Public Choice Theory and the Transition Market Economy in Eastern Europe: Currency Convertibility and Exchange Rates

In 1989, the people of Eastern Europe\u27 revolted against their Communist governments with the hope of achieving political and economic self-determinism. These countries then faced the important challenge of transforming centrally-planned economies into market economies. This transition process has been a topic of much debate among economic theorists with little agreement as to which transition measures should be taken or when they should be executed. Public choice theory provides an analytical framework on which the nature and timing of the transition process can be better understood. The transition process in Eastern Europe is not a result of the uniform application of macroeconomic theory; rather, it is the result of competing interest groups acting rationally to further their self-interest. This Article discusses the theoretical application of public choice theory to the economic changes taking place in the Eastern European countries and demonstrates the accuracy of the public choice theory

Information and Transaction Costs as the Determinants of Tolerable Growth Levels

This paper develops a theory to explain growth in developed and undeveloped countries. Where transaction and information costs are low, people more easily perceive and oppose activities conducive to deadweight losses. The opposite holds where information and transaction costs are high, because it will be too costly for relatively weak groups to check the rent-seeking proclivities of the dominant interest groups. And, by definition, high transaction and information costs make it hard to displace incumbent leaders who produce poor growth. The levels of information and transaction costs in different countries will determine how much growth we can expect.

A Public Choice Model of International Economic Cooperation and the Decline of the Nation State

The idea of the state lies at the core of international relations and international law. The concept of sovereignty is also central to the notion of the state. Indeed, inherent in the existing system of states are the principles of political independence and sovereign equality that form the underpinnings of sovereignty. Thus, it is unsurprising that the United Nations Charter specifically declares that: Nothing contained in the present Charter shall authorize the United Nations to intervene in matters which are essentially within the domestic jurisdiction of any state or shall require the Members to submit such matters to settlement under the present Charter; but this principle shall not prejudice the application of enforcement measures under Chapter VII. This provision, which is similar to provisions found in many other international treaties, was necessary because without it sovereign states would have been reluctant to join the United Nations. Countries jealously protect their sovereignty, and under international law, have the right to use armed force to do so. This devotion to sovereignty appears to be inconsistent with the increasing trend toward the establishment of international agreements and institutions, since they involve a surrender of some degree of sovereignty. After all, [s]ince governments put a high value on the maintenance of their own autonomy, it is usually impossible to establish international institutions that exercise authority over states. This paper attempts to reconcile this apparent inconsistency by examining the trend toward international agreements from a public choice perspective

Exchange-Rate Management in Eastern Europe: A Public Choice Perspective

The paper presents a public-choice analysis of the existing exchange-rate regimes in transition economies, with special reference to Eastern Europe. The links between policy making, rent seeking and exchange-rate regimes are thus examined in detail from a theoretical point of view, and then compared with the existing empirical evidence. Some comments about the role of the West and of international organizations are also put forward