Abstract
The theory of economic reforms in Soviet Union and Eastern Europe did not follow the development of western economic theory. Although the fundamental economic issues are different in the West and in the East (employment and inflation versus shortages and lack of technological progress) the reform economics is concerned with the optimal mix of centralisation and decentralisation, of market and hierarchy, of autonomy and control, and-more recently-of public and private. All these issues have been extensively treated in western economic literature.
This paper overviews those fields in contemporary economics which could offer the East European reformers an enlightening perspective and useful tools in their search for a new institutional solution. Four such fields are presented: comparative economic systems, theory of incentives, literature stressing relative costs and benefits of different institutional solutions and comparing market and nonmarket failures, and the theory of property rights.
Article PDF
Similar content being viewed by others
Avoid common mistakes on your manuscript.
References
Alchian, A.A. (1950), ‘Uncertainty, evolution and economic theory’, Journal of Political Economy, 58(3).
AlchianA.A. (1969), ‘Corporate management and property rights’, in ManneH. (ed.), Economic Policy and the Regulation of Corporate Securities, Washington D.C.: American Enterprise Institute.
Alchian, A.A. and Demsetz, H. (1972), ‘Production, information costs and economic organization’, American Economic Review 62.
Berle, A. and Means, G.C. (1932), The Modern Corporation and Private Property.
Buchanan, J.M. (1987), ‘The constitution of economic policy’, American Economic Review 77(3).
BuchananJ.M. and TullockG. (1962), The Calculus of Consent, Ann. Arbor, MI: University of Michigan Press.
Caillaud, B., Guesnerie, R., Rey, P. and Tirole, J. (1988), ‘Government intervention in production and incentives theory: a review of recent contributions’, Rand Journal of Economics 19(1).
Coase, R.H. (1937), ‘The nature of the firm’, Economica 4.
Demsetz, H. (1967), ‘Toward a theory of property rights’, American Economic Review 57.
Demsetz, H. (1969), ‘Information and efficiency: another viewpoint’, Journal of Law and Economics 12.
Fama, E. (1980), ‘Agency problems and the theory of the firm’, Journal of Public Economics 88.
Fiorina, M. and Noll, R. (1978), ‘Voters, bureaucrats, and legislators: a rational choice perspective on the growth of bureaucracy’, Journal of Public Economics 9.
Freixas, X., Guesnerie R., and Tirole, J. (1985), ‘Planning under incomplete information and the ratchet effect’, Review of Economic Studies 52(2).
Forte, F. (1982), ‘The law of selection in the public economy as compared to the market economy’, Public Finance 37(2).
FreyB.S. (1978), Modern Political Economy, London: Martin Robertson.
Furubotn, E. and Pejovich, S. (1972), ‘Property rights and economic theory: a survey of recent literature’, Journal of Economic Literature 10.
GranickD. (1987), Job Rights in the Soviet Union: Their Consequences, Cambridge, England: Cambridge University Press.
Grosfeld, I. (1986), ‘Endogenous planners and the investment cycle in the centrally planned economies’, Comparative Economic Studies 28(1).
Grosfeld, I. (1987), ‘Modeling planners' investment behavior: Poland, 1956–1981’, Journal of Comparative Economics 11(3).
Groves, T. (1973), ‘Incentives in teams’, Econometrica 41.
Guesnerie, R. (1988), ‘Regulation as an adverse selection problem’, European Economic Review 32(2–3).
HewettE.A. (1988), Reforming the Soviet Economy, Washington, D.C.: The Brookings Institution.
HirschmanA.O. (1986), Rival Views of Market Society, New York: Viking.
Jensen, M.C. and Meckling W.H. (1976), ‘Theory of the firm: managerial behavior, agency cost and ownership structure’, Journal of Financial Economics 3.
KornaiJ. (1980), Economics of Shortage, North-Holland Publishing Company, Amsterdam.
Kornai, J. (1983), ‘The health of nations. Reflection on the analogy between the medical sciences and economics’, Kyklos 36.
