Economic Ideas and Institutional Change: Evidence from Soviet Economic Debates JOACHIM ZWEYNERT 09 Baek Jongmyung 1

Questions 1. How the two kinds of ideological change(path-dependence or paradigm shift) interacted 2. How the evolution of economic ideas related to institutional change in Russia during the perestroika period 2

3 Contents 1.The theoretical problem 2.Working hypothesis 3.What was Soviet ideology? 4.How the idea of Perestroika related to Soviet dogma 5.The early debates in journal Voprosy ekonomiki 6.The inflow of western liberal ideas 7.The decline of Soviet ideology 8.Conclusions

1. The theoretical problem 1.Douglass Cecil North - argues in favor of a priority of informal over formal constraints of human behavior. - the decisive feature of shared mental model is that they are deeply interwined with culture and history -> Evolution of the dominating shared mental model is path-dependent and they usually change only incrementally. 4

1. The theoretical problem 2. Thomas Samuel Kuhn’s theory of scientific revolutions Normal science Scientific revolutions the increase of knowledge non-cumulative within the paradigm is a developmental episodes, cumulative process in which an older paradigm is replaced by an incompatible new one 5

1. The theoretical problem 2. Thomas Samuel Kuhn’s theory of scientific revolutions The reason why the replacement of paradigm takes place in a revolutionary way : the representatives of normal science are able to hold down challenges to the paradigm after discoveries have been made that contradict the prevalent doctrine. 6

2. Working hypothesis Socialization is strongly influenced by the prevailing culture and religious traditions, the evolution of general perception of the world can be assumed to be path-dependent and general. Evolution of economic ideas and ideas about economic policy are determined both by a rational choice between competing sets of ideas, and by general world view prevailing in the society concerned. 7

2. Working hypothesis Process of ideological change - In a situation of crisis replacement takes place within a relatively short period of time and can be interpreted as a paradigm shift - In the medium- and long-terms ① developed in the country : reflect domestic patterns of thought-> be compatible with the shared mental models prevailing in that society ② imported from abroad : gradually will be reinterpreted according to the prevailing historically and culturally determined belief system 8

3. What was Soviet ideology? Three pillars of Soviet ideology ① On the belief that Marwism-Leninism offered a ‘true’ interpretation of social reality ② On democratic centralism(the dictatorship of the CPSU) ③ On a centrally planned economy 9

3. What was Soviet ideology? Neil Robinson - key elements of Soviet ideology were neither the planned economy nor ‘democratic centralism’, but rather a peculiar interpretation of history Marxism proved so fruitful in Russia because it was highly compatible with the Russian intellectual traditions shaped by the legacy of Orthodox Christianity. 10

4. How the idea of Perestroika related to Soviet dogma Perestroika - motivated by the increasing scientific and technical backwardness of Soviet Union compared to the Western industrial countries - includes the exploitation of ‘commodity-monetary relations’ and the implementation of ‘economic contention’ 11

4. How the idea of Perestroika related to Soviet dogma - Intention : did not intend a break with Soviet telos - Fact : bores an irresolvable contradiction Gorbachov and his economic advisors believed that elements of the market economy could be freely combined with the planned economy → wrong 12

5. The early debates in the leading Soviet economic journal Voprosy ekonomiki ① The economic contradictions of socialism - Suspicion was voiced for the first time that the problems of the Soviet economy might have their roots in a conflict between its bureaucratic organization and some ‘natural’ economic laws. 13

5. The early debates in the leading Soviet economic journal Voprosy ekonomiki ② Price formation - Marx : social wants(demand) determined the amount of social work to be spent on the production of a product., -The discussion was still about the ‘perfection of the calculation of planned production expenditures’, not about a transition to market prices -> fiercely resisted a reform of price formation 14

5. The early debates in the leading Soviet economic journal Voprosy ekonomiki ③ The new official textbook of political economy and the debates on social property - the problem of ‘socialist property’ : Socialist property did not have a real owner, neither in the person of worker, nor in that of apparatus. - The majority of Soviet economists still believed that ‘socialist alienation’ could be overcome by a reform of socialist property. 15

6. The inflow of western liberal ideas ① The MEMO debates on Western reforms - The main task of the institute, to observe the economic development of the capitalist countries, offered the opportunity to deal with topics and literature that otherwise were strictly taboo - On debate in this journal, the central principles of Soviet ideology criticized from all sides for the first time. 16

6. The inflow of western liberal ideas ② The debates in the general interest press - regarding the principal incompatibility between the market and the plan lay at the heart of the liberal discourse in these journals 17

7. The decline of Soviet ideology 18 1.Soviet economy was in a state of crisis 2.The peacuful revolutions in Europe 3.The influence of Western neo-liberal ideas Perestroika had not fulfilled its promise of raising the living standard of the population →The old dogmas in Soviet economic thought had been replaced by an incompatible new one

8. Conclusions: paradigm shift or path-dependence? Obviously, in Soviet economic thought the old dogmas had been replaced by an incompatible new one(paradigm shift). However, it can be shown that revolution and path- dependence are not mutually exclusive. The way in which these ideas were interpreted, clearly reflected intellectual traditions inherited from the socialist past, namely utopianism. 19

8. Conclusions: paradigm shift or path- dependence? As the neo-liberal doctrine still fundamentally contradicted the Russia intellectual traditions, almost nothing remained of it when it failed to fulfill its promise quickly. The idea that had been imported from the West would undergo a gradual adaption to the path- dependent shared model prevailing in Russia. 20

21 Q & A To professor