IDEAS home Printed from https://ideas.repec.org/a/bla/kyklos/v58y2005i2p239-264.html
   My bibliography  Save this article

Viability, Economic Transition and Reflection on Neoclassical Economics

Author

Listed:
  • Justin Yifu Lin

Abstract

Many transition policies, based on the existing neoclassical economic theories, failed in Eastern Europe, the former Soviet Union, and China. This paper argues that the failure is due to the implicit viability assumption of neoclassical economics. The existing neoclassical economics implicitly assumes that a firm is expected to earn a socially acceptable profit in an open, competitive market as long as the firm has normal management. However, many firms in socialist as well as transitional economies are not viable, that is, they will not be able to earn a socially acceptable profit in an open, competitive market even if they are under normal management because they are in sectors that are inconsistent with their economies' comparative advantages. Under the viability assumption, neoclassical‐based reform policies focus on issues related to property rights, corporate governance, government interventions and other issues that may obstruct a firm's normal management. However, many of these issues are in fact endogenous to the firms' viability problem. Therefore, without resolving the firms' viability problem, such reforms fail to achieve their intended goals. Not only in socialist and transition economies but also in many developing economies there exist many nonviable firms. This paper suggests that the viability assumption in neoclassical economics should be relaxed when analyzing socialist, transition and developing economies.

