The transition to the market and corruption in post-socialist Russia

Political Studies

Volumn 45, Issue 3, 1997, Pages 579-596

  Varese, Federico ^a  

^a NONE

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EID: 0040151662     PISSN: 00323217     EISSN: None     Source Type: Journal    
DOI: 10.1111/1467-9248.00097     Document Type: Article

References (118)

1. Gerry Mackie, Cecilia Garcia-Penalosa, Mark Philp and Marc Stears have made extremely valuable suggestions. I am also grateful to Stephanie Chester, who read a version of this paper. The usual disclaimers apply.
2. A. Smith. The Wealth of Nations (London; Penguin [1776] 1986), p. 119.
3. Heritage Foundation, '1997 index of economic freedom', Transition, 7/11-12 (November-December, 1996), 22-24.
4. N. V. Chemina, 'Bednost' kak sotsial'nyy fenomen rossiyskogo obshchestva', Sotsiologicheskie issledovaniya, 21/3 (1994), 54-61.
5. A US-Russian study presented in Moscow in June 1995 reported that male life expectancy has declined from 64.9 years to 58.3 since 1987. The study also predicted that the number of suicides and cancer cases would continue to rise and that tuberculosis cases would remain at the level they were in developed countries 30 to 40 years ago. According to the Collegium of the Ministry of Natural Resources, half of Russia's population drinks water that does not meet acceptable hygiene standards, water purification systems are in critical condition, and the danger of dams breaking has increased (OMRI Daily Digest, 5 June 1995 and 6 February 1997).
6. G. Hardin, 'The tragedy of the commons', Science, 162 (1968), 1243-48.
7. GRF/RECEP Russian Economic Trends 1995, 4/4 (London, Whurr, 1996), pp. 98-9.
8. GRF/RECEP Russian Economic Trends 1994, 3/4 (London, Whurr, 1995), p. 97.
9. R. J. Struyk and J. Daniell, 'Housing privatization in urban Russia', Economics of Transition, 3/2 (1995), 197-214.
10. S. K. Wegren, 'Trends in Russian agrarian reform', RFE/RL, 2/13 (26 March 1993), S. K. Wegren, Building market institutions', Communist and Post-Communist Studies, 27/3 (1994), 195-224.
11. S. K. Wegren, 'Trends in Russian agrarian reform', RFE/RL, 2/13 (26 March 1993), S. K. Wegren, Building market institutions', Communist and Post-Communist Studies, 27/3 (1994), 195-224.
12. R. Posner, 'The cost of enforcing legal rights', East European Constitutional Review, 4/3 (1995), Summer, 71-83, p. 73; J. Getzler, 'Theories of property and economic development', Journal of Interdisciplinary History, XXVI/4 (1996), 639-69, p. 664; A. Ryan, 'Property' in J. Eatwell, M. Milgate and P. Newman (eds), New Palgrave Dictionary of Economics, 4 (London, Macmillan, 1987), 1029-31.
13. R. Posner, 'The cost of enforcing legal rights', East European Constitutional Review, 4/3 (1995), Summer, 71-83, p. 73; J. Getzler, 'Theories of property and economic development', Journal of Interdisciplinary History, XXVI/4 (1996), 639-69, p. 664; A. Ryan, 'Property' in J. Eatwell, M. Milgate and P. Newman (eds), New Palgrave Dictionary of Economics, 4 (London, Macmillan, 1987), 1029-31.
14. R. Posner, 'The cost of enforcing legal rights', East European Constitutional Review, 4/3 (1995), Summer, 71-83, p. 73; J. Getzler, 'Theories of property and economic development', Journal of Interdisciplinary History, XXVI/4 (1996), 639-69, p. 664; A. Ryan, 'Property' in J. Eatwell, M. Milgate and P. Newman (eds), New Palgrave Dictionary of Economics, 4 (London, Macmillan, 1987), 1029-31.
