Soviet Industrial Production, 1928-1950: Real Growth, Hidden Inflation, and the 'Unchanged' Prices of 1926/27,
in: Ekonomicheskaja istorija. Ezhegodnik (Economic Hystory. Yearbook). 2001, Moscow: ROSSPEN, 2002, p.293-336.
Soviet central planners developed the 'unchanged prices of 1926/27' to facilitate their regulation of production enterprises and ministries. The system was intended to limit the scope for producers to cheat in fulfilling plans for the ruble value of output by raising prices rather than output. However, the system contained weaknesses which enterprises soon learnt to exploit. Producers pressed continually for higher 'unchanged' prices. The authorities contained this pressure with regard to the prices of existing products, but were relatively powerless with regard to the pricing of new products. The most important consequence was an upward bias in measuring the growth of real output ("hidden inflation"). Biases arising from the introduction of new products are present in all national statistical systems, not only the Soviet one, and it is wrong to criticize Soviet statisticians for not having found an unattainable ideal solution. However, by both historical and present-day standards of international best practice Soviet procedures were particularly vulnerable to hidden inflation. This finding can be reconciled with a paradox: under particular circumstances, official measures of the output of machinery and weapons showed an opposite bias towards hidden deflation and understated real growth.