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Lange and Hayek Revisited: Lessons from the Czech Voucher Privatization
By Jan Hanousek and Randall K. Filer
Introduction
Since the sudden demise of communism in the late 1980s, economists have regarded the transition from command to market economies in Central and Eastern Europe with intense interest. In addition to studying the transition, they have begun using the region as a testing ground to investigate the validity of classic propositions. Vouchers were used to privatize substantial portions of the economy in several transition countries in Central and Eastern Europe. The core of these voucher schemes was use of artificial money (vouchers) to purchase shares of privatized companies in several waves of closed auctions. Since policymakers in these countries were typically afraid to employ open financial markets even in the few cases where such markets existed, most countries used administrative price committees to set the prices of shares in these auctions.
Voucher privatizations, therefore, quite unintentionally provided an empirical test of one of the key issues in an almost forgotten, but once famous, controversy in the economic theory of socialism: whether a socialist economy (whose differentia specifica was the public ownership of the capital and natural resources) could allocate its resources to replicate a perfectly competitive outcome. Simply put, the question was whether a system of government price administration could "get the prices right" in comparison with the competitive market.
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