Dioscuri Research Project
Eastern Enlargement – Western Enlargement
Cultural Encounters in the European Economy and Society after the Accession
DIOSCURI Final Conference
Institute for Human Sciences, Vienna
April 20-22, 2007
Janos Matyas Kovacs
BEYOND THE BASIC INSTINCT?
On the Reception of New Institutional Economics in Eastern Europe
Work in Progress
Please do not cite or circulate without permission of the author
Only for conference discussion

I owe special thanks to Dragos Aligica and Horia Paul Terpe, Roumen Avramov, Vojmir Franicevic, Aleksandra
Jovanovic and Aleksander Stevanovic, Jacek Kochanowicz, Alice Navratilova and Tjasa Zivko for their cooperation.
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„True, I did not use the word ’institution’ in every second paragraph in a way
it has became fashionable by now. I believe, however, that I understood what
the notion of ’system’ and what the difference between capitalism and socialism
were.”
(Janos Kornai, 2000)1
„Even the Ponzi schemes could be considered as ’schools’.”
(An interview excerpt from Bulgaria)
We did not have a large choice but were looking forward to exploring an exciting, new and
quickly growing research field. In planning our project on East-West cultural encounters in
economics, we were looking for a school of thought that is popular enough in our region to
provide us with a sufficient amount of empirical information for a meaningful comparative
analysis; and, at the same time, identifiable enough to target our inquiry as precisely as possible.
Moreover, it was plausible to focus on a subdiscipline which also plays an important role at the
other two research sites, the economics departments and the think tanks.
Neoclassical economics enjoying an extremely friendly reception in Eastern Europe over the past
two decades would have easily satisfied the requirement of popularity. Nevertheless, given its two
voluminous branches, micro- and macroeconomics, that have become less and less separable, this
choice would have gone beyond our research capacities. Conversely, any of the applied fields
such as labor, finance or industrial organization, although managable as research tasks, would
have offered too little to compare if we had examined them individually. Taken together,
however, they do not show a high degree of cohesion. Thus, we were tempted to choose from
among the heterodox schools. Selecting any sort of radical political economy promised an
inevitable failure because of its lack of popularity in the region due to a general suspicion
inherited from the old regime toward anything illiberal, Marxist, leftist, you name it. In terms of
ideological predisposition, picking the (neo)Austrian school (nota bene, Friedrich Hayek rather
than Joseph Schumpeter) would have offered more success but I am afraid that we would have
had to face a similar shortage of comparable scientific results at the local level as in any field of
applied economics.
New institutional thought, however, seemed to guarantee an identifiable set of scientific theories
of rapid expansion and strong methodological cohesion, which are „doomed” to flow in the
region in large quantity. Thus, we did not have to fear from a lack of research materials. By new
institutional thought we meant first of all what is usually called „new institutional economics”
(NIE), i.e., a large variety of rapidly expanding research programs ranging from property rights
theory, through public choice and the theory of incentives, all the way down to evolutionary
economics and the analysis of social capital. Owing to the fact that NIE is famous for a profound
interpenetration of economics with other social sciences, interdisciplinary fields such as economic
history, economic policy, economic sociology, law and economics even economic psychology are
also indispensable components of the supply of scientific knowledge generated by the given
school.2
A broad and rapidly expanding „Western” supply does not necessarily have to produce an
upsurge in „Eastern” demand. Why did we nonetheless expect to explore an „exciting, new and
Janos Kornai, Tíz évvel a Röpirat angol nyelvű megjelenése után. A szerző önértékelése (Ten Years after Publishing
“the Pamphlet” in English. A Self-Assessment by the Author) Közgazdasági Szemle, 2000/9, p. 654.
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quickly growing research field” in our region? The answer has to start with a substantial dose of
self-criticism, recalling a prediction of mine made back in the early 1990s (and sustained up until
the beginning of our project) that proved dismally wrong. Actually, NIE has proven to be a new
and exciting field, it did grow quickly but its upswing turned into stagnation after some years.