Suggested Citation

  • Justin Yifu Lin, 2005. "Viability, Economic Transition and Reflection on Neoclassical Economics," Kyklos, Wiley Blackwell, vol. 58(2), pages 239-264, May.
    • Handle: RePEc:bla:kyklos:v:58:y:2005:i:2:p:239-264
    DOI: 10.1111/j.0023-5962.2005.00287.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.0023-5962.2005.00287.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.0023-5962.2005.00287.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Joseph E. Stiglitz, 1999. "More instruments and broader goals: moving toward the Post-Washington Consensus," Brazilian Journal of Political Economy, Center of Political Economy, vol. 19(1), pages 101-128.
    2. Olivier Jean Blanchard & Kenneth A. Froot & Jeffrey D. Sachs, 1994. "Introduction to "The Transition in Eastern Europe, Volume 1"," NBER Chapters, in: The Transition in Eastern Europe, Volume 1, Country Studies, pages 1-18, National Bureau of Economic Research, Inc.
    3. World Bank, 2002. "Transition, The First Ten Years : Analysis and Lessons for Eastern Europe and the Former Soviet Union," World Bank Publications - Books, The World Bank Group, number 14042, December.
    4. J. Stiglitz, 1999. "Whither Reform? Ten Years of the Transition," Voprosy Ekonomiki, NP Voprosy Ekonomiki, vol. 7.
    5. Blanchard, Olivier Jean & Froot, Kenneth A. & Sachs, Jeffrey D. (ed.), 1994. "The Transition in Eastern Europe, Volume 2," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226056623, June.
    6. N/A, 2000. "The world economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 173(1), pages 3-3, July.
    7. Kolodko, Grzegorz W., 2000. "From Shock to Therapy: The Political Economy of Postsocialist Transformation," OUP Catalogue, Oxford University Press, number 9780198297437, Decembrie.
    8. Woo Wing Thye, 1994. "The Art of Reforming Centrally Planned Economies: Comparing China, Poland, and Russia," Journal of Comparative Economics, Elsevier, vol. 18(3), pages 276-308, June.
    9. N/A, 2000. "The world economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 174(1), pages 3-3, October.
    10. Olivier Blanchard & Kenneth Froot & Jeffrey Sachs, 1994. "The Transition in Eastern Europe, Volume 2, Restructuring," NBER Books, National Bureau of Economic Research, Inc, number blan94-3, March.
    11. Blanchard, Olivier Jean & Froot, Kenneth A. & Sachs, Jeffrey D. (ed.), 1994. "The Transition in Eastern Europe, Volume 1," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226056609, December.
    12. N/A, 2000. "The World Economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 173(1), pages 43-65, July.
    13. Olivier Jean Blanchard & Kenneth A. Froot & Jeffrey D. Sachs, 1994. "The Transition in Eastern Europe, Volume 1, Country Studies," NBER Books, National Bureau of Economic Research, Inc, number blan94-2, March.
    14. N/A, 2000. "The world economy," National Institute Economic Review, National Institute of Economic and Social Research, vol. 172(1), pages 3-3, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Justin Yifu Lin & Peilin Liu, 2005. "Development Strategies and Regional Income Disparities in China," Development Economics Working Papers 21984, East Asian Bureau of Economic Research.
    2. David Aristei & Cristiano Perugini, 2014. "Speed and Sequencing of Transition Reforms and Income Inequality: A Panel Data Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(3), pages 542-570, September.
    3. Weede Erich, 2006. "Globale Ordnungspolitik im Zeitalter amerikanischer Hegemonie: Kritische Anmerkungen dazu, wie man Demokratie und Kapitalismus nicht verbreiten kann / Global Order in the Era of American Hegemony," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 57(1), pages 371-392, January.
    4. Pasquale Tridico & Maria Lissowska, 2010. "Approaches, Hopes and Reality in Transition Economies," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 4, December.
    5. K. Thomas, 2022. "Amending China’s Notion of a “Consumer”: Lessons from Comparative Analysis of the PRC Consumer Protection Law," Journal of Consumer Policy, Springer, vol. 45(3), pages 435-456, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:zbw:bofitp:2000_008 is not listed on IDEAS
    2. Laurila, Juhani & Singh, Rupinder, 2000. "Sequential reform strategy : The case of Azerbaijan," BOFIT Discussion Papers 8/2000, Bank of Finland, Institute for Economies in Transition.
    3. Michał Myck & Monika Oczkowska, 2018. "Shocked by therapy? Unemployment in the first years of the socio‐economic transition in Poland and its long‐term consequences," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(4), pages 695-724, October.
    4. Kennedy, Robert E., 1997. "A tale of two economies: Economic restructuring in post-socialist Poland," World Development, Elsevier, vol. 25(6), pages 841-865, June.
    5. Ale?Ahcan & Saso Polanec, 2008. "Social Security and Retirement during Transition:Microeconometric Evidence from Slovenia," LICOS Discussion Papers 22108, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    6. Sweder J. G. van Wijnbergen & Tim Willems, 2016. "Learning Dynamics and Support for Economic Reforms: Why Good News Can Be Bad," The World Bank Economic Review, World Bank, vol. 30(1), pages 1-23.
    7. Elise S. Brezis & Adi Schnytzer, 2003. "Wy are the transition paths in China and Eastern Europe different?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(1), pages 3-23, March.
    8. Ulla Grapard, 1997. "Theoretical Issues of Gender in the Transition from Socialist Regimes," Journal of Economic Issues, Taylor & Francis Journals, vol. 31(3), pages 665-686, September.
    9. Oana-Ramona SOCOLIUC (GURIȚĂ) & Andreea-Oana IACOBUȚĂ-MIHĂIȚĂ & Elena CIORTESCU, 2021. "Private property - the inclusive institution which shaped dissimilar economic dynamics. Evidence from the Czech Republic and Romania," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 12, pages 213-243, December.
    10. Luděk Sýkora & Stefan Bouzarovski, 2012. "Multiple Transformations," Urban Studies, Urban Studies Journal Limited, vol. 49(1), pages 43-60, January.
    11. George F. DeMartino, 2015. "Harming Irreparably: On Neoliberalism, Kaldor-Hicks, and the Paretian Guarantee," Review of Social Economy, Taylor & Francis Journals, vol. 73(4), pages 315-340, December.
    12. Christian Sellar & Rudolf Pástor, 2015. "Mutating Neoliberalism: The Promotion of Italian Investors in Slovakia before and after the Global Financial Crisis," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 39(2), pages 342-360, March.
    13. Marianne Afanassieva, 2015. "Survival Through Networks: The 'grip' of the administrative links in the Russian post-Soviet context," Public Management Review, Taylor & Francis Journals, vol. 17(9), pages 1261-1281, October.
    14. Keun-Yeob Oh & Taegi Kim, 2012. "Measuring the welfare effects of intellectual property rights changes on the Korean pharmaceutical industry: the case of Korea–US Free Trade Agreement," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 19(3), pages 278-291.
    15. Alfons Palangkaraya & Jongsay Yong, 2009. "Parallel Imports, Market Size And Investment Incentive," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 54(02), pages 167-181.
    16. Noland, Marcus & Robinson, Sherman & Wang, Tao, 2000. "Modeling Korean Unification," Journal of Comparative Economics, Elsevier, vol. 28(2), pages 400-421, June.
    17. Shinji Takagi & Issei Kozuru, 2010. "Output And Price Linkages In Asia'S Post-Crisis Macroeconomic Interdependence," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 55(01), pages 59-81.
    18. Arias, Fernando & Parra-Amado, Daniel & Garrido, Daira, 2013. "¿Responden los diferentes tipos de flujos de capitales a los mismos fundamentos y en el mismo grado? : evidencia reciente para países emergentes," Chapters, in: Rincón-Castro, Hernán & Velasco, Andrés M. (ed.), Flujos de capitales, choques externos y respuestas de política en países emergentes, chapter 2, pages 53-81, Banco de la Republica de Colombia.
    19. V. Bárta, 1996. "Estimation of the Fiscal Stance in the Czech Republic during Transformation: Full Employment Budget Analysis," CERT Discussion Papers 9612, Centre for Economic Reform and Transformation, Heriot Watt University.
    20. Dobrescu, Emilian, 1998. "Macromodels of the Romanian transition economy, Second edition," MPRA Paper 35825, University Library of Munich, Germany.
    21. Changying Li, 2005. "Vertical Product Innovation And Parallel Imports," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 50(01), pages 35-46.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:kyklos:v:58:y:2005:i:2:p:239-264. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0023-5962 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.