The Review of Austrian Economics, 15:1, 61–74, 2002.
2002 Kluwer Academic Publishers. Manufactured in The Netherlands.
Is There an Austrian Approach to Transition?
ENRICO COLOMBATTO email@example.com
Professor of Economics, Universit
a di Torino and ICER, Torino, Italy
Abstract. This paper discusses the meaning of the term “transition” and its implications for policy making. It
is suggested that an Austrian view would enhance a better understanding of what has been happening in Central
and Eastern Europe in the past decade. Within this framework, the analysis should be based on three criteria:
acquisition of knowledge, individual responsibility, free entry. It concludes that future transition analysis should
devote more attention to the way a number of subjectivistic features drive institutional change, as well as to the
features of the new opportunity sets made available to individuals.
JEL classiﬁcation: P20, A11, B41.
1. The End of Transition and its Consequences
Central and Eastern-European Countries (CEECs) are still referred to as “transition
economies”. In this context, the term “transition” is of course meant to convey the notion of
continuous structural change, say from a central-planning archetype to a free-market ideal.
Yet, ten years have already gone by since the political collapse of the centrally-planned
regimes. Although the traits of these countries show constant change (as it happens in any
economy), some general features have already come to the surface fairly explicitly. As such
attributes become clearer and clearer, the more misleading and harmful it is to assign the
post-communist economies a special standing, worthy of special treatment and support,
allegedly to ease and speed up their conversion. Put differently, we believe that if transition
were over, transition policy would be inappropriate to say the least.
This paper discusses the usual approaches to transition and questions the very meaning
of this term. It is maintained that in its present form the orthodox literature doesn’t provide
many insights into the way CEECs work and evolve, and may actually lead to wrong
conclusions from the normative standpoint. At the same time, it is argued that the transition
literature may still play a role, but only if it addresses entirely different issues, possibly
derived from an Austrian perspective.
Transition is currently deﬁned as the period of time it takes for new institutions and
organizations to be introduced and upheld,
for agents to learn how to operate according to
a reformed system of property rights and adjust to hitherto virtually unknown rules of the
game. This applies to the man in the street, as well as to policy makers and bureaucrats.
Present address: ICER, Villa Gualino, Viale Settimio Severo, 63, 10133, Torino, Italy.
I am grateful to K. Leube, S. Pejovich and J. Vromen and two referees of this journal for their comments on a
preliminary draft of this paper. Previous versions were presented at seminars organized by ICER (Torino), by the
Berger International Program (Cornell Law School), by the University of Gent.