15. Smith, The Wealth of Nations, p. 380. A recent confirmation of this general principle is J. M. Ramseyer's study of Japan, Odd Markets in Japanese History (Cambridge, Cambridge University Press, 1996).
16. Smith, The Wealth of Nations, p. 380. A recent confirmation of this general principle is J. M. Ramseyer's study of Japan, Odd Markets in Japanese History (Cambridge, Cambridge University Press, 1996).
17. 'If, for instance, nobody could leave land to their children, or sell a freehold in it, or raise a mortgage on it, we should be doubtful whether individuals could be said to "own" it at all' (Ryan, 'Property', p. 1029).
18. Posner, 'The cost of enforcing legal rights', p. 73.
19. Posner, 'The cost of enforcing legal rights', p. 71.
20. This distinction appears to resemble that between positive and negative liberties. Posner does in fact link the two concepts directly (Posner, 'The cost of enforcing legal rights', p. 71). Such a link however is problematic. Negative liberty is usually conceptualized as 'the absence of external obstacles to an individual's pursuit of her conception of the good'. The commitment to negative freedom may require some positive rights. Miller for instance advocates positive rights while still rejecting a positive definition of freedom. D. Miller, Market, State, and Community: Theoretical Foundations of Market Socialism (Oxford, Clarendon, 1989), ch. 1. (I am grateful to Marc Stears for a discussion on this point.)
21. This distinction appears to resemble that between positive and negative liberties. Posner does in fact link the two concepts directly (Posner, 'The cost of enforcing legal rights', p. 71). Such a link however is problematic. Negative liberty is usually conceptualized as 'the absence of external obstacles to an individual's pursuit of her conception of the good'. The commitment to negative freedom may require some positive rights. Miller for instance advocates positive rights while still rejecting a positive definition of freedom. D. Miller, Market, State, and Community: Theoretical Foundations of Market Socialism (Oxford, Clarendon, 1989), ch. 1. (I am grateful to Marc Stears for a discussion on this point.)
22. Posner, 'The cost of enforcing legal rights', p. 75.
23. R. Dornbusch, Priorities of Economic Reform in Eastern Europe and the Soviet Union (Centre for Economic Policy Research Occasional Paper no. 5, London, 1991), p. 7.
24. R. Frydman, A. Rapaczynski and J. Earle, The Privatization Process in Russia, Ukraine and the Baltics (Budapest, Central European University Press, 1993). Quoted in F. Varese, 'Is Sicily the future of Russia? Private protection and the rise of the Russian mafia', Archives Européennes de Sociologie XXXV (1994), 224-58, p. 242.
25. R. Frydman, A. Rapaczynski and J. Earle, The Privatization Process in Russia, Ukraine and the Baltics (Budapest, Central European University Press, 1993). Quoted in F. Varese, 'Is Sicily the future of Russia? Private protection and the rise of the Russian mafia', Archives Européennes de Sociologie XXXV (1994), 224-58, p. 242.
26. V. Naishul, 'Liberalism, customary rights and economic reforms', Communist Economies and Economic Transformation, 5/1, (1993), quoted in Varese, 'Is Sicily the future of Russia?', p. 242.
27. V. Naishul, 'Liberalism, customary rights and economic reforms', Communist Economies and Economic Transformation, 5/1, (1993), quoted in Varese, 'Is Sicily the future of Russia?', p. 242.
28. M. Boycko, A. Shleifer and R. Vishny, Privatizing Russia (Cambridge MA, MIT Press, 1996), p. 128.
29. Boycko et al., Privatizing Russia, p. 133.
30. This figure does not include shares traded by banks (see GRF/RFCEP, Russian Economic Trends 1995, p. 104).
31. Financial Times, 4 October 1994 and 29 November 1994.
32. GRF/RECEP, Russian Economic Trends 1995, p. 104.
33. Financial Times, 16 November 1994.
34. Financial Times, 29 November 1994.
35. Financial Times, 29 November 1994.
36. Officials at Krasnoyarsk smelter confirmed that shares held by Transworld had been deleted from the share register, but they contended that the shares had been improperly purchased in the first place (Financial Times, 29 November 1994). This shows that factory directors can, and unilaterally do, alter shareholder registers. Mr. David Reuben, president of Transworld, concluded that 'shareholders are completely at the mercy of factory managers' (Financial Times, 16 November 1994).
