Mario Ferrero

English

Research Papers in Economics

 
The European Journal of Comparative Economics 
Vol. 5, n.2, pp. 287-290 
 
ISSN 1722-4667 
 
 
 
 
Available online at http://eaces.liuc.it 
Book review of: 
Transition and Beyond. Essays in Honor of Mario 
Nuti
1 
Saul Estrin, Grzegorz W. Kolodko, Milica Uvalic (Editors) 
by Mario Ferrero, University of Eastern Piedmont 
 
This is a collection of essays in honor of Domenico Mario Nuti, written and 
edited by a group of long-time associates, friends, and former students of him on the 
occasion of his seventieth birthday. After an Introduction in which the editors sketch 
out a concise but lively portrait of Nuti’s life and work career, as well as a brief summary 
of the contributions to follow, the main body of the book is divided into three parts, 
labelled respectively “The socialist legacy” (3 papers), “Transition: From socialism to 
capitalism” (7 papers), and “Beyond transition” (4 papers), for a total of 14 papers. This 
division, as the editors state (p. 6), is meant “to reflect some of Mario’s most enduring 
intellectual concerns”. We may note in passing that others of his “enduring concerns”, 
possibly no less important, are not reflected in the book’s contributions: in particular, 
his work on the reform of the Soviet-type economy, for the very good reason that the 
subject  matter  itself  has  vanished  and  the  specialized  stock  of  knowledge  of  all  its 
scholars has rapidly been allowed to become obsolete; and his work on the economics 
of participation, co-operation and profit sharing, arguably because this subject has lately 
been  falling  out  of  fashion  in  the  globalized  world  and,  sadly,  in  the  globalized 
economics profession too. 
As publishers never tire to repeat, Festschrifts are a hard sell these days, largely 
because contributors often take their commitment lightly as they free ride on each other 
and  plan  on  duplicate  publication  in  professional  journals,  so  that  the  quality  of 
contributions tends to be uneven and on average rather low. This particular collection 
however, while not without its shortcomings, comes out refreshingly well against this 
background,  perhaps  because  the  contributors  make  up  a  good  section  of  the  best 
scholarship  still  active  in  this  vanishing  field  of  economics  –  which  is  in  itself  a 
testimony to the high quality standards that Nuti’s lifelong research and teaching has 
been able to inspire and promote. If an outsider wants to get a bird-eye’s view of what 
the comparative economics profession has to offer now that its glory days are over, this 
book is a good place to look.  
  Disregarding  the  book’s  formal  partition,  to  this  reviewer  the  essays  can  be 
arranged in ascending order in terms of interest and originality. At the bottom of the 
range we find “Financial transition in Central and Eastern Europe. A note” by Marcello 
De Cecco, a professor but at the same time a banker for most of his career (see his bio 
on pp. XIII-XIV). His contribution, though obviously based on previous research and 
thought, is impossible to evaluate because the author – alone among the contributors 
here – feels so self-confident as to dispense with citation of previous own or others’ 
                                                 
1 Palgrave Macmillan, Basingstoke and New York 2007, pp. XX – 307  
EJCE, vol. 5, n. 2 (2008) 
 
 
 