Kornai, J. (1986), ‘The Hungarian reform process: visions, hopes, and reality’, Journal of Economic Literature 24.
LaffontJ.J. and MaskinE. (1982), ‘The theory of incentives: an overview’, in HildenbrandW. (ed.), Advances in Economic Theory, Cambridge: Cambridge University Press.
Lavoie, D. (1986), ‘The market as a procedure for discovery and conveyance of inarticulate knowledge’, Comparative Economic Studies 28(1).
Loeb, M. and Magat W. (1978), ‘Success indicators in the Soviet Union: the problem of incentives and efficient allocation’, American Economic Review 68(1).
Lindbeck, A. (1976), ‘A stabilization policy in open economics with endogenous politicians’, American Economic Review 66(2).
LundbergE. (1962), Instability and Economic Growth, New Haven, Conn., London: Yale University Press.
McKenzieR.B. (1984), ‘Introduction’, in McKenzieR.B. (ed.), Constitutional Economics, Lexington, Mass., Toronto: Lexington Books.
Manne, H.G. (1965), ‘Mergers and the market for corporate control’, Journal of Public Economics 73.
MarchandM., PestieauP. and TulkensH. (1984), ‘The performance of public enterprises: normative, positive and empirical issues’, in MarchandM., P.Pestieau, and H.Tulkens (eds.), The Performance of Public Enterprises, Amsterdam: North Holland.
Mougeot, M. (1988), ‘Les mécanisme incitatifs dans une économie centralement planifiée’, Revue d'Etudes Comparatives Est-Ouest 19(1).
Nelson, R.R. (1981), ‘Assessing private enterprise: an exegesis of tangled doctrine’, The Bell Journal of Economics 12(1).
NiskanenW. (1971), Bureaucracy and Representative Government, Chicago: Aldine-Atherton.
Nordhaus, W.D. (1975), ‘The political business cycle’, Review of Economic Studies 62(2).
North, D.C. and Thomas R.P. (1973), The Rise of the Western World: A New Economic History, Cambridge University Press.
Nuti, D.M. (1988), ‘Competitive valuation and efficiency of capital investment in the socialist economy’, European Economic Review 32(2–3).
NutterG. Warren (1974), ‘Markets without property: a grand illusion’, in FurubotnE. and S.Pejovich (eds.), The Economics of Property Rights, Cambridge, Mass.: Ballinger Publishing Company.
Pelikan, P. (1985), ‘The formation of incentive mechanism in different economic systems’, The Industrial Institute for Economic and Social Research, mimeo.
Picard, P. (1987), ‘On the design of incentive scheme under moral hazard and adverse selection, Journal of Public Economics 33.
PolanyiM. (1967), The Tacit Dimension, Garden City, N.Y.: Doubleday Anchor.
PryorF.L. (1973), Property and Industrial Organization in Communist and Capitalist Nations, Bloomington and London: Indiana University Press.
Schroeder, G.E. (1988), ‘Property rights issues in economic reforms in socialist countries’, Studies in Comparative Communism 26(2).
Tardos, M. (1986), ‘The conditions of developing a regulated market’, Acta Oeconomica 36(1–2).
VickersJ. and G.Yarrow (1988), Privatization: An Economic Analysis, Cambridge, Mass., London: The MIT Press.
Ward, B. (1958), ‘The firm in Illyria, market syndicalism’, American Economic Review 48(4).
Williamson, O.E. (1975), Market and Hierarchies: Analysis and Antitrust Implications, The Free Press.
Wolf, C. (1979), ‘A theory of nonmarket failure’, Journal of Law and Economics 22.
Yarrow, G. (1986), ‘Privatization in theory and practice’, Economic Policy 2.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Grosfeld, I. Reform economics and western economic theory: Unexploited opportunities. Econ Plann 23, 1–19 (1990). https://doi.org/10.1007/BF00418967
Issue Date:
DOI: https://doi.org/10.1007/BF00418967