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Making the Menu: Russia’s Recipe for Calculating Political-economy Constraints

In: Alternative Theories of the State

Author

Listed:
  • Peter J. Boettke
  • Bridget I. Butkevich

Abstract

When the Berlin Wall fell in 1989, Western economists were asked for advice on how to manage the transition from a state-controlled economy to a market economy. This task has proven more difficult than first imagined. One source of difficulty is that the transition to the market is less a process to be managed and more a process to be observed.1 Nonetheless, the standard advice was straightforward. If consumers suffered under the old state-administered economy from a shortage of consumer goods, then reform would allow prices to fluctuate equilibrating supply and demand.2 If the system suffered from production inefficiencies due to perverse incentives caused by state ownership of enterprise, then reform would privatize enterprises.3 Finally, if the system had macroeconomic imbalances due to the softbudget constraints needed to subsidize inefficient firms and maintain a cradle-to-grave social safety net, then reform would harden those budget constraints and restructure the social safety net.4

Suggested Citation

  • Peter J. Boettke & Bridget I. Butkevich, 2006. "Making the Menu: Russia’s Recipe for Calculating Political-economy Constraints," Palgrave Macmillan Books, in: Steven Pressman (ed.), Alternative Theories of the State, chapter 9, pages 191-216, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-37279-5_9
    DOI: 10.1057/9780230372795_9
    as

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