37. Officials at Krasnoyarsk smelter confirmed that shares held by Transworld had been deleted from the share register, but they contended that the shares had been improperly purchased in the first place (Financial Times, 29 November 1994). This shows that factory directors can, and unilaterally do, alter shareholder registers. Mr. David Reuben, president of Transworld, concluded that 'shareholders are completely at the mercy of factory managers' (Financial Times, 16 November 1994).
38. Financial Times, 1 December 1995.
39. Financial Times, 18 July 1995. See also Financial Times, 16 November 1994.
40. Financial Times, 18 July 1995. See also Financial Times, 16 November 1994.
41. 'An end to the long process of adopting the new tax code is still out of sight', said Deputy Finance Minister Sergei Shatalov in March 1996 (Moscow News, 14 March 1996).
42. Corporate profit tax was 32 per cent until 1 January 1994 (see presidential decree No. 2270, issued on 22 December, 1993). The tax is split between the Federal Budget (13 per cent) and local budget (a maximum of 25 per cent). The decree also increased the maximum level of the asset tax to 2 per cent and introduced a special tax for the support of the economy of 3 per cent, to be collected with VAT.
43. According to the latest survey or corporate taxation, there are eighteen Federal taxes in force on the territory of the Federation. S. V. Almakaeva, 'Corporate taxation in the Russian Federation', Review of Central and East European Law, 1 (1995), 41-64, p. 41.
44. J. Charap and L. Webster, 'Constraints on the development of private manufacturing in St Petersburg', Economics of Transition, 1/3 (September 1993), 299-316, p. 305.
45. Almakaeva, 'Corporate taxation in the Russian Federation', p. 41.
46. Moscow Times, 25 March 1994.
47. Moscow Times, 19 March 1994.
48. Charap and Webster, 'Constraints on the development of private manufacturing', pp. 304-5.
49. P. Filippov, 'Organizovannaya prestupnost' i perspektivy prikhoda k vlasti v Rossii natsional-sotsialistov', Izvestiya, 26 January (1994), 1-2.
50. Charap and Webster, 'Constraints on the development of private manufacturing', p. 305.
51. A more efficient taxation system would tax positional consumption (R. F. Frank, 'A Contractarian View of Tax and Regulatory Policy', in E. F. Paul, F. D. Miller Jr and J. Paul (eds), Liberalism and Economic Order (Cambridge, Cambridge University Press, 1993), pp. 258-81).
52. Charap and Webster, 'Constraints on the development of private manufacturing', p. 305; M. Buravoy and K. Hendley, 'Between perestroika and privatization: divided strategies and political crisis in a Soviet enterprise', Soviet Studies, 44/3 (1992), 371-402, list other examples.
53. Charap and Webster, 'Constraints on the development of private manufacturing', p. 305; M. Buravoy and K. Hendley, 'Between perestroika and privatization: divided strategies and political crisis in a Soviet enterprise', Soviet Studies, 44/3 (1992), 371-402, list other examples.
54. Filippov, 'Organisovannaya prestupnost', pp. 1-2.
55. G. Kisunko, 'Economic crime in Russia', Transition. A World Bank Newsletter, 7/7-8, July-August (1996), 13-16, p. 13.
56. Kisunko, 'Economic crime in Russia', p. 13. Increased severity towards tax offenders is in line with the growing concern over tax evasion voiced by President Yeltsin (see OMRI, 11 October 1996).
57. Kisunko, 'Economic crime in Russia', p. 13. Increased severity towards tax offenders is in line with the growing concern over tax evasion voiced by President Yeltsin (see OMRI, 11 October 1996).