Available online at http://eaces.liuc.it 
292 
work altogether (the reference list includes one item). The author states (p. 136): “Some 
of my friends find this method rather irritating. I know Mario Nuti is not one of them”. 
As an outsider, this reviewer is happy to join the irritated company. Friendship with 
Nuti may have earned De Cecco a place in the book; it certainly will earn him no further 
word in this review. 
  Next in line is a couple of papers that, though duly acknowledging their sources, 
not only entirely draw on the author’s previously published work but cover so broad a 
ground in so superficial a way that the reader’s attention and interest sink after a few 
pages. One is Grzegorz Kolodko’s “The great post-communist change and uncertain 
future of the world”, a mis-titled piece because it’s all about globalization. This is a 
political speech on where the world is in fact going vs where it should be going in the 
author’s view. The bottom line is that globalization is basically good but would be even 
nicer if it put on a human face, which it hasn’t so far, and we all should help it doing so. 
The  paper  may  be  interesting  to  read  as  eyewitness  testimony,  on  account  of  the 
important role played by the author in the Polish transition, but nothing he says here 
adds anything new to the scholarly literature on globalization. Similarly, Làszlò Csaba’s 
“Optimal  transition  trajectories?”  reviews  the  transition  experience  of  the  new  EU 
members of Central Europe and concludes that past trajectories could perhaps have 
been better, but bygones are bygones; future trajectories, on the other hand, are so 
open-ended, value-laden and path-dependent that the issue of optimality in the paper’s 
title loses meaning. Once again, the discussion is so wide-ranging that it is not clear that 
anything is being added to the huge mass of writings already stored up on this subject. 
  Next  comes  a  group  of  papers  that,  while  not  presenting  new  research, 
summarize some of the authors’ previous research on well-defined topics in a clean, 
useful way. This group includes four papers. Following the book’s order, the first is 
“The rise and fall of socialist planning” by Michael Ellman. It traces the history of 
socialist planning through its 70 years of life and probes into the deep causes of its 
failure and ultimate demise. Ellman first identifies these causes as partial ignorance, 
inadequate techniques for data processing, and above all, complexity, and then describes 
the legacies these factors bequeathed on the reform attempts, the great collapse, and the 
start  of  transition  –  a  terrain  where  Ellman’s  line  of  thought  meets  Nuti’s.  Simon 
Commander’s “Skills and the transition” examines the widely held presumption that 
transition countries started with a favourable legacy from the socialist era: a high level of 
human capital stock. Exploiting some original firm-level datasets, the author concludes 
that  the  presumption  was  largely  illusory:  socialist  education  was  generally  of  poor 
quality and overly-specific vocational type, making for low adaptability of the workforce. 
This legacy has lingered on during the transition and has joined hands with the secular, 
technology-driven shift in labor demand away from unskilled labor to produce high 
unemployment  rates  for  the  low-skilled  and  a  widening  of  wage  inequality.  Padma 
Desai’s “The search for identity: Where is Russia heading?” draws on her recent book 
Conversations  on  Russia  to  summarize,  in  a  mind-capturing  style  of  writing,  the 
reconstruction  of  Russian  identity  during  the  painstaking  evolution  from  Yeltsin’s 
“demolition project” to Putin’s “paternalistic majoritarian model”. Among other things, 
she properly draws attention to the most troubling feature of Putin’s course: the heavy-
handed, Russian-centered line towards ethnic minorities. Finally, John Eatwell’s “Risk 
management and systemic risk” summarizes his own research and policy advice on the 
issue  of  international  financial  regulation.  He  argues  that  financial  risk-taking  at  the  
Book review on: Transition and Beyond. Essays in Honor of Mario Nuti 
 
