The Transition from Communism: A Diagrammatic Exposition of Obstacles to the Demand for the Rule of Law

In an earlier paper, the authors presented a mathematical exposition of a theory that demonstrated that mass privatization without institutions to limit asset-stripping may not lead to a demand for the rule of law ["After the Big Bang? Obstacl...

Full description

Bibliographic Details
Main Authors:	Hoff, Karla, Stiglitz, Joseph E.
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, D.C. 2013
Subjects:	ACTIONS ACTS ASSETS CAPITAL FLIGHT CAPITAL MARKETS CIVIL SOCIETY COMMERCIAL LAW COMMUNISM COMPARATIVE ECONOMICS CONSUMER SOVEREIGNTY CREDIT RATIONING CRIMINAL LAW DEBT DEMOCRACY DEVELOPMENT ECONOMICS ECONOMIC ANALYSIS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC HISTORY ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIC REFORM ECONOMIC STRATEGIES ECONOMIC THEORY ECONOMISTS EQUILIBRIUM EXPECTED RETURN EXPENDITURES EXTERNALITIES GDP INCOME INFLATION INHERITANCE INSTITUTIONAL CHANGE INTEREST RATE JUSTICE LABOR MARKET LAW ENFORCEMENT LAWS LEGAL REFORM LEGITIMACY LIABILITY MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMICS MONETARY POLICIES MONETARY POLICY NEOCLASSICAL ECONOMICS PAYOFFS POLICY INSTRUMENTS POLITICAL ECONOMY PRIVATE PROPERTY PRIVATIZATION PROPERTY RIGHTS PUBLIC GOOD RISK NEUTRAL RULE OF LAW SECURE PROPERTY RIGHTS STEALING TRANSITION ECONOMIES VOTING WAGES MASS PRIVATIZATION ASSET STRIPPING ASSET VALUATION POLITICAL DECISION MAKING POLITICAL ECONOMY ANALYSIS POLITICAL ECONOMY OF DEVELOPMENT PROPERTY RIGHTS LAW INDIVIDUAL BEHAVIOR PUBLIC GOODS VALUATION
Online Access:	http://documents.worldbank.org/curated/en/2004/06/4990641/transition-communism-diagrammatic-exposition-obstacles-demand-rule-law http://hdl.handle.net/10986/14173

