Adapting the Economies of Eastern Europe: Behavioural and institutional aspects of Flexibility (1995)
In 1994, I had a chance to work with Tony Killick of the UK’s Overseas Development Institute (ODI) at a conference dedicated to the role of flexibility in economies. My essay, which also benefited from comments from Douglas North, an economist with a leading role in creating Institutional Econonmics, and which has played a key role in my academic thinking, was subsequently published in the May 1995 book edited by Tony Killick.
The essay focuses on a number of issues, as follows:
a. Flexibility and its determinants are important implicit categories in the reform discussions in transition economies. This chapter attempts to make the assumptions underlying these discussions more explicit, by focusing on the constituent parts of flexibility, namely the nature and determinants of behavioural and institutional flexibility.
b.It goes on to analyse the determinants of behavioural inertia, in order to determine to what extent they may be amenable to decisive policy change.
c. To my surprise, since I am an institutionalist at heart, the earlier conclusions (of my 1993 paper) is found to be hardly tenable and I have come to the conclusion that policy is an endogenous factor in behavioural change, thereby increasing the possibility of success even of radical departures in economic policy.
d. Part II analyses the structural and behavioural properties of planned economies, and the legacy that they present for reforms.
e. Part III is the core of the chapter, and develops a conceptual framework about the interrelationship of institutionalisation and flexibility of economic activity, as well as the transition outcomes associated with different assumptions about the the feasibility of behavioural and institutional change.
f. In particular, this section focuses on the interaction between institutional (formal) change and behavioural change (norms, values), and the impact of different speeds of adjustment on transition outcomes.
g. Throughout, the primary focus is on the generic ‘supply side’ adaptability of man as homo economicus rather than on the tactical vagaries forced on to the reform process to deal with the politikon zoon in man; thus the political economy of reform is less emphasised, and the reader is referred to my earlier paper (Neuber, 1993).
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