 
Available online at http://eaces.liuc.it 
293 
micro  level  generates  systemic  risk;  that  this  threat  increases  with  the  increasing 
homogeneity of financial markets across the world, which in turn makes such markets 
increasingly volatile; and that consequently, financial regulation should be international 
in scope and provide for a lender of last resort. Though not new, the argument is tightly 
argued and thought-provoking. 
  The next group presents new research and is comprised of five papers. Vladimir 
Popov’s “Life cycle of the centrally planned economy: Why Soviet growth rates peaked 
in the 1950s” is a skilful simulation exercise on Domar’s growth model. It shows that 
the tendency toward accumulation of new capital stock to the detriment of replacement 
investment – a tendency which is inherent in a CPE because of the planners’ systemic 
incentives – is a sufficient explanation of why Soviet growth rates peaked in the 1950s 
and declined thereafter. In “Investment, wages and corporate governance during the 
transition: Evidence from Slovenian firms”, Janez Prasnikar and Jan Svejnar perform a 
comprehensive test on the main hypothesis about corporate governance put forward by 
the transition literature: namely, that insider privatization, where workers enjoy a higher 
bargaining power, generates a wage-investment tradeoff that jeopardizes further growth, 
whereas sale to outsiders would keep this distortion in check. The authors use a large 
sample of Slovenian firms that were observed before privatization but when each firm 
knew  whether  it  was  eventually  slated  for  insider  rather  than  outsider  privatization. 
Perhaps unsurprisingly, they find the theoretical hypothesis confirmed. Milica Uvalic’s 
“How  different  is  Serbia?”  is  a  paper  typical  of  the  competent,  specialist  kind  of 
comprehensive area studies that we have come to expect from the author. She surveys 
the main features of transition in Serbia and argues that, although the Milosevic regime 
kept Serbia apart from the mainstream of transition countries through the 1990s, this 
delay has largely been overcome after 2000 by a turn to a full-fledged market economy 
that has now brought Serbia back to the mainstream, thus fully deserving candidate 
status for EU membership. “The effects of privatization on company performance in 
Belarus”, by Saul Estrin and associates, uses a new enterprise-level dataset to put to 
empirical test the conventional wisdom which holds that the property rights structure is 
a key determinant of enterprise performance in transition economies. Counterintuitively, 
they find that in Belarus that has not been the case, as both privatization of former 
SOEs and entry of new private firms have had no effect on company performance. The 
authors argue that the blame for this failure must fall on an institutional environment 
that  is  not  market-friendly,  and  particularly  on  a  pervasive  soft-budget-constraint 
syndrome.  Finally,  Vito  Tanzi’s  “Complexity  and  systemic  failure”  is  a  fascinating 
account  of  how  complexity,  in  its  multiple  dimensions,  was  not  only  a  key  factor 
underlying  the  collapse  of  CPEs  (the  focus  of  Ellman’s  paper)  but  is  a  crucial 
component  of  the  increasing  systemic  risk  that  threatens  market  economies.  It  also 
undermines the legitimacy of the market system in so far as it increases corruption and 
inequality  in  the  distribution  of  wealth,  influence  and  power.  Since  part  of  this 
complexity  is  clearly  man-made,  Tanzi’s  cogent  policy  advice  is  to  work  towards 
increasing transparency and simplicity in regulation and legislation.  
  Finally we come to the highlights of the book. In “Are transition economies 
normal developing countries? The burden of the socialist past”, Michael Keren and Gur 
Ofer revive Simon Kuznets’ methodology to characterize a “normal” path of evolution 
for transition economies based on a number of governance indicators at comparable 
levels of development. They use this framework to evaluate Shleifer’s (2005) claim that 
Russia is by now a normal country and find compelling evidence that disproves such  
EJCE, vol. 5, n. 2 (2008) 
 
 
 
Available online at http://eaces.liuc.it 
294 
claim. Their findings provide support for the idea of a “great divide” between the new 
EU accession countries, on the one hand, and the successor states to the former Soviet 
Union, including Russia, on the other: the former lie close to the “institutional Kuznets 
curve”,  constructed  by  relating  the  relevant  governance  indicators  to  the  level  of 
development, while the latter are far off it. The authors emphasize that since transition 
is  path-dependent,  this  divergence  has  everything  to  do  with  the  socialist  legacy,  in 
particular with the different way that the communist regime collapsed in the two groups 
of countries. In “Growth, initial conditions, law and speed of privatization in transition 
countries: 11 years later”, Sergio Godoy and Joseph Stiglitz mount a wide-ranging, well-
documented challenge to the once-widespread favor enjoyed by the “shock therapy” 
approach to economic transition. By extending the period of analysis and using a broad 
array of data, the authors are able to provide further support to the well-established 
proposition  that  the  quality  of  legal  institutions  matters  for  growth  performance, 
whereas – contrary to the claim of the Keren and Ofer essay reviewed above – initial 
conditions and the communist legacy have a negligible effect as time passes. The most 
important finding, however, is that the speed of privatization has a significant, negative 
effect on cross-sectional growth – a finding that vindicates the gradualist approach to 
transition. 
  Even for the average economist outside the comparative economics field, these 
last two papers are of sufficient breadth and general interest to make the book well 
worth reading. 

Book Review of: "Transition and Beyond. Essays in Honor of Mario Nuti", Saul Estrin, Grzegorz W. Kolodko, Milica Uvalic (Editors)

http://eaces.liuc.it/18242979200802/182429792008050206.pdf

Book Review of: "Transition and Beyond. Essays in Honor of Mario Nuti", Saul Estrin, Grzegorz W. Kolodko, Milica Uvalic (Editors)

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