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This paper was presented in June 1974 at the Symposium ―On the Measurement of Factor Productivities‖ at the castle Reisensburg in Bavaria, and was published in the book of proceedings from this Symposium. It contains results of several years of research about the economies of six East European countries, namely Czechoslovakia, Poland, Hungary, East Germany, Bulgaria and Rumania. Data on output, capital and labor for 15 – 20 branches of industry and 17 – 20 years were collected for each of the mentioned countries. About 40 different models of production function were estimated using time series, cross-section, and combined time series and cross-section regression analysis. Because the time series regressions were run for each industrial branch in every country and cross-section regressions were run for each year across all branches in every country and almost always 40 different versions of production function were estimated, several thousand regressions were run all together. The results showed that in most cases the production functions had usual form with constant returns to scale and close to unit elasticity of substitution between capital and labor. However the most interesting result was relatively high original but steadily declining growth rate of total factor productivity (technical progress). This indicated that within 10 to 20 future years Eastern Europe would be tremendously lagging behind the West.

The normative approach is a conspicuous feature of economic literature dealing with socialist planning. As against that, the authors follow a descriptive approach: they formulate rules about the behaviour of planners by examining the Hungarian medium-term plans and the annual plans of the past fifteen years. The data are examined by the authors throughout in terms of growth rates. Investigating the relations between medium-terms and annual plans, it turns out that the link between the two kinds of plans is rather loose. The first year of the medium-term plan, however, is still affected by the medium-term plan starting at the same date: in the majority of cases this annual plan figure fell between the fact figure of the previous year and the task set by the medium-term plan. Analysing the aggregate planned and factual figures of national income, industry, construction and agriculture the authors seek an answer to the question to what extent past results, i.e. deviations between the plans and facts influence future plans. By examining the series of annual plans and facts it has become clear that planners very quickly and sharply respond to deviations between plans and facts. It is characteristic for the majority of cases that if in some year the plan has not been fulfilled, the target of the next year will be smaller than the former plan figure, while in the case of overfulfillment the planned figure of the next year will be higher than the overfulfilled plan had been. This behaviour, which might be also called ‘learning from mistakes’, proves to be characteristic also for the annual plans of Bulgaria, Poland and the Soviet Union, and was shown to be true to almost hundred per cent for the Hungarian medium-term plans. Next the authors define the notion of ‘planners' ambition’. Based Accordingly, every plan can be bold, cautious or devoid of ambition, and for every series of plan figures an ambition-curve can be drawn. With the aid of the ambition-curve the authors analyse primarily the relation between the balance of trade and national income. The regularities found are the following: Under the effect of a deteriorating balance of trade the ambition of the plan for national income diminishes, while under the effect of an improving balance it increases. Affected by a deteriorating trade balance the ambition of exports increases, while that of imports decreases, and vice versa. Following the above patterns a cycle determining foreign trade and the whole of economic policy might be formulated, where, conforming to the changes in the balance of trade, a well discernible cycle of stop-and-go policies emerge. At the end of the article the authors examine the combined effect of the regularities discovered on the plans of national income. They find that a rather simple complex rule can be formulated. The notions and ideas of this article are very near to the ideas expounded by János Kornai in his book Anti-equilibrium.