A bias in growth-rate comparisons of capitalist and socialist economies

An economy is described by an n-sector linear production matrix and a fixed vector of consumption needs. There are many ways in which goods may be priced and many ways in which “surplus labor” may be allocated among sectors. Depending on which vector of prices and which distribution of surplus labor prevails, the average growth rate of the economy will differ. It is shown that the surplus-labor-price constellation likely to prevail in oligopolistic, free-enterprise economies overestimates the “true” growth rate, and in a centrally planned socialist economy underestimates it. This raises the question whether actual growth rates are systematically biased in the directions indicated. J. Comp. Econ.,