Question

In the former Soviet Union, producers were paid for meeting output targets, not for selling products. Under those circumstances, what were the economic incentives for producers?

Answer 1

Answer:

The economic incentive was to produce enough to meet the output target, without regard for quality or cost.

Explanation:

As the only condition for the payment to the producers is linked with the output thus there is no constraint for the quality and the sales of the product. This indicated that the producer will get the reward irrespective whether the quality or cost of the product is feasible or not.

Answer 2

Answer:

produce enough output to meet the government imposed target (or quota)

Explanation:

The Soviet Union was a communist federation or union of several countries, the largest and most powerful being Russia. It wasn't a voluntary union, instead it was a forced one. The economy was a command economy, which means that the government decided how to allocate resources.

So basically the government decided that a certain month it would distribute X amount of bread to the population and each person was going to received a Y amount of bread. In order for the government to be able to keep its promise and effectively give Y bread to each person, it ordered the bread producers to produce X amount. And the producers couldn't simply decide not to produce X amount of bread, since the punishment for failure to meet the imposed quota was extremely severe (you could even go to prison for it). This meant that the output quota had to be reached without regarding product quality.

As a result from the combination of the previous factors, the producers of bread or any type of product, e.g cars, clothes, watches, airplanes, boats, houses, etc., were very motivated to complete their production quota. The system worked for everyone, because the bread maker would then get a shirt or a car, and the makers of shirts and cars also faced the same command system.