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This has been an unusually productive exchange. My critics largely accept my main theoretical claims about economic calculation & socialism. They have also started to do what advocates of the Misesian view should have been doing for decades: offer empirical evidence that the calculation problem is serious. While I continue to believe that incentive problems explain most of the failures of socialism, I am slightly less confident than I was before. Fortunately, there are many unexploited sources of information to help resolve the issue. References. Adapted from the source document.

In the 1920s, Austrian-school economists began to argue that in a fully socialized economy, free of competitively generated prices, central planners would have no way to calculate which methods of production would be the most economical. They claimed that this "economic calculation problem" showed that socialism is "impossible." Although many believe that the Austrian position was later vindicated by the collapse of the Soviet bloc, the Austrian school's own methodology disallows such a conclusion. And, historical evidence suggests that poor incentives -- not lack of economic calculation -- were the main source of the economic defects of "really existing socialism.". 24 References. Adapted from the source document.

The paper develops an economic-political model to explain why the convergence hypothesis fails even though good economic policies seem to be a sufficient condition for strong economic growth (Sachs, J., Warner, A., 1995a. Economic convergence & economic policies. NBER Working Paper No. 5039. National Bureau of Economic Research, Cambridge, MA.). The model has three variables: growth, policy, & ideas, which take on discrete values "good," "mediocre," or "bad." Positive feedback from growth to ideas gives rise to multiple equilibria. In one, the "idea trap," bad growth, bad policy, & bad ideas mutually support each other; better policies would work, but are endogenously unlikely to be tried. The paper then illustrates the model's empirical plausibility by reinterpreting some otherwise puzzling historical episodes. 4 Tables, 1 Appendix, 61 References. Adapted from the source document.

Objectives. Economic models of politics typically make two assumptions about voters: first, their motives are egocentric, not sociotropic; second, their beliefs are rational, not subject to systematic bias. Political scientists have presented strong evidence against the first assumption (Mansbridge, 1990), but have become increasingly willing to accept the second (Page and Shapiro, 1992; Marcus and Hanson, 1993). This article tests these two assumptions, then explores the tests' broader implications. Methods. I use the Survey of Americans and Economists on the Economy to test for egocentricity of motivation and rationality of belief. Results. Both standard assumptions fail for the case where the economic approach would seemingly be most relevant: economic beliefs. Conclusions. This is not necessarily cause for greater optimism about the efficiency of democracy: sociotropic voters with biased economic beliefs are more likely to produce severe political failures than are selfish voters with rational expectations.