[This paper compares outcomes of alternative allocation systems (queues, convertible and nonconvertible rations, and unhindered market) to distribute limited quantity of a deficit good among heterogeneous individuals. It is shown that, for the poor, the ranking of systems (from better to worse) is convertible rations, nonconvertible rations, queues, and nonintervention. The rich are better off under nonintervention than under other systems. These and other positive results are robust to certain types of commodity taxes and administrative costs.]

This paper presents some new ways of looking at economic systems and organizations. Individuals' judgments entail errors; they sometimes reject good projects and accept bad projects (or ideas). The architecture of an economic system (i.e., how the decision-making units are organized together within a system, who gathers what information, and who communicates what with whom) affects the errors made by individuals within the system, as well as how those errors are aggregated.

This paper undertakes three sets of tasks: (i) it analyzes positive and normative aspects of price scissors (the domestic terms of trade between agriculture and industry) within nonsocialist as well as socialist LDCs. The critical role of the economy's institutional features (e.g., external trade environment, wage and income determination, and wage-productivity effects) is emphasized. Certain aspects of the Soviet Industrialization Debate and subsequent collectivization are interpreted, (ii) It develops simple rules to delineate who gains and who loses (within agriculture) from changes in terms of trade, (iii) It presents powerful (and informationally parsimonious) rules for Pareto-improving price reforms for cash crops and agricultural inputs.

The question of how the funds required for the capital accumulation associated with industrialization are to be raised has a long history. Since the industrial sector is relatively small in the early stages of industrialization, there has been a presumption that funds must primarily come from the agricultural sector. A simple model of a closed socialist economy in which the instruments at the disposal of the government are the terms of trade and the industrial wage, sheds some light on these questions, particularly in the context of the Soviet industrialization debate. In an economy facing binding constraints in external trade, a lowering of the price of the rural good, which reduces the supply of rural surplus available to the urban sector, must be accompanied by a lowering of the urban wage to reduce the demand for the rural good, and hence to balance the supply and demand of the rural good. A virtue of developing a general theoretical framework is that it enables one to isolate those features of the economy which are critical for the issues at hand.

Stiglitz and Sah examine the relationship between human fallibility and economic organization.