Equality, Participation, Transition: Essays in Honour of Branko Horvat

and the application of non-economic means for the implementation of
economic goals. Slowness and inconsistency were amplified by the
need to compromise in order to obtain conformity of regional governments
and cartelized economic groups. The distrust of economic units
by administrators emerged from the differences between their expected
and actual behaviour. Economic units responded to administrative
measures in a way which, while rational, was considered socially undesirable.
Moreover, responses often would have to be considered irrational
by the standards of a market economy. The irrational, in this
latter sense, and socially undesirable responses of economic units
therefore constantly required ad hoc administrative measures, leading
to systemic instability. Attempts to correct the behaviour of economic
units could be made only through political persuasion, which strengthened
the links between the economic and political system.
8.4 The economic effects of the reforms
Jozae Mencinger 129
To evaluate adequately the impact of economic reforms on the performance
of the Yugoslav economy is not possible, since we do not know
how the economy would have performed in the absence of these
reforms. My remarks in this section are therefore necessarily somewhat
speculative.
Most studies analyzing performance of the socialist self-managed
economy focus on micro-economic issues. Performance has been
judged predominantly by deductive analysis, comparing the workermanaged
firm’s behaviour to that of the capitalist firm under different
assumptions concerning objective functions, production functions,
institutional constraints on labour and capital supply, and environmental
conditions. Macroeconomics of the labour managed economy
has been analyzed much less, though both theoretical and empirical
studies of macroeconomic performance do exist (Tyson, 1980; Estrin
and Bartlett, 1983; Burkett, 1983; Bajt, 1986).
The two most prominent scholars in the field of labour-managed
economy, Vanek and Horvat, stressed its macroeconomic advantages.
Vanek’s conclusions about the expected performance of the selfmanaged
economy were extremely favourable:
Comparatively – leaving aside the Soviet-type model as a basically
inefficient one (except perhaps when it comes to income distribution)
– there is every reason to believe that the participatory
economy is, all other things considered, superior to the western