Epistemological Imperfections of Transformational Processes in Transitive Countries

Abstract

From the epistemological point of view policymakers in transitional economies operated in the severely distorted information environment. Neither theorists or decision makers paid attention to the problem of economic calculation that was an integral part of a centrally planned economy and its immediate institutional followers in transition. Interventionists (political and government employees) made investment, production and redistribution decisions based on their subjective judgment and preferences trying to perform cyclical or countercyclical policy. Their knowledge of the business cycle as superficial and not based on a solid scientific base. In fact they considerable increased transformation costs and built fragile institutions prone to recurrent crises. Theorists of transition failed to single out the subject of economic actions – homo agens. Erroneously homo oeconomicus was taken as a doer and he was put in the frameworks of equilibrium models. Aggregate indicators of these models distorted the reality of actual discovery process by acting individuals even further. Macroeconomic approach to the analysis of transitional phenomena could not provide the information and insights that Austrian school of economics based on methodological subjectivism could. Interventionists focused their attention of neutralizing so-called market failures instead of emphasizing government failures and severe economic, social and institutional costs of state intervention. Interventionists created the whole vocabulary to justify their actions and outcomes. Vague concepts like social welfare or well-being, sustainable development, national interests were used to restrain political and economic competition, accountability of all cost and benefit outcomes in the SWOT analysis. The inclusion of theoretical achievements of Austrian school of economics into the analysis of transformation processes considerably broadens and deepens our understanding of both human actions in transformation and their outcomes.