s been a huge adjustment mentally. Much of what we do (it’s a municipal government) is literally public service, and as someone tasked with helping strategically plan and shape IT efforts with the help of our partner departments, the lack of the usual indicators like market share, P&L, etc… makes it pretty difficult to get my head around, at least from the traditional MBA perspective. I mean, it’s hard some of the time to determine if you’re even successful, much less actually measure and quantify how successful or whether you’re improving.

This sort of mental disconnect extends throughout the institution. In the private sector, most people are working not to get fired, with a lucky few actually chasing extra pay/rewards. Neither of those really apply in the public sector. You have to really f**k up to get fired, and merit raises are scarce as hen’s teeth as well. Most are working because they like having a job, but they’re neither expecting to get fired nor are they expecting to be rewarded for going above and beyond either. So you’ve got to adjust your expectations about how/when/etc… people will reply, get stuff done, etc… It’s very different than the private sector; things move much slower and are generally unhurried. Which introduces a lot of friction in IT when stuff really is mission-critical and you expect people to stay late on a Friday to fix it.

I imagine the communist systems are much like that- without that profit motive to push everything along (and inject a substantial amount of fear of getting fired into the workforce), everything becomes “inefficient”.

[Exapno_Mapcase]

Japan also had the world’s largest (non-hyperinflation) land bubble, with Tokyo land values up to $139,000/sq. ft. or 350 times as much as Manhattan.

To show the absurdity of such numbers, some wit calculated that the amount of land under the one sq. mi. Imperial Palace was therefore worth more than all of California’s real estate combined.

That took immense amounts of money out of the capital flow, and forced the government to desperately try to salvage businesses.

[msmith537]

@bump

I actually work in the public sector now, and it’s been a huge adjustment mentally. Much of what we do (it’s a municipal government) is literally public service, and as someone tasked with helping strategically plan and shape IT efforts with the help of our partner departments, the lack of the usual indicators like market share, P&L, etc… makes it pretty difficult to get my head around, at least from the traditional MBA perspective. I mean, it’s hard some of the time to determine if you’re even successful, much less actually measure and quantify how successful or whether you’re improving.

I’ve found the same thing moving from professional services into back office at a large insurance company. Where before I knew almost to the penny how much I or anyone on my team was worth based on what we sold or worked on, I have no idea in my current job. In fact, much of what we do is trying to tie metrics to activities to figure out if we are doing something “well” or not. And if so, how is that actually saving or making money.