FROM CENTRAL PLANNING TO MARKET ECONOMY: SOME MICROECONOMIC ISSUES.

The economies that we are concerned with here fall somewhere between the two extremes of a very traditional centrally planned economy and a well-established market-type economy. In this paper, much of the more detailed discussion concerns Hungary, largely because it is the economy which has already moved furthest towards a market-type economy. Changing an economic system, even one that is performing poorly, is always a difficult and risky undertaking. In the Eastern European countries, where central planning has generated rather high growth rates of gross output in the past, accompanied by much slower improvements in living standards (as evidenced by the widening gap between East and West in Europe), it has taken some time for outside observers, as well as local political elites and the general population in Eastern Europe to appreciate that the old. Soviet-type system for running the economy had run out of steam. But there is now widespread acceptance of the need for fundamental change, fuelled by actual declines in living standards in the 1980s in several countries, by an increase awareness of the severity of the debt crisis especially in Hungary and Poland (but also now in Bulgaria), and by easier travel to the West making people more conscious of the achievements of more productive economies. [ABSTRACT FROM AUTHOR]