58. Izvestiya, 26 February 1990 and New Times, no. 35, 1989.
59. Izvestiya, 26 February 1990 and New Times, no. 35, 1989.
60. These data are taken from 'Crime - The Threat to Russia', documents prepared for a closed Kremlin Conference on Organised Crime in Russia (12-13 February 1993), quoted in Nezavisimaya Gazeta 12 February 1993, and Kommersant-Daily 16 February 1993. am drawing here upon Varese, 'Is Sicily the future of Russia', p. 244.
61. These data are taken from 'Crime - The Threat to Russia', documents prepared for a closed Kremlin Conference on Organised Crime in Russia (12-13 February 1993), quoted in Nezavisimaya Gazeta 12 February 1993, and Kommersant-Daily 16 February 1993. am drawing here upon Varese, 'Is Sicily the future of Russia', p. 244.
62. These data are taken from 'Crime - The Threat to Russia', documents prepared for a closed Kremlin Conference on Organised Crime in Russia (12-13 February 1993), quoted in Nezavisimaya Gazeta 12 February 1993, and Kommersant-Daily 16 February 1993. am drawing here upon Varese, 'Is Sicily the future of Russia', p. 244.
63. OMRI Daily Digest, 7 June 1995.
64. Moskovsky komsomolets, 29 June 1995.
65. Kisunko, 'Economic crime in Russia', p. 13.
66. Kisunko, 'Economic crime in Russia', p. 13. Though there was a reduction in 1995 (35.6 of all recorded crimes), the total number of economic crimes increased (from 100 to 140 thousand).
67. Transparency International (1996), 'The index of corruption http://www.GWDG.DE/ ~uwvw/icr.htm.
68. ITAR-TASS, 9 November 1995.
69. ITAR-TASS, 13 October 1995.
70. R. Hood and R. Sparks, Key Issues in Criminology (London, Weidenfeld and Nicolson, 1970), pp. 11-12.
71. Crime and Crime Prevention in Moscow, 1994, p. 40.
72. A. Alvazzi del Frate and K. Goryainov, Latent Crime in Russia, UNICRI Issues and Reports, 1 (1994).
73. P. G. Ponomarev, 'Legal measures against legalization of criminal assets as means of combating organized crime in Russia', Academy of Criminal Justice Sciences, XIV/4 (January/February, 1996), 1-3, p. 1. Aleksei Kazannik, the current Russian Federation Prosecutor General, said that his office is in a position to complete no more than 50 per cent of the bills of indictment in the already investigated cases (Nezavisimaya Gazeta, 28 October 1993).
74. P. G. Ponomarev, 'Legal measures against legalization of criminal assets as means of combating organized crime in Russia', Academy of Criminal Justice Sciences, XIV/4 (January/February, 1996), 1-3, p. 1. Aleksei Kazannik, the current Russian Federation Prosecutor General, said that his office is in a position to complete no more than 50 per cent of the bills of indictment in the already investigated cases (Nezavisimaya Gazeta, 28 October 1993).
75. W. E. Butler, 'Crime in the Soviet Union', British Journal of Criminology, 32/2 (1992), 144-59, p. 156.
76. Posner, 'The cost of enforcing legal rights', p. 75.
77. The size of groups in connection to collective action is a classic question explored first by Olson. M. Olson, The Logic of Collective Action (Cambridge MA, Harvard University Press, 1965).
78. J. R. Hay, A. Shleifer and R. W. Vishny, Toward a theory of legal reform', European Economic Review, 40 (1996), 559-567, p. 564.
79. C. Hunt, Development of the Business Corporation in England, 1700-1867 (Cambridge MA, Harvard University Press, 1936).
80. M. Raeff, The Well-ordered Police State: Social and Institutional Change through Law in the Germanies and Russia, 1600-1800 (New Haven, Yale University Press, 1983).
81. Hay et al., 'Toward a theory of legal reform'.
82. M. McFaul, 'The allocation of property rights in Russia: the first round', Communist and Post-Communist Studies, 29/3 (1996), 287-308, p. 291.
