June 1, 2004

An 'Austrian' Economics Perspective on Transitional Political Economy

  • Peter J. Boettke

    Director, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
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After the failure of western advice to aid former communist countries in their transitions to market economies, economists are faced with dilemma at the beginning of the 21st century that was widely recognized in the 19th century: to do good economics one must study the interaction of the economy, polity, and society and that nothing is so dangerous as an economists who attempts to offer advice based on a study of the economy isolated from all other factors. This paper stresses three simple points about the transition from the former socialist system to a market economy:

1. Transition problems are not economic problems, but political and legal problems;

2. Change requires an accurate defining of the "here" from which reforms start and a good idea of the "there" to which change is to accomplish;

3. Effective change of the political and legal institutions requires government to establish a binding and credible commitment to reform.

Read the full article at the London School of Economics website.

Citation (Chicago Style): Boettke, Peter. "An 'Austrian' Economics Perpsective on Transitional Political Economy." Ama-gi: The Journal of the Hayek Society at the London School of Economics 6, no. 2 (Summer 2004): 12-14.