id	okr-10986-14173
recordtype	oai_dc
spelling	okr-10986-141732021-04-23T14:03:21Z The Transition from Communism: A Diagrammatic Exposition of Obstacles to the Demand for the Rule of Law Hoff, Karla Stiglitz, Joseph E. ACTIONS ACTS ASSETS CAPITAL FLIGHT CAPITAL MARKETS CIVIL SOCIETY COMMERCIAL LAW COMMUNISM COMPARATIVE ECONOMICS CONSUMER SOVEREIGNTY CREDIT RATIONING CRIMINAL LAW DEBT DEMOCRACY DEVELOPMENT ECONOMICS ECONOMIC ANALYSIS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC HISTORY ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIC REFORM ECONOMIC STRATEGIES ECONOMIC THEORY ECONOMISTS EQUILIBRIUM EXPECTED RETURN EXPENDITURES EXTERNALITIES GDP INCOME INFLATION INHERITANCE INSTITUTIONAL CHANGE INTEREST RATE JUSTICE LABOR MARKET LAW ENFORCEMENT LAWS LEGAL REFORM LEGITIMACY LIABILITY MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMICS MONETARY POLICIES MONETARY POLICY NEOCLASSICAL ECONOMICS PAYOFFS POLICY INSTRUMENTS POLITICAL ECONOMY PRIVATE PROPERTY PRIVATIZATION PROPERTY RIGHTS PUBLIC GOOD RISK NEUTRAL RULE OF LAW SECURE PROPERTY RIGHTS STEALING TRANSITION ECONOMIES VOTING WAGES MASS PRIVATIZATION ASSET STRIPPING ASSET VALUATION RULE OF LAW POLITICAL DECISION MAKING POLITICAL ECONOMY ANALYSIS POLITICAL ECONOMY OF DEVELOPMENT PROPERTY RIGHTS PROPERTY RIGHTS LAW LAW ENFORCEMENT INDIVIDUAL BEHAVIOR PUBLIC GOODS VALUATION MACROECONOMIC POLICY In an earlier paper, the authors presented a mathematical exposition of a theory that demonstrated that mass privatization without institutions to limit asset-stripping may not lead to a demand for the rule of law ["After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies," American Economic Review 94(3), June 2004, pages 753-63]. This report makes the same argument in terms of simple diagrams. The central idea is that economic actions (to build value or strip assets) and political positions of individuals are interdependent. "Big bang" privatization may give individuals an interest in taking what they can quickly, rather than waiting for the establishment of property rights protection that would permit them to build more valuable assets. Asset stripping gives some of these individuals an interest in prolonging the absence of the rule of law so that they can enjoy the fruits of stripping without the constraint of government enforcement of property rights. Each individual, in attempting to influence society's choice of the environment, focuses on the impact on himself, not the impact on others. In choosing their economic actions, individuals ignore the effect of their economic decisions on how they themselves vote, how other people believe the system will evolve, and thus how others invest and vote. Thus, two distortions of individual behavior are associated with the public good nature of votes. The authors use this framework to make one further point. Because of the interdependence between individuals' economic and political choices, demand for and opposition to the rule of law cannot be separated from macroeconomic policy. A too stringent macroeconomic policy can lower the returns to building value relative to stripping assets and thereby weaken the equilibrium demand for the rule of law. Macroeconomic policies and institutional evolution are not independent issues. 2013-06-25T16:24:48Z 2013-06-25T16:24:48Z 2004-03 http://documents.worldbank.org/curated/en/2004/06/4990641/transition-communism-diagrammatic-exposition-obstacles-demand-rule-law http://hdl.handle.net/10986/14173 English en_US Policy Research Working Paper;No.3352 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, D.C. Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ACTIONS ACTS ASSETS CAPITAL FLIGHT CAPITAL MARKETS CIVIL SOCIETY COMMERCIAL LAW COMMUNISM COMPARATIVE ECONOMICS CONSUMER SOVEREIGNTY CREDIT RATIONING CRIMINAL LAW DEBT DEMOCRACY DEVELOPMENT ECONOMICS ECONOMIC ANALYSIS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC HISTORY ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIC REFORM ECONOMIC STRATEGIES ECONOMIC THEORY ECONOMISTS EQUILIBRIUM EXPECTED RETURN EXPENDITURES EXTERNALITIES GDP INCOME INFLATION INHERITANCE INSTITUTIONAL CHANGE INTEREST RATE JUSTICE LABOR MARKET LAW ENFORCEMENT LAWS LEGAL REFORM LEGITIMACY LIABILITY MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMICS MONETARY POLICIES MONETARY POLICY NEOCLASSICAL ECONOMICS PAYOFFS POLICY INSTRUMENTS POLITICAL ECONOMY PRIVATE PROPERTY PRIVATIZATION PROPERTY RIGHTS PUBLIC GOOD RISK NEUTRAL RULE OF LAW SECURE PROPERTY RIGHTS STEALING TRANSITION ECONOMIES VOTING WAGES MASS PRIVATIZATION ASSET STRIPPING ASSET VALUATION RULE OF LAW POLITICAL DECISION MAKING POLITICAL ECONOMY ANALYSIS POLITICAL ECONOMY OF DEVELOPMENT PROPERTY RIGHTS PROPERTY RIGHTS LAW LAW ENFORCEMENT INDIVIDUAL BEHAVIOR PUBLIC GOODS VALUATION MACROECONOMIC POLICY