83. M. Olson, 'Why the transition from communism is so difficult', Eastern Economic Journal, 21/4 (1995), 437-461, p. 452.
84. S. Whitefield, Industrial Power and the Soviet State (Oxford, Clarendon Press, 1993).
85. Olson, 'Why the transition from communism is so difficult', pp. 458-9.
86. By 1993, 63.7 per cent of enterprises had chosen Option Two, while only 34.5 per cent had chosen Option One. By the end of the voucher privatization in 1994, 73 per cent selected Option Two and 25 per cent Option One. McFaul, 'The allocation of property rights', p. 293; Boycko et al., Privatizing Russia, p. 98.
87. By 1993, 63.7 per cent of enterprises had chosen Option Two, while only 34.5 per cent had chosen Option One. By the end of the voucher privatization in 1994, 73 per cent selected Option Two and 25 per cent Option One. McFaul, 'The allocation of property rights', p. 293; Boycko et al., Privatizing Russia, p. 98.
88. McFaul, 'The allocation of property rights', p. 294.
89. McFaul, 'The allocation of property rights', p. 294.
90. Insider ownership leads to a number of other negative consequences, including the absence of managerial discipline. Since owners and managers to a large extent coincide, it is hard to imagine owners firing incompetent managers.
91. Enterprise directors are of course maximizing their personal profits, but do not divide them with other share owners. What they do instead is create parasitic, subsidiary companies attached to the parent enterprise. Directors channel revenues into these small, close joint-stock companies, where profits are divided among a handful of directors, rather than thousands of small shareholders (McFaul, 'The allocation of property rights', p. 305).
92. Posner concludes that 'the distinction between positive and negative liberties blurs'. For instance, the right to abortion is a negative right for an affluent person, but for a poor person, who cannot purchase an abortion, it must be a positive right, a state-supplied service, for that right to be meaningful (Posner, 'The cost of enforcing legal rights', p. 72). Although this conclusion may be correct from a normative point of view, it clearly is not true descriptively. States such as the USA and the UK provide individuals with negative rights without dedicating themselves to providing them the resources necessary to exercise those rights.
93. D. Gambetta, 'Democracy and corruption', mimeo (1996), p. 4. See also e.g. OCTF [Organized Crime Task Force] Corruption and Racketeering in the New York Construction Industry (New York, ILR, 1988). D. Gambetta, The Sicilian Mafia (London, Harvard University Press, 1993), pp. 214-20. D. Gambetta and P. Reuter, 'Conspiracy Among the Many: The Mafia in Legitimate Industries', in G. Fiorentini and S. Peltzman (eds), The Economics of Organized Crime (Cambridge, Cambridge University Press, 1995), pp. 116-36 . S. Rose-Ackerman, 'The political economy of corruption', mimeo (1996). A. Ades and R. DiTella, 'The new economics of corruption. A survey and some new results', this volume, pp. 496-515.
94. D. Gambetta, 'Democracy and corruption', mimeo (1996), p. 4. See also e.g. OCTF [Organized Crime Task Force] Corruption and Racketeering in the New York Construction Industry (New York, ILR, 1988). D. Gambetta, The Sicilian Mafia (London, Harvard University Press, 1993), pp. 214-20. D. Gambetta and P. Reuter, 'Conspiracy Among the Many: The Mafia in Legitimate Industries', in G. Fiorentini and S. Peltzman (eds), The Economics of Organized Crime (Cambridge, Cambridge University Press, 1995), pp. 116-36 . S. Rose-Ackerman, 'The political economy of corruption', mimeo (1996). A. Ades and R. DiTella, 'The new economics of corruption. A survey and some new results', this volume, pp. 496-515.
