NOMENKLATURA, STATE MONOPOLY, AND PRIVATE ENTERPRISE

Using a behavioral model of political decisionmaking, it is argued that an increasing population size and/or an increasing efficiency of production in a private enterprise economy relative to a centrally planned economy may create the conditions for a self-interested nomenklatura in a Soviet-type economy to consider a transition to a market economy. This transition may be thwarted, however, by the threat for prospective private enterpreneurs of exploitation after the change of regime. Some form of political pluralism guaranteeing sufficient political influence to private entrepreneurs appears to be required for a successful transition. The analysis shows that such a combined political and economic reform can be in the interest of the nomenklatura, thereby providing an endogenous behavioral explanation for a change of regime.