Capital, Profit and Bonus in Soviet Industry

The proposals of Evsei Liberman for the installation of incentive payments to Soviet enterprises based on profitability have evoked a continuous stream of controversy on both sides of the Iron Curtain. In a recent article,2 Stephen Merrett argues that Liberman's proposals cannot function as an efficient criterion of enterprise management reward. The purpose of this Comment is to show that Merrett's conclusion does not necessarily follow from Liberman's proposals. In particular, Merrett's discussion of what he refers to as Liberman's multiplier (that is, the payment of bonuses to enterprise management by multiplying the incentive rate per unit of capital employed by the value of capital used within the enterprise) must be called into question. This will necessitate taking a closer look at Liberman's landmark Pravda article.3

Capital (architecture) · Classical economics · Economics · Incentive · Incentive compatibility · Keynesian economics · Microeconomics · Multiplier (economics) · Payment · Profit (economics) · Profitability index · Value (mathematics) · Computer Science · Finance · History · Russia and Soviet political economy