Papers on Development and Transition
*
"On economic growth and
development",
[Review of
Austrian Economics, 19, 2006, pp. 243-260] download.
Contrary to the mainstream view, the paper
offers a subjectivist approach to growth and an institutional view of
development. In particular, the term development regards the prevailing
rules
of the game and their effects on the key variables for economic
activity to
take off: property rights and entrepreneurship. And growth is deemed to
be the
result of favourable institutional environments where chances are
exploited and
individuals succeed in improving their living conditions.
From a methodological standpoint it
is then argued that the common attempts to measure growth provide at
best crude
evaluations of the efforts to acquire purchasing power, but hardly
measure
well-being. From a normative perspective, the role of growth-enhancing
government intervention is thus questioned. Doubts are also raised with
respect
to the recent and increasing literature on institutional design, which
seems to
ignore much of the lessons taught by the institutional schools - both
old and
new. And which tends to describe the past, rather than providing
explanations
that might help us understand the future.
*
"Are property rights relevant fo
development
economics? On the dangers of Western constructivism" [The Elgar
Companion to the Economics of Property Rights, Cheltenham (UK)
and Northampton (Ma.): Edward Elgar 2004, pp. 363-379] download.
Although
the importance of property rights
as the engine of growth remains beyond dispute, this article tries to
show
that the crucial issue is not so much the definition of the allegedly
‘optimal’
property right system, as the understanding of the ideological elements
that justify property rights in the first place – entrepreneurship and
self-responsibility. Unless one clearly perceives the nature of the
ideological
structure that legitimises the rules of the game in a given society, it
is virtually impossible to understand why growth-conducive
property-right
systems fail to emerge and be accepted.
Put differently, property rights are certainly
necessary
for growth. But they are no tools for policy-making. Getting them right
– or transferring them from other contexts - is not enough, especially
if their assignment and enforcement remains a top-down process, whereby
local politicians or international technocrats suggest and enforce
institutional
arrangements experienced elsewhere.
* "
Is there an Austrian approach
to transition"? [The Review of Austrian Economics, 15, 1,
January
2002, pp.61-74] download
The
paper discusses the meaning of the
term
"transition" and its implications for policy-making. Two extreme
orthodox
views are outlined. In particular, it is shown that both the
institutional
and the public-choice approaches address a set of important but
misleading
questions borrowed from the neoclassical tradition. It is suggested
that
an Austrian view would enhance a better understanding of what has been
happening in Central and Eastern Europe in the past decade. Within this
framework, the analysis should be based on three criteria: acquisition
of knowledge, individual responsibility, free entry.
The article leads to two main conclusions. First, future
transition
analysis should keep at bay all temptations in social engineering.
Instead,
more attention should be devoted to the way a number of subjectivistic
features drive institutional change. In addition, Western observers
should
focus on the features of the new opportunity sets made available to
individuals,
as well as on their freedom to choose. On this latter point, much
remains
to be done.
* "Eine praxeologische
Betrachtung
institutioneller Reformen in post-sowietischer Zeit”, in Kommentarband
zum Faksimile-Nachdrck der Erstausgabe von L. von Mises
Nationalökonomie,
Düsseldorf, Verlag Wirtschaft und Finanzen, 2002, pp.83-104 (download);
available in English as "A praxeological view of Post-Soviet
institutional
engineering" (ICER Working Paper, 13, July 2001 download).
The Misesian lesson in a transition framework raises a number of
questions
about the very aim of individuals as they switch from a communist
regime
to a so-called capitalist environment. According to the answers
provided
one may understand why so many recent candidates to free-market
experiments
are now evolving towards some kind of mixed-economy system.
This paper tries to suggest the right questions by looking at
the origin of the transition process in Eastern Europe. Four different
theories are put forwards and analyzed. It is concluded that the
so-called transition economies did not
opt for a clearly-defined institutional system to oppose to Soviet
communism.
Rather, transition has been a painful process to find out new
institutional
rules apt to replace the previous order. Nationalistic feelings have
also
been playing an important role and explain why paternalistic policies
often
tend to be welcome. From a praxeological viewpoint, it will be
important to assess
whether the present institutional framework is flexible enough to
accommodate
today's yearning for paternalistic policies, but strong enough to
resist
pressure to transform paternalism into redistribution and thereby award
privileges to new rent-seeking coalitions.
* "Was transition about
free
market economics?" (Journal des Economistes et
des
Etudes Humaines, 1, 11, March 2001, pp. 63-76) download
Transition has not always been a success story. In some cases
failure was due to the introduction of top-down legislature, which was
not always compatible with the existing informal rules of the game. In
other cases transition was just a euphemism for a fight for power with
little substantial change. Still, most Western analysts indulged
in analysing all
East-European
economies according to a rather standard (neo-classical) pattern. This
paper explains this approach by referring to the need to maintain
rent-seeking
policies in the West, to create new rents in the East. Western
governments
complied with the constructivistic view willingly, especially in the EU
area, for social engineering was instrumental in order to acquire and
expand
consensus on the principles of state interference.
* "On the concept of
transition"
[The Journal of Markets and Morality, 4, 2, Fall 2001, pp.
269-288]
download
The article reassesses the meaning of transition. After a
critical
review of the traditional approach, it is argued that meaningful
transition
requires emphasis on the change of the institutional path-dependent
process.
In this light, the issue of transition may also apply to the West. Put
differently, the notion of transition is here referred to broader
context
than that acknowledged by the orthodox views and now includes the
dynamics
of power, the attitude towards risk and uncertainty within a
civilization
and also ideology. It is maintained that changes depend heavily on the
opportunities for rent seeking, which may be enhanced or stifled by
technological
progress or other exogenous events.
