The culture of policy-making in the transition from socialism: Price policy in Mongolia

Economic Development and Cultural Change

Volumn 45, Issue 1, 1996, Pages 175-194

  Murrell, Peter ^a   Dunn, Karen Turner ^a   Korsun, Georges ^a  

^a UNIVERSITY OF MARYLAND   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

DEVELOPING COUNTRY; ECONOMIC POLICY; ECONOMIC REFORM; POLICY MAKING; PRICING POLICY; SOCIALIST TRANSITION;

MONGOLIA;

EID: 0030429315     PISSN: 00130079     EISSN: None     Source Type: Journal    
DOI: 10.1086/452262     Document Type: Article

References (52)

1. The use of culture does not entail rejection of a rational-choice perspective, nor is it inconsistent with the methodological pronouncements of Gary Becker and George Stigler ("De Gustibus Non Est Disputandum," American Economic Review 67, no. 2 [March 1977]: 76-90).
2. Douglass C. North, Institutions, Institutional Change and Economic Performance (Cambridge: Cambridge University Press, 1990), p. 96.
3. Justifying this point could occupy a whole paper in itself. In an unsystematic search, we have found evidence of developments similar to those in Mongolia, though usually not in degree, in Bulgaria, Belarus, Czechoslovakia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Moldova, Romania, Russia, Turkmenistan, Ukraine, and Uzbekistan.
4. A. L. Kroeber and Clyde Kluckhorn, Culture: A Critical Review of Concepts and Definitions (Cambridge, Mass.: Harvard University, Peabody Museum, 1952).
5. See Sushil Bikhchandani, David Hirshleifer, and Ivo Welch, "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades," Journal of Political Economy 100, no. 5 (1992): 992-1026; and David Hirshleifer and Ivo Welch, "Institutional Memory, Inertia and Investment Decisions" (University of California, Los Angeles, 1993, mimeographed).
6. See Sushil Bikhchandani, David Hirshleifer, and Ivo Welch, "A Theory of Fads, Fashion, Custom, and Cultural Change as Informational Cascades," Journal of Political Economy 100, no. 5 (1992): 992-1026; and David Hirshleifer and Ivo Welch, "Institutional Memory, Inertia and Investment Decisions" (University of California, Los Angeles, 1993, mimeographed).
7. See Michael Oakeshott, Rationalism in Politics and Other Essays (New York: Basic, 1962).
8. Michael Polanyi, Personal Knowledge: Towards a Post-Critical Philosophy (Chicago: University of Chicago Press, 1962).
9. This paragraph recasts Hirshleifer and Welch's results in the present perspective.
10. Robert Shiller, Maxim Boycko, and Vladimir Korobov, "Popular Attitudes toward Free Markets: The Soviet Union and the United States Compared," American Economic Review 81 (1991): 385-400, and "Hunting for Homo Sovieticus: Situational versus Attitudinal Factors in Economic Behav-ior," Brookings Papers on Economic Activity 1 (1992): 127-81, 193-94.
11. Robert Shiller, Maxim Boycko, and Vladimir Korobov, "Popular Attitudes toward Free Markets: The Soviet Union and the United States Compared," American Economic Review 81 (1991): 385-400, and "Hunting for Homo Sovieticus: Situational versus Attitudinal Factors in Economic Behav-ior," Brookings Papers on Economic Activity 1 (1992): 127-81, 193-94.
12. Vladimir Shlapentokh examines Russian privatization debates, reaching conclusions similar to ours ("Privatization Debates in Russia: 1989-1992," Comparative Economic Studies 35, no. 2 [Summer 1993]: 19-320).
13. In interviews with officials, we found it easy to form this impression.
14. Shiller et al., "Hunting for Homo Sovieticus," p. 180.
15. For a description, see Michael Alexeev, Clifford Gaddy, and Jim Leitzel, "Economics in the Former Soviet Union," Journal of Economic Perspectives 6, no. 2 (Spring 1992): 137-48.
16. Our most enlightening information source was a large number of interviews with Mongolian officials. With the official record providing only a small and distorted part of the picture, interviews were essential to assess the nature of policy. For further details of events and policies shaping price reforms, see Peter Murrell, Georges Korsun, and Karen Turner Dunn, "Price Policy in Mongolia: A Chronology of Developments," IRIS Country Report 6 (IRIS, College Park, Md., May 1992).
17. Government of Mongolia, Resolution 20, "Some Measures on Shifting the Economy to Market Relations" (Ulaanbaatar, January 15, 1991). Resolutions had the force of law.
18. Government of Mongolia, Resolution 240, "Additional Measures toward the Transition to a Free-Price System" (Ulaanbaatar, September 1991).
19. Government of Mongolia, Resolution 35, "Some Measures Regarding Prices" (Ulaanbaatar, March 1, 1992).
20. See, e.g., Government of Mongolia, Resolution 34, "Farmgate Prices for Some Livestock Products" (Ulaanbaatar, March 1, 1992).
