ABSTRACT
This paper discusses the following questions:
What is the prevailing economic motivation of the producers in a centrally planned economy (CPE) and why?
Is it possible to change the producers’ objective function by partial measures affecting the mechanism of central control, e.g., by reforms that go as far as to abolish direct command rules and to supersede them by the principle of economic self-financing? Section 2 outlines a model of the typical producer in a CPE and presents
an answer to the first set of questions. The second question is addressed in Sections 3 and 4 where we also discuss some of the problems that arise from implementing reforms of the traditional economic mechanisms of centrally planned economies.