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INTRODUCTION
In 1958, Benjamin Ward published his seminal paper, 'The Firm in Illyria: Market Syndicalism'. He suggested that some Eastern European economies were shifting from socialist planning towards a new economic system with many of the characteristics of market socialism (see Lange, 1936), namely state ownership of the means of production combined with the use of the market mechanism in the allocation of resources. However, he pointed out that Lange's original concept of market socialism left open the question - how these state-owned firms would actually respond to market signals - to which the practises of the 1950s reforming socialist economies might provide an answer. The country upon which he chose to base his model of socialist enterprise supply responses was Yugoslavia, which had recently emerged from a short era of Stalinist planning to introduce, in the early 1950s, a system that Ward described as 'market syndicalist'. Ward's paper was quite specific in building its assumptions from Yugoslav practices; in its second section, the legal arrangements that had been introduced by Yugoslav reformers between 1952 and 1954 were outlined in detail.1
Ward's paper focused on how a socialist labour-managed enterprise might actually respond to market signals and contained the first derivation of the perverse supply response, thereby spawning, with a lag, a vast new economics literature. From the outset, it was not clear whether labour-management theory was seeking (1) to model the Yugoslav economic system, as proposed originally by Ward and developed by, for example, Vanek (1970), Furubotn and Pejovich (1970) and Estrin (1983); (2) to analyse in a formal way the behaviour of cooperatives, as asserted by Domar (1966), Meade (1972) and numerous subsequent papers (eg, Nuti, 1992) surveyed by Bonin et al. (1993); or (3) as a purely theoretical construct to illustrate the implications of alternative ownership and incentive arrangements, as, for example, Dreze (1976) and Sertel (1982). The important point is that there was a single theoretical framework underlying all three strands, based on Ward's original assumptions and examining enterprises that maximise average earnings per head rather than profits. For example Domar, who titled his 1966 paper, 'The Soviet Collective Farm as a Producer Cooperative', refers to Ward's (1958) paper not as describing Yugoslavia but rather as 'The first and...