95. D. Gambetta, 'Democracy and corruption', mimeo (1996), p. 4. See also e.g. OCTF [Organized Crime Task Force] Corruption and Racketeering in the New York Construction Industry (New York, ILR, 1988). D. Gambetta, The Sicilian Mafia (London, Harvard University Press, 1993), pp. 214-20. D. Gambetta and P. Reuter, 'Conspiracy Among the Many: The Mafia in Legitimate Industries', in G. Fiorentini and S. Peltzman (eds), The Economics of Organized Crime (Cambridge, Cambridge University Press, 1995), pp. 116-36 . S. Rose-Ackerman, 'The political economy of corruption', mimeo (1996). A. Ades and R. DiTella, 'The new economics of corruption. A survey and some new results', this volume, pp. 496-515.
96. D. Gambetta, 'Democracy and corruption', mimeo (1996), p. 4. See also e.g. OCTF [Organized Crime Task Force] Corruption and Racketeering in the New York Construction Industry (New York, ILR, 1988). D. Gambetta, The Sicilian Mafia (London, Harvard University Press, 1993), pp. 214-20. D. Gambetta and P. Reuter, 'Conspiracy Among the Many: The Mafia in Legitimate Industries', in G. Fiorentini and S. Peltzman (eds), The Economics of Organized Crime (Cambridge, Cambridge University Press, 1995), pp. 116-36 . S. Rose-Ackerman, 'The political economy of corruption', mimeo (1996). A. Ades and R. DiTella, 'The new economics of corruption. A survey and some new results', this volume, pp. 496-515.
97. D. Gambetta, 'Democracy and corruption', mimeo (1996), p. 4. See also e.g. OCTF [Organized Crime Task Force] Corruption and Racketeering in the New York Construction Industry (New York, ILR, 1988). D. Gambetta, The Sicilian Mafia (London, Harvard University Press, 1993), pp. 214-20. D. Gambetta and P. Reuter, 'Conspiracy Among the Many: The Mafia in Legitimate Industries', in G. Fiorentini and S. Peltzman (eds), The Economics of Organized Crime (Cambridge, Cambridge University Press, 1995), pp. 116-36 . S. Rose-Ackerman, 'The political economy of corruption', mimeo (1996). A. Ades and R. DiTella, 'The new economics of corruption. A survey and some new results', this volume, pp. 496-515.
98. D. Gambetta, 'Democracy and corruption', mimeo (1996), p. 4. See also e.g. OCTF [Organized Crime Task Force] Corruption and Racketeering in the New York Construction Industry (New York, ILR, 1988). D. Gambetta, The Sicilian Mafia (London, Harvard University Press, 1993), pp. 214-20. D. Gambetta and P. Reuter, 'Conspiracy Among the Many: The Mafia in Legitimate Industries', in G. Fiorentini and S. Peltzman (eds), The Economics of Organized Crime (Cambridge, Cambridge University Press, 1995), pp. 116-36 . S. Rose-Ackerman, 'The political economy of corruption', mimeo (1996). A. Ades and R. DiTella, 'The new economics of corruption. A survey and some new results', this volume, pp. 496-515.
99. ITAR-TASS, 22 December 1996; The Economist, 8 April 1995; Business Week, 1 April 1996.
100. ITAR-TASS, 22 December 1996; The Economist, 8 April 1995; Business Week, 1 April 1996.
101. ITAR-TASS, 22 December 1996; The Economist, 8 April 1995; Business Week, 1 April 1996.
102. Olson, 'Why the transition from communism is so difficult', p. 454.
103. ITAR-TASS, 12 November 1996; AFP, 12 November 1996; OMRI Daily Digest, 13 November 1996. Large enterprises are not alone in lobbying for tax breaks. Sporting organizations alone have received import tax breaks worth as much as 1.3 trillion rubles ($300 million) since a presidential decree (signed on 1 March 1992) relieved them from paying import duties, value-added and excise taxes. Entire regions also try and often succeed to reduce the transfer of resources to the central government. D. Treisman, 'The politics of inter-regional transfers in post-Soviet Russia', British Journal of Political Science, 26/3 (July, 1996), 299-335.
