New Institutional Economics in the Post‐Socialist Transformation Debate

Abstract

The paper suggests that there is a tension between the basic tenant of New Institutional Economics (NIE) and the manner in which it has been applied in the debate on post‐socialist transformation. This tension is explored in the context of four main perspectives on NIE: (i) property rights, (ii) transaction costs economics, (iii) new economic history, and (iv) evolutionary economics. There are two main arguments. The first is that the transformation phase should be seen as ‘open‐ended’ rather than a ‘closed process’ where the ‘pure market’ is the inevitable end result. The second is that, although the NIE literature touches on most of the issues which are relevant to post‐socialist transformation, the insights that it offers are still too general for policy guidance.