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We've all heard the story, which sounds for all the world like a typical urban legend. It goes something like this:

Once upon a time, there was a factory in the Soviet Union that made nails. Unfortunately, Moscow set quotas on their nail production, and they began working to meet the quotas as described, rather than doing anything useful. When they set quotas by quantity, they churned out hundreds of thousands of tiny, useless nails. When Moscow realized this was not useful and set a quota by weight instead, they started building big, heavy railroad spike-type nails that weighed a pound each.

The moral of the story, depending on who's telling it, is either "be careful what you measure for because it's often not representative of the result you really wanted," or "ha ha, look at how silly central planning of an economy is; we never had messes like that over here with Free Enterprise™." But it makes me wonder, did the Soviet Nail Factory ever truly exist?

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    I can ensure you that a Soviet nail factory existed. – SIMEL Jul 17 '14 at 19:57
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    We've all heard the story -- I've never heard the story.... :( – Flimzy Jul 19 '14 at 1:25
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    So, is your question about why planned economy encouraged factories producing useless items (as in the header), or is it about did the Soviet Nail Factory ever truly exist, as in the final sentence? – bytebuster Jul 20 '14 at 21:18
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    Meyer Kron's memoirs describes a Russian factory labelling "cut and unassembled leather" as "complete shoes" (in effect producing useless shoes to improve metrics) in order to meet their production targets. This, while not directly related to the nail issue, shows the problem did exist. – March Ho Sep 6 '15 at 23:18
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    The actually applicable moral of the story is, "don't use the same metric for measuring and regulating". Because anyone will start gaming the system if he thinks he can get away with it. Happens in capitalism all the time as well. – DevSolar Aug 28 at 11:28
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Seems pretty clearly a joke grown into an urban legend.

See, e.g., this memoir by Pail Craig Roberts:

A famous Soviet cartoon depicted the manager of a nail factory being given the Order of Lenin for exceeding his tonnage. Two giant cranes were pictured holding up one giant nail.

The cartoon in question may be the one pictured here:

enter image description here Click to enlarge. Image Source

Of course, the problem of which this is an exaggerated example was, indeed, real.

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    Please improve the clarity of the last sentence. – user20862 Jul 18 '14 at 15:57
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    Tsvetelin M. Tsonevski has kindly provided me with the following translation of the text in the cartoon: The worker asks: "Who needs this nail?" and the factory bureaucrat answers "This is irrelevant. It's important that we fulfilled the plan immediately." – szarka Jul 18 '14 at 16:27
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    I mean that, while a Soviet nail factory probably never produced a single nail to fulfill a quota based on tonnage, it's certainly the case that--divorced from information about and incentives to provide nails of the sizes and weights actually needed by their comrades--actual Soviet nail factories may have produced too few, too heavy nails. – szarka Jul 18 '14 at 16:34
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    See also this passage in the Roberts essay I linked: The Soviet manager’s success indicator was a measure of gross output, such as weight, quantity, square feet, or surface area. Gross output indicators played havoc with assortments, sizes, quality, and so on. Nikita Khrushchev complained of chandeliers so heavy “that they pull the ceilings down on our heads”... – szarka Jul 18 '14 at 16:35
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    Add all this information to your answer. Your current answer throws in a link to a PDF, the noteworthiness of which has not been established, then a joke, and then concludes that "Of course the problem was indeed real". – user7920 Jul 18 '14 at 17:47
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I can't find examples of nails, but there's a concrete example of chemical equipment where a factory avoided switching to producing superior models because they were lighter... and their output was measured by weight.

There's also articles on the subject of rolled metal products.

From the book "Planning Problems in the USSR" there are some specific examples.

A factory in Tambov,

enter image description here enter image description here

It's also noted that there was a general problem with rolled metal products.

enter image description here enter image description here enter image description here

I can't speak russian but tracking down Zakruzhnyi [1966] may be worthwhile for anyone who can.

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