* "
Catching-up for Eastern Europe?" (with A. Brzeski)
[Post-Communist
Economies (formerly Communist Economies and Economic Transformation),
11,1,
1999, pp.5-25] download
The plausibility of catching-up with
Western
Europe by six East-European countries is assessed by examining a
hypothetical
growth scenario. Per capita GDP in Western Eu-rope is chosen as an
adequate
benchmark. The requirements for convergence are then examined, with
particular
reference to population, capital stock, investment, trade and
"technical
progress". The growth rates suggested by a successful convergence
process
for Eastern Europe turn out not be unrealistic, but nevertheless rather
ambitious. Future institutional developments seem to hold the key to
success.
* "
Information and transaction costs as the
determinants
of politically tolerable growth levels" (with J. Macey) [Journal of
Institutional
and Theoretical Economics (JITE), December 1999] download
The paper develops a theory
to
explain growth in developed and undeveloped countries. Where
transaction
and information costs are low, people more easily perceive and oppose
activities
conducive to deadweight losses. The opposite holds where information
and
transaction costs are high, because it will be too costly for
relatively
weak groups to check the rent-seeking proclivities of the dominant
interest
groups. And, by definition, high transaction and information costs make
it hard to displace incumbent leaders who produce poor growth.
The levels of information and transaction
costs
in different countries will determine how much growth we can expect.
* "An institutional view of the LDC
failure"
[Journal of Policy Modeling, 20, 5, September 1998, pp. 631-648] download
The
search for rent-seeking opportunities
in democracy harms growth and is likely to lead to political
turbulence,
thereby opening the way to the bureaucratic nomenclature or to
totalitarian
rule. In the former case, the priority goes to rent-extraction
policies;
in the latter, the dictator tends to be short-sighted, or just a
representative
of a few, powerful rent-seeking coalitions. A possible solution could
come
from the birth of strong, "enlightened" and wide-ranging coalitions
which
would internalize the costs of rent-seeking. But this may not be
realistic;
more likely, poor policies will be followed by other equally poor
policies,
with growth kept close to the minimum politically-acceptable level.
* "Lessons from transition in Eastern
Europe.
A property-right interpretation" (with J. Macey) [Journal for
Institutional
Innovation, Development and Transition, 1, 1, 1997, pp. 10-17] download
This paper questions the neo-classical
and
gradualist views to transition in Eastern Europe, and suggests a
property-right
approach based on the economics of institutions and the public-choice
literature.
This allows us to make a clear and most important distinction between
reform
and transition: only the latter is a serious attempt to change the
existing
property rights system. It is argued that the chances for successful
transition
depend critically on the public-choice equilibria prevailing at the
beginning
of the transition process, and on the sources of legitimacy for the
ruling
coalition(s). This conceptual framework is then applied to analyze the
case of the former Soviet Union and of three different categories of
East-European
countries.
* "
Transition in Eastern Europe" (with Jon Macey), [P. Newman
(ed.), The New Palgrave Dictionary of Economics and the Law,
McMillan,
1998, pp.613-617]
download
* "Path dependence, public choice
and
the future of Russia: a bargaining approach" (with Jon Macey), [Cornell
Journal of Law and Public Policy, 4, 2, Spring 1995, 379-413]
The recent experience in Eastern Europe
demonstrates
that the three pillars of transition - privatization, price
liberalization
and currency convertibility - are extremely fragile, unless they
are
realized within a suitable institutional framework. The paper tries to
develop a public-choice approach to transition, by applying the
principles
of economic theory to the production of law and legislation. Competing
hypotheses of constitution making are studies in detail, and the
crucial
role of nomenclature emphasized. As a result, the future is shown to
depend
on whether the constitutional moment is effectively under way, or just
a prospect; in the former case - contrary to common beliefs - hopes for
rapid and sound improvement would probably be misplaced.
* "Exchange rate management in
Eastern
Europe: a Public-Choice Perspective" (with J. Macey), [Journal des
Economistes
et des Etudes Humaines, 2/3, Juin-Septembre 1995, 259-275;
International
Review of Law and Economics, 16, 2, June 1996, 195-209. ]
download
The paper presents a public-choice
analysis
of the existing exchange-rate regimes in transition economies, with
special
reference to Eastern Europe. The links between policy making, rent
seeking
and exchange-rate regimes are thus examined in detail from a
theoretical
point of view, and then compared with the existing empirical evidence.
Some comments about the role of the West and of international
organizations
are also put forward.
* "A public
choice view of Transition in Eastern Europe" (with J. Macey), [Economia
delle Scelte Pubbliche, 2-3, 1994, 113-132] download
The design of a monetary system in
Slovenia
was influenced by the heritage of persistent shortages of foreign
exchange.
This and other considerations prompted a decision that a new currency -
the Tolar - was to float on two separate foreign exchange markets: a
market
for current-account transactions, and a market for capital-account
transactions.
Actual developments differed considerably from forecasts, and the Tolar
turned out to be stronger than expected.
The aim of the paper is to present, estimate and test a simple
model
describing the behaviour of the Tolar in the first period of high
uncertainty;
and to assess its relevance for the real world. Exchange-rate movements
are analyzed as if they were adjusting to the expected price level. The
results imply that the dealers do not wait for new data on prices to be
disclosed. They try to anticipate the likely effects of inflation on
the
exchange rate. It is shown that interventions by the Central Bank did
not
affect the SIT/DM exchange rate appreciably. The answer to the question
whether other Eastern European countries could have benefitted from the
"short-run story of the tolar" is inconclusive, if not negative.