Understanding post-communist transitions: the relevance of Austrian economics

Abstract

The economic literature about the post-communist transition focused primarily on the debate between gradualism and “shock therapy”, and on issues such as prices liberalization, privatization, and macroeconomic stability. Some other factors, emphasized mainly by Austrian economics, were generally given less prominence, although, in retrospect, they were no less important. These include the difficulties of reallocating heterogeneous physical and human capital, the institutions underpinning foreign investment and financial markets, democracy understood as a collective learning process, the importance of civil society, and the threat of populism.