Path Dependence, Public Choice, and Transition in Russia: A Bargaining Approach

Abstract

The transition process from communism in Eastern Europe is probably the most important economic challenge in the last twenty years. Some five years have elapsed since the political events that started this process, and in a limited number of countries (the Czech Republic, Slovenia, and the Baltic Republics) transition seems to be heading towards success; in others the prospects remain uncertain (as in Poland) or worrisome (as in Russia). Indeed, as has been observed about the Russian situation, the plausible possible futures for Russia "range from an enticing vision of society A la Milton Friedman to one more in the style of Stalin .... There is no end to incongruous data about the main remnant of what used to be the fatherland of socialism." A broad spectrum of transition attempts and results has been documented; however, economists have yet to explain convincingly these differences. This paper develops a different approach to transition by applying the principles of economic theory and public choice analysis to the production of law and legislation.