From socialism to an institutional void: Notes on the nature of the transformation crisis
This paper discusses the possible nature of a transformation crisis. The major point is that the institutional void which the collapse of socialism has left behind is a major cause of the slump. The wealth of developed economies, be they socialist or capitalist, springs from a complicated pattern of an extended division of labour. Any beneficial specialisation in production in turn depends on an appropriate institutional framework for the reliable coordination of the various activities. The essence of systemic transformation is an institutional revolution: the old high-cost institutional setting (socialism) is abolished to make way for an ultimately far superior low-cost one (capitalism). However, the emergence, establishment and consolidation of the new institutional arrangements takes time. Furthermore, the new social devices lack two essential features; they have no well-established reputation (credibility) and economic agents are not yet familiar with them (information costs). The present institutional deficiencies include the lack of a reliable means of deferred payments, i.e. a sound money. Before these institutional aspects are elaborated, this paper addresses some other possible causes of the transformation crisis, notably the issue of inherited inefficiencies, the role of an insufficient responsiveness of supply and the consequences of real factor price rigidity.
|Date of creation:||1991|
|Date of revision:|
|Contact details of provider:|| Postal: Kiellinie 66, D-24105 Kiel|
Phone: +49 431 8814-1
Fax: +49 431 85853
Web page: http://www.ifw-kiel.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kronman, Anthony T, 1985. "Contract Law and the State of Nature," Journal of Law, Economics and Organization, Oxford University Press, vol. 1(1), pages 5-32, Spring.
- Hare, Paul G & Hughes, Gordon, 1991. "Competitiveness and Industrial Restructuring in Czechoslovakia, Hungary and Poland," CEPR Discussion Papers 543, C.E.P.R. Discussion Papers.
- Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 98-116.
When requesting a correction, please mention this item's handle: RePEc:kie:kieliw:480. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny)
If references are entirely missing, you can add them using this form.