causal

Shortages are rational behavior in socialist economies

In socialist economies, chronic shortage is not a strange outcome but the rational result of soft budget constraints: each enterprise hoards as many inputs (labor, raw materials) as possible, producing the simultaneous presence of a glut of stockpiled inputs inside firms and a shortage outside as everyone bids for the same scarce goods.

causalpending

Speaker

Branko Milanovic

Evidence Quote

It's a rational behavior when you had soft budget constraint where each enterprise tries to hoard as much inputs, whether it is labor or raw materials and everything else.

Source

Branko Milanovic on the Big Questions of EconomicsEconTalk
Created: 6/13/2026, 12:16:00 AM

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