a critique of the new comparative economics.docVIP

A CRITIQUE OF THE NEW COMPARATIVE ECONOMICS J. Barkley Rosser, Jr. Department of Economics MSC 0204 James Madison University Harrisonburg, VA 22807 rosserjb@jmu.edu Marina V. Rosser Department of Economics MSC 0204 James Madison University Harrisonburg, VA 22807 rossermv@jmu.edu December, 2006 Abstract. We examine the “new comparative economics” as proposed by Djankov et al. (2003) and their use of the concept of an institutional possibilities frontier. While we agree with their general argument that one must consider a variety of institutions and their respective social costs, including legal systems and cultural characteristics, when comparing the performance of different economic systems, we find various complications and difficulties with the framework they propose. We propose that a broader study of clusters of institutions and such newly emerging forms as the new traditional economy may be better suited as ways to approach the study of comparative economics in the era after the breakdown of the old comparison of market capitalism and command socialism that came to an end with the breakup of the Soviet Union. Key words: institutional possibilities frontier, new comparative economics, new traditional economy, civic capital JEL classification: K1, O10, P10, P37, P40, P50 1. Introduction In an address to the International Economic Association in August, 1992, eight months after the breakup of the Soviet Union, then Premier of Russia (and leading economic reformer), Yegor Gaidar declared, “Henceforth books on comparative economic systems will be found on the shelves dealing with economic development” (Rosser and Rosser, 2004, p. 575). This remark reflected the reality that the collapse of the socialist bloc associated with that now defunct nation largely ended as a serious study the traditional comparison between capitalism and socialism that was the central topic of the old comparative economics. However, while development economics involves study of how d