The Culture of Policy-Making in the Transition from Socialism: Price Policy in Mongolia

Abstract

In this article we argue that history of policy-making can deeply influence current economic policy decisions in reforming socialist countries. History's impact lies beyond rigidity of inherited organizations; it acts separately from inherited allocation of power and property rights. Notions and practices that are a product of past historical experience are an autonomous force in development of policy, and they endure even when policymakers deeply desire change. Many labels could be attached to phenomena we describe. We have chosen word because most common interpretation of that term captures essence of what we hope to convey. The central element of culture, a common set of beliefs and practices resulting from a shared historical experience, is exactly phenomenon on which we focus. As explained in Section II, our treatment of culture is consistent with standard methodology applied to a setting in which informational and learning processes are all important.' In fact, our conclusions on Mongolian price policy exemplify Douglass C. North's point that the historically derived perceptions of actors shape choices that they make [and] ... imperfect and fumbling efforts of actors reflect difficulties of deciphering a complex environment with available mental constructs-ideas, theories, and ideologies.2 The article's stimulus was provided by observation of tortuous progress of price reform in Mongolia. With much fanfare, Mongolia's government proclaimed a policy of rapid and complete price liberalization. The commitment to liberalization was both genuine and widespread: there was a general aspiration within society to move to a market economy. However, in turn from abstraction to action, details of legislation, rules embodied in regulations, and policy