21. Government of Mongolia, Resolution 224, "About Setting Up Price Commissions" (Ulaanbaatar, July 15, 1991).
22. Government of Mongolia, Resolution 279, "Measures to Restrict Producers' Monopoly Power and to Stop Some Negative Phenomena during the Transition to a Market-Based Economy" (Ulaanbaatar, October 1, 1991).
23. Government of Mongolia, Resolution 316, "Measures in Connection with Foreign-Trade Activity" (Ulaanbaatar, November 22, 1991).
24. Government of Mongolia, Ministry of Trade and Industry, Order 273 (Ulaanbaatar, May 14, 1991).
25. Government of Mongolia, Resolution 252, "Supplementary Measures to Shift to the Free-Price System" (Ulaanbaatar, August 23, 1991).
26. Government of Mongolia, Resolution 279.
27. Government of Mongolia, Resolution 317, "Measures concerning the Transfer of Commercial Organizations to the Market System" (Ulaanbaatar, November 22, 1991).
28. Government of Mongolia, Privatization Commission, "Preliminary Results of Privatization Work Done in 1991 and Objectives for 1992" (Ulaanbaatar, December 1991).
29. Government of Mongolia, Resolution 224.
30. Government of Mongolia, Resolution 252.
31. Government of Mongolia, Resolution 2, "Measures Regarding the Prices of Services and Products of Certain Branches" (Ulaanbaatar, January 3, 1992), and Resolution 77, "About the Request of Agricultural Organizations" (Ulaanbaatar, March 9, 1991).
32. Government of Mongolia, Resolution 2, "Measures Regarding the Prices of Services and Products of Certain Branches" (Ulaanbaatar, January 3, 1992), and Resolution 77, "About the Request of Agricultural Organizations" (Ulaanbaatar, March 9, 1991).
33. Prime Minister Byambrasuren's speech to Parliament (Ulaanbaatar, May 1991). (Distributed in English, "Basic Guidelines: Results and Further Goals of the Mongolian People's Republic Government Activities," Government of Mongolia, Ulaanbaatar, July 1991.)
34. Ibid.
35. Government of Mongolia, Ministry of Trade and Industry, Order 273 (n. 22 above).
36. Government of Mongolia, Resolution 279 (n. 20 above).
37. At one stage, we sought concrete empirical evidence by asking Mongolian policymakers to respond to a formal questionnaire. To provide comparisons, we used a subset of the questions of B. S. Frey, W. W. Pommerehne, F. Schneider, and G. Gilbert ("Consensus and Dissention among Economists," American Economic Review 74, no. 5 [December 1984]: 986-94). We found no consistent pattern of differences in the attitudes of Mongolian policymakers (primarily economists) and the Western economists questioned by Frey et al. But when questions were asked less directly and phrased in a deep contextual way, the answers were radically different from those given in response to the questionnaire. This outcome is consistent with the framework of this article. The context-free answers reflect general preferences for the market, while answers to situation-specific questions reflect informational and technology of decision-making constraints.
38. Evidence most indicative of the homogeneity of views came from a party at the extreme, the Free Labor Party, which represented entrepreneurs, advocating a stateless society after transition but price controls in the meantime.
39. Government of Mongolia, Resolution 77.
40. There were many productive alternatives available, such as demonopolizing the distribution system or removing trade licensing.
41. Hirshleifer and Welch (n. 5 above).
42. See Amos Tversky and Daniel Kahneman, "Rational Choice and the Framing of Decisions," in Rational Choice: The Contrast between Economics and Psychology, ed. Robin M. Hogarth and Melvin W. Reder (Chicago: University of Chicago Press, 1987), pp. 67-94.
43. Government of Mongolia, Resolution 317 (n. 25 above); Government of Mongolia, Ministry of Trade and Industry, Order 105 (Ulaanbaatar, February 13, 1992).
44. Press conference of Deputy Prime Minister Ganbold (Ministry of Foreign Trade, Ulaanbaatar, January 16, 1991).
45. Government of Mongolia, Resolution 35 (n. 17 above).
46. We thank Fred Pryor for raising this point.
47. For example, Ronald McKinnon suggests that the last Soviet government used price controls as a second-best anti-inflation policy ("Stabilizing the Ruble: The Problem of Internal Currency Convertibility" [Stanford University, Stanford, Calif., 1990, mimeograph], p. 10).
48. As argued above, neither of these groups wanted to retain the old system. The divisions were on strategy rather than on the necessity of farreaching changes.
49. Andrei Shleifer and Robert Vishny, "Pervasive Shortages under Socialism," Rand Journal of Economics 23, no. 2 (Summer 1992): 237-46.
50. From data provided by the State Statistical Service of Mongolia (Ulaanbaatar, December 1991, mimeograph).
51. Government of Mongolia, Resolution 279 (n. 20 above).
52. Government of Mongolia, Resolution 317 (n. 25 above).