Why Collectivization of Agriculture in Socialist Countries Has Failed: A Transaction Cost Approach

Transaction costs are bound to the principal-agent problem stimulating free-riding. Furthermore, the right of co-determination favors inefficient decisions of the cooperative's management. From an economic point of view, the major objective of collectivization in agriculture was to achieve a more efficient allocation of resources through capturing economies of size and thus to enable agriculture to contribute to the industrialization of the Soviet economy by maximizing the transfer of resources in line with Preobrazhenskii's theory of primitive accumulation of capital in a socialist economy. From an economic point of view, the major objective of collectivization in agriculture was to achieve a more efficient allocation of resources through capturing economies of size and thus to enable agriculture to contribute to the industrialization of the Soviet economy by maximizing the transfer of resources in line with Preobrazhenskii's theory of primitive accumulation of capital in a socialist economy.