104. ITAR-TASS, 12 November 1996; AFP, 12 November 1996; OMRI Daily Digest, 13 November 1996. Large enterprises are not alone in lobbying for tax breaks. Sporting organizations alone have received import tax breaks worth as much as 1.3 trillion rubles ($300 million) since a presidential decree (signed on 1 March 1992) relieved them from paying import duties, value-added and excise taxes. Entire regions also try and often succeed to reduce the transfer of resources to the central government. D. Treisman, 'The politics of inter-regional transfers in post-Soviet Russia', British Journal of Political Science, 26/3 (July, 1996), 299-335.
105. ITAR-TASS, 12 November 1996; AFP, 12 November 1996; OMRI Daily Digest, 13 November 1996. Large enterprises are not alone in lobbying for tax breaks. Sporting organizations alone have received import tax breaks worth as much as 1.3 trillion rubles ($300 million) since a presidential decree (signed on 1 March 1992) relieved them from paying import duties, value-added and excise taxes. Entire regions also try and often succeed to reduce the transfer of resources to the central government. D. Treisman, 'The politics of inter-regional transfers in post-Soviet Russia', British Journal of Political Science, 26/3 (July, 1996), 299-335.
106. ITAR-TASS, 12 November 1996; AFP, 12 November 1996; OMRI Daily Digest, 13 November 1996. Large enterprises are not alone in lobbying for tax breaks. Sporting organizations alone have received import tax breaks worth as much as 1.3 trillion rubles ($300 million) since a presidential decree (signed on 1 March 1992) relieved them from paying import duties, value-added and excise taxes. Entire regions also try and often succeed to reduce the transfer of resources to the central government. D. Treisman, 'The politics of inter-regional transfers in post-Soviet Russia', British Journal of Political Science, 26/3 (July, 1996), 299-335.
107. G. S. Becker, The Economic Approach to Human Behaviour (Chicago, University of Chicago Press, 1976), pp. 39-86. Posner, 'The cost of enforcing legal rights', p. 75.
108. G. S. Becker, The Economic Approach to Human Behaviour (Chicago, University of Chicago Press, 1976), pp. 39-86. Posner, 'The cost of enforcing legal rights', p. 75.
109. B. Williams, 'Formal Structures and Social Realities', in D. Gambetta (ed.), Trust. Making and Breaking Cooperative Relations (Oxford, Basil Blackwell, 1988), pp. 3-13, p. 7. Most human undertakings, therefore, are forms of co-operation, from driving cars to play, from marriage to international relations. 'Even [economic] competition, rather than being an alternative to co-operation, rests on co-operative arrangements'. D. Gambetta, 'Trust and co-operation', The Blackwell Dictionary of Twentieth-Century Social Thought (Oxford, Blackwell, 1993), 678-80, p. 678.
110. B. Williams, 'Formal Structures and Social Realities', in D. Gambetta (ed.), Trust. Making and Breaking Cooperative Relations (Oxford, Basil Blackwell, 1988), pp. 3-13, p. 7. Most human undertakings, therefore, are forms of co-operation, from driving cars to play, from marriage to international relations. 'Even [economic] competition, rather than being an alternative to co-operation, rests on co-operative arrangements'. D. Gambetta, 'Trust and co-operation', The Blackwell Dictionary of Twentieth-Century Social Thought (Oxford, Blackwell, 1993), 678-80, p. 678.
111. Gambetta, 'Trust and cooperation', pp. 678-9.
112. D. Charny, 'Nonlegal sanctions in commercial relationships', Harvard Law Review, (1990), 104. In small, homogeneous groups where members usually engage in repeat dealings, reputations rather than formal institutions compel parties to comply with contractual obligations (J. T. Landa, Trust, Ethnicity and Identity (Ann Arbor, The University of Michigan Press, 1994)). Though such mechanisms are important even in large market societies, they are not a perfect substitute for the public legal system: either they operate in specialized markets, such as the diamond industry (L. Bernstein, 'Opting out of the legal system: extralegal contractual relations in the diamond industry', Journal of Legal Studies, 21 (1992), 115-157) or, ultimately, rely on the legal system (S. Shavell, 'Alternative dispute resolution: an economic analysis', Journal of Legal Studies, XXIV (1995), 1-28).
