The Israeli Kibbutz: A Simulation and Analysis on the Optimality of Privatization versus Degrees of Central Planning

Abstract

The purpose of this project is to create and evaluate the total utility generated by the individual members of a kibbutz and how this utility compares to similar environments in which individuals are given all or no control over their allocation of resources. Because the kibbutz is mostly studied through a qualitative lens, I create simulated utility curves used to mirror the decision making process of rational individuals within the kibbutz. I begin with a very simplistic and straightforward model intended to mimic social welfare generated from full privatization and full central control. I then elaborate onto this model by introducing finer tuning elements. Following this I vary the level of privatization to further mimic that of a kibbutz and study the subsequent effects. Overall, I found that the introduction of a central planner reduces the overall utility of the society when looking at a single period of time. However, in the long run having a central planner increases the overall utility of the community. In addition, I find that varying the level of privatization in a community affects the utility generated but not the growth. Finally, there is evidence to suggest that the increase in utility of privatized goods is correlated with the variability of the good.