Capitalism from Outside?: Economic Cultures in Eastern Europe after 1989

Beyond Basic Instinct? On the Reception of New Institutional Economics in Eastern Europe

I owe special thanks to Paul Dragoş Aligică, Roumen Avramov, Vojmir Franičevi ć, Aleksandra Jovanović, Jacek Kochanowicz, Alice Navratilova, Aleksander Stevanović, Horia Paul Terpe, and Tjaša Živko for their participation in the project . Beyond Basic Instinct? On the Reception of New Institutional Economics in Eastern Europe János Mátyás Kovács I did not use the term “institution” in every second paragraph as it recently has become fashionable to do, but I think I understood what a system means, and what the difference is between socialism and capitalism… —János Kornai (2000) Even the Ponzi schemes could be considered as “schools.” —An interview excerpt from Bulgaria In planning our study of East–West cultural encounters in economics, we were looking for a school of thought that is popular enough in our region to provide us with a sufficient amount of empirical information for a meaningful comparative analysis, and at the same time, identifiable enough to target our inquiry as precisely as possible. New institutional thought seemed to guarantee a large set of scientific theories of rapid expansion that have been “doomed” to flow in Eastern Europe during the past few decades. By new institutional thought we mean, first of all, what is usually called “new institutional economics” (NIE), that is, a great variety of expanding research programs ranging from property rights and transaction costs theory, through public choice, all the way down to evolutionary economics. Owing to the fact that NIE is famous/notorious for a profound interpenetration of economics with other social sciences, interdisciplinary fields such as new branches of economic history, economic policy, economic sociology, law and 1 In order to avoid straight-jacketing our interview partners, we let them define the notion of new institutional economics and the list of relevant authors. As expected, they suggested as many definitions as one can find in the leading descriptions of the field, for example: Hutchison (1984); Coase (1998); Furubotn and Richter (2000); Hodgson (2001); Langlois (1986, 1989); Ménard and Shirley (2005); Nee (2005); Williamson (2000); Rutheford (1994); Aoki (2008); Chavance (2008). As regards the main authors of the subdiscipline, our respondents referred to nearly the same names. Ultimately, NIE boiled down to a couple of prominent scholars, inevitably including Coase, North, and Williamson. A Nobel Prize helps, as evidenced by the case of Elinor Ostrom who did not occur in the interviews before 2009 at all (the same applied to Leonid Hurwicz), though the names of Buchanan, Fogel, Kahnemann, and Vernon Smith were also rarely mentioned. Gary Becker, Friedrich Hayek, and George Stigler appear, however , rather often among the alleged new institutionalists, not to speak of Svetozar Pejovich who happens to be the only well-known link between East and West in current institutionalist thought. 2 By ORDO I meant, with quite a bit of simplification, the Freiburg School and its intellectual milieu with their older and younger followers, without making a distinction between the less and more liberal authors as well as between theorists and politicians. Alfred Müller-Armack, Franz Böhm, Walter Eucken, Wilhelm Röpke, and Alexander Rüstow were referred to just like some works of the secondary literature. Cf.: Alan Peacock and Hans Willgerodt 1989a, b, c; Norman P. Barry 1989; Johnson 1989; Zweig 1980; Watrin 1979. For more recent studies, see: Koslowski 1998; Sally 1996; Vanberg 1998; Albert 2004. 282 János Mátyás Kovács economics, economic psychology (behavioral economics, experimental economics) were also regarded as organic components of the school.1 A broad and rapidly growing “Western” supply does not necessarily have to produce an upsurge in “Eastern” demand to bring the local marketplace of ideas into equilibrium. Why did we nonetheless expect to explore an exciting, new, and rapidly widening research field in the region? Let me start with self-criticism. Working Hypotheses: Abundant Imports, Rivalry and Hybridization In 1993, I portrayed the logic of East–West encounters in economic institutionalism as a large-scale venture of importation accompanied by a rivalry of two Western paradigms (ORDO and NIE) for the hearts and the minds of Eastern European economists (Kovács 1993).2 Witnessing the popularity of the concept of Soziale Marktwirtschaft in 3 This simplistic dual typology was, of course, a result of a larger dilemma discussed (mostly privately) by economists in Eastern Europe already prior to 1989: How could we retain part of our historical/verbal/empirical research style in...