113. D. Charny, 'Nonlegal sanctions in commercial relationships', Harvard Law Review, (1990), 104. In small, homogeneous groups where members usually engage in repeat dealings, reputations rather than formal institutions compel parties to comply with contractual obligations (J. T. Landa, Trust, Ethnicity and Identity (Ann Arbor, The University of Michigan Press, 1994)). Though such mechanisms are important even in large market societies, they are not a perfect substitute for the public legal system: either they operate in specialized markets, such as the diamond industry (L. Bernstein, 'Opting out of the legal system: extralegal contractual relations in the diamond industry', Journal of Legal Studies, 21 (1992), 115-157) or, ultimately, rely on the legal system (S. Shavell, 'Alternative dispute resolution: an economic analysis', Journal of Legal Studies, XXIV (1995), 1-28).
114. D. Charny, 'Nonlegal sanctions in commercial relationships', Harvard Law Review, (1990), 104. In small, homogeneous groups where members usually engage in repeat dealings, reputations rather than formal institutions compel parties to comply with contractual obligations (J. T. Landa, Trust, Ethnicity and Identity (Ann Arbor, The University of Michigan Press, 1994)). Though such mechanisms are important even in large market societies, they are not a perfect substitute for the public legal system: either they operate in specialized markets, such as the diamond industry (L. Bernstein, 'Opting out of the legal system: extralegal contractual relations in the diamond industry', Journal of Legal Studies, 21 (1992), 115-157) or, ultimately, rely on the legal system (S. Shavell, 'Alternative dispute resolution: an economic analysis', Journal of Legal Studies, XXIV (1995), 1-28).
115. D. Charny, 'Nonlegal sanctions in commercial relationships', Harvard Law Review, (1990), 104. In small, homogeneous groups where members usually engage in repeat dealings, reputations rather than formal institutions compel parties to comply with contractual obligations (J. T. Landa, Trust, Ethnicity and Identity (Ann Arbor, The University of Michigan Press, 1994)). Though such mechanisms are important even in large market societies, they are not a perfect substitute for the public legal system: either they operate in specialized markets, such as the diamond industry (L. Bernstein, 'Opting out of the legal system: extralegal contractual relations in the diamond industry', Journal of Legal Studies, 21 (1992), 115-157) or, ultimately, rely on the legal system (S. Shavell, 'Alternative dispute resolution: an economic analysis', Journal of Legal Studies, XXIV (1995), 1-28).
116. K. Pistor, 'Supply and demand for contract enforcement in Russia: courts, arbitration and private enforcement', Review of Central and Eastern European Law, 1 (1996), 55-87, p. 84.
117. The Arbitrazh Court system exists in addition to the system of civil courts. The jurisdiction of the different systems depends on the status of the parties involved: claims involving entrepreneurs, private organizations, or state organs are filed with the Arbitrazh courts. These courts have broad jurisdiction over commercial disputes, including claims arising out of contractual breaches and property claims, and over disputes arising out of government activities. F. Varese, 'The emergence of the Russian mafia', D.Phil. thesis submitted to the Faculty of Social Studies, Oxford University, (1996); see also Pistor, 'Supply and demand for contract enforcement'.
118. The Arbitrazh Court system exists in addition to the system of civil courts. The jurisdiction of the different systems depends on the status of the parties involved: claims involving entrepreneurs, private organizations, or state organs are filed with the Arbitrazh courts. These courts have broad jurisdiction over commercial disputes, including claims arising out of contractual breaches and property claims, and over disputes arising out of government activities. F. Varese, 'The emergence of the Russian mafia', D.Phil. thesis submitted to the Faculty of Social Studies, Oxford University, (1996); see also Pistor, 'Supply and demand for contract enforcement'.