spellingShingle	ACTIONS ACTS ASSETS CAPITAL FLIGHT CAPITAL MARKETS CIVIL SOCIETY COMMERCIAL LAW COMMUNISM COMPARATIVE ECONOMICS CONSUMER SOVEREIGNTY CREDIT RATIONING CRIMINAL LAW DEBT DEMOCRACY DEVELOPMENT ECONOMICS ECONOMIC ANALYSIS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC HISTORY ECONOMIC OUTCOMES ECONOMIC PERFORMANCE ECONOMIC REFORM ECONOMIC STRATEGIES ECONOMIC THEORY ECONOMISTS EQUILIBRIUM EXPECTED RETURN EXPENDITURES EXTERNALITIES GDP INCOME INFLATION INHERITANCE INSTITUTIONAL CHANGE INTEREST RATE JUSTICE LABOR MARKET LAW ENFORCEMENT LAWS LEGAL REFORM LEGITIMACY LIABILITY MACROECONOMIC POLICIES MACROECONOMIC POLICY MACROECONOMICS MONETARY POLICIES MONETARY POLICY NEOCLASSICAL ECONOMICS PAYOFFS POLICY INSTRUMENTS POLITICAL ECONOMY PRIVATE PROPERTY PRIVATIZATION PROPERTY RIGHTS PUBLIC GOOD RISK NEUTRAL RULE OF LAW SECURE PROPERTY RIGHTS STEALING TRANSITION ECONOMIES VOTING WAGES MASS PRIVATIZATION ASSET STRIPPING ASSET VALUATION RULE OF LAW POLITICAL DECISION MAKING POLITICAL ECONOMY ANALYSIS POLITICAL ECONOMY OF DEVELOPMENT PROPERTY RIGHTS PROPERTY RIGHTS LAW LAW ENFORCEMENT INDIVIDUAL BEHAVIOR PUBLIC GOODS VALUATION MACROECONOMIC POLICY Hoff, Karla Stiglitz, Joseph E. The Transition from Communism: A Diagrammatic Exposition of Obstacles to the Demand for the Rule of Law
relation	Policy Research Working Paper;No.3352
description	In an earlier paper, the authors presented a mathematical exposition of a theory that demonstrated that mass privatization without institutions to limit asset-stripping may not lead to a demand for the rule of law ["After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies," American Economic Review 94(3), June 2004, pages 753-63]. This report makes the same argument in terms of simple diagrams. The central idea is that economic actions (to build value or strip assets) and political positions of individuals are interdependent. "Big bang" privatization may give individuals an interest in taking what they can quickly, rather than waiting for the establishment of property rights protection that would permit them to build more valuable assets. Asset stripping gives some of these individuals an interest in prolonging the absence of the rule of law so that they can enjoy the fruits of stripping without the constraint of government enforcement of property rights. Each individual, in attempting to influence society's choice of the environment, focuses on the impact on himself, not the impact on others. In choosing their economic actions, individuals ignore the effect of their economic decisions on how they themselves vote, how other people believe the system will evolve, and thus how others invest and vote. Thus, two distortions of individual behavior are associated with the public good nature of votes. The authors use this framework to make one further point. Because of the interdependence between individuals' economic and political choices, demand for and opposition to the rule of law cannot be separated from macroeconomic policy. A too stringent macroeconomic policy can lower the returns to building value relative to stripping assets and thereby weaken the equilibrium demand for the rule of law. Macroeconomic policies and institutional evolution are not independent issues.
format	Publications & Research :: Policy Research Working Paper
author	Hoff, Karla Stiglitz, Joseph E.
author_facet	Hoff, Karla Stiglitz, Joseph E.
author_sort	Hoff, Karla
title	The Transition from Communism: A Diagrammatic Exposition of Obstacles to the Demand for the Rule of Law
title_short	The Transition from Communism: A Diagrammatic Exposition of Obstacles to the Demand for the Rule of Law
title_full	The Transition from Communism: A Diagrammatic Exposition of Obstacles to the Demand for the Rule of Law
title_fullStr	The Transition from Communism: A Diagrammatic Exposition of Obstacles to the Demand for the Rule of Law
title_full_unstemmed	The Transition from Communism: A Diagrammatic Exposition of Obstacles to the Demand for the Rule of Law
title_sort	transition from communism: a diagrammatic exposition of obstacles to the demand for the rule of law
publisher	World Bank, Washington, D.C.
publishDate	2013
url	http://documents.worldbank.org/curated/en/2004/06/4990641/transition-communism-diagrammatic-exposition-obstacles-demand-rule-law http://hdl.handle.net/10986/14173
_version_	1764430535137951744

The Transition from Communism: A Diagrammatic Exposition of Obstacles to the Demand for the Rule of Law

Similar Items