Journal of Economic Perspectives: Vol. 5 No. 4 (Fall 1991)


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Legality and Market Reform in Soviet-Type Economies

Article Citation

Litwack, John M. 1991. "Legality and Market Reform in Soviet-Type Economies." Journal of Economic Perspectives, 5(4): 77-89.

DOI: 10.1257/jep.5.4.77


The classical Soviet-type system operates in the virtual absence of economic legality, which is a prerequisite to a successful transition to a market economy in the Soviet Union and the nations of Eastern Europe. In the absence of economic legality, the leadership of these countries will not be able to implement a credible commitment to private property rights or any other effective market incentive mechanism. In addition, they will be unable to promote the growth of multilateral impersonal trade. Without legality, a shift away from central planning toward market allocation may very likely lead to economic decline, inflationary pressures, and a polarization in income distribution, which, in turn, could unleash political reaction against the reform process in general.

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Litwack, John M. (Stanford U)

JEL Classifications

P21: Socialist Systems and Transitional Economies: Planning, Coordination, and Reform


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