On nationalizing private property and the present value of dictators

The empirical and theoretical results in this paper cast doubt upon the explanation of socialism advanced by Gifford and Kenney. The empirical finding that socialism is inversely related to the degree of political instability is directly contrary to the prediction of their model. Further, we have argued that their major theoretical justifications for their theory are inconsistent with the stated objective of the decision maker; a command economy is not the necessary result of a revenue-maximizing government. Beyond this, we might also point out that the notion of a revenue-maximizing ruler seems to be an inadequate characterization of socialist leaders. While we have disagreed with Gifford's and Kenney's conclusions, the central question is still important: why is socialism such a successful system given what appear to be such obvious allocative and productive inefficiencies? If only by way of a survivorship type test, socialism is in some sense ‘efficient.’ However, what it is producing is still open to debate. We have found the explanation suggested by Hayek and Friedman to be consistent with the evidence. Copyright Martinus Nijhoff Publishers 1986