The Political Economy of a Soviet Military R&D Failure: Steam Power for Aviation, 1932 to 1939

Abstract

The behavior of principals and agents in the interwar Soviet economy can be studied through the failed attempt to develop a new aviation-engine technology based on the steam turbine. Some possible approaches to the evaluation of R&D failure are outlined. Soviet R&D agents competed for funding within a command system. Principals funded ventures in a context of biased information and adverse selection. In the presence of sunk costs budget constraints on individual projects were often loose, but were tightened periodically. There is evidence of rent seeking, but not that rents were distributed deliberately as political gifts to loyal agents.