JOURNAL OF COMPARATIVE ECONOMICS 14,40 I-424 (1990) Complexity, Bounded Rationality, and Equilibrium: The Soviet-Type Case’ GERARD ROLAND Centre d’hdes de la Plunijcation et du DCveioppement, UniversitP Libre de Bruxelles, 1050 Brussels, Belgium Received March 14, 1989; revised February 2 1, 1990 Roland, Gerard-Complexity, Bounded Rationality, and Equilibrium: The Soviet-Type Case How is the equilibrium or coordination problem solved in a complex nonmarket economy with unbalanced plans like the typical Soviet-type economy (STE)? This paper tries to tackle this important question through the use of a methodology based on a bounded rationality approach. Six fundamental equilibrating procedures are iden- tified and their hierarchical interaction is studied. The analysis allows us to deduce some fundamental properties of STEs and to shed light on some of the key issues and difficulties of the reform processes. J. Comp. Econom., September 1990, 14( 3), pp. 40 I-424. Centre d’ctudes de la Planification et du Developpement, Universite Libre du Bruxelles, 1050 Brussels, Belgium. o 1990 Academic PXSS, IX Journal qf!fEconomic Literature Classification Numbers: 027, 052, I 13. I. INTRODUCTION How is it possible that the decentralized decision making by interdependent economic agents does not end in chaos but may produce coherence, however defined? This question, i.e., the question of economic equilibrium, called by Hahn ( 1970) the “most intellectually exciting question on our subject,” is probably also the central problem of our discipline, from Adam Smith to Arrow-Debreu. In the institutional framework of Soviet-type economies, this central issue has been addressed by many economists. Whereas in the early years of central planning, one could have thought that equilibrium was reached through the ’ We thank J. Waelbroeck, M. Aglietta, J. Carteher, P. Devil& 0. Favereau, C. Mtnard, A. Orlean, A. Szafarz, and two anonymous referees for their helpful suggestions and comments. I am, of course, solely responsible for the views expressed and for any remaining errors. 401 0147-5967190 $3.00 Copy&t 8 1990 by Academic Press, Inc. All rights of reproduction in an? form resewed.