Working hypotheses: abundant imports, rivalry and hybridization
In 1993, I portrayed the logic of East-West encounters in economic institutionalism as a largescale venture of importation accompanied by a rivalry of two Western paradigms (ORDO
liberalism and NIE) for the hearts and the minds of Eastern European economists3. Witnessing
the popularity of the concept of Soziale Marktwirtschaft (coupled, in a peculiar fashion, with
Austrian liberalism) in political discourse after communism, and the proliferation of new
institutionalist notions such as transaction costs, path dependency or social capital in the
economic analysis of the transition to capitalism, I presumed to see an ongoing competition
between old („German”) and new („American”) patterns of institutionalist thought in economics.
This open-ended scenario with two possible outcomes rested on the following four assumptions:
1. Both major schools of economic science under communism, i.e., official political
economy (textbook Marxism) and reform economics will disappear: the former virtually
collapsed before 1989 while the latter will merge with old and new institutionalist theories
prevailing in the West. The merger may be facilitated by the fact that socialist reformism
(including self-management programs) developed quasi-institutionalist techniques of
criticizing the planned economy as well as of engineering its reforms.4
2. The institutionalist explanations for severe market distortions in the planned economy
(shortages, campaigns, investment cycles, overcentralization, plan bargaining, informal
economy, etc), which were put forward by the reform economists between the 1950s and
1980s, can easily be incorporated in the Western literature on the evolution of property
rights, government failures, bargaining games, etc. (of course, following a major analytical
improvement).5
3. The communist reformers will become capitalist “transformers” studying the postcommunist economy and designing large-scale deregulation and privatization schemes.
Hence, they will badly need reliable know-how for understanding and initiating
institutional change.
4. A good part of that know-how is available in the West, the Big Unknown of scientific
development is on the demand side. In leaving reformism behind, the Eastern European
economists will face, by and large, two rival institutionalist traditions: an essentially
verbal-historical one offered by ORDO liberalism, and another one based on
neoclassical-style formal analysis and offered by NIE. Which of the two will be their
choice? To put it simply, the former relies on holistic concepts such as economic order,
and stresses social responsibility and the need to correct the market from outside whereas
the latter prefers methodological individualism, and trusts in the ultimate justice-making
and self-correcting power of the market. The former is closer to the intellectual and
political traditions of the ex-reformers, offers an activist role to the scholars, and is
Which Institutionalism? Searching for Paradigms of Transformation in Eastern European Economic Thought, in:
Hans-Jürgen Wagener (ed): The Political Economy of Transformation, Physica-Verlag, Heidelberg, 1993.
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justified, especially in the eyes of the older generations, by the European success story of
the welfare state between the 1950s and the 1980s.
The latter is superior in terms of scientific precision and academic strength due to its
intimate links to neoclassical economics, probably more attractive for the younger
generations of economists in the region, and gains legitimation from the comparative
advantages of the “American model” vis à vis most of the European ones during the past
two decades. To put it bluntly, the former is assisted by the boring but reliable past of
moderate sophistication whereas the second represents the music of the future full of
risks and perhaps of Grand Discoveries.
Shortly after 1989, my predictions were rather cautious, I avoided guessing who the winner could
be. Without revealing my own preference for either paradigm on the supply side, I only expressed
a certain fear from a possible combination of the old-new propensity of the transformers for
state interventionism with resurgent nationalism in the region under the auspices of a statistconservative interpretation of the ORDO program. Thus, part of the latter’s liberal constituents
would be suppressed, and the concepts of the ex-reformers (or even of the textbook Marxists)
would find refuge in the theoretical construct of a new kind of social market economy, a NationalSoziale Marktwirtschaft somewhere between the new Eastern-European types of “hard” socialism
(post-communism) and “soft” nazism.6
Indeed, it was terribly difficult to forecast the winner (or to define the terms of an incidental –
local -- cohabitation between NIE and ORDO7) but it seemed evident that if there were a winner
it would emerge from the rivalry of these two. I did not expect to see a sweeping victory of any
of the rivals. Instead, I could well imagine a hybrid solution, according to which the reformist
tradition would be affected by certain features of both Western paradigms, perhaps alternately,
with no clear trend of evolution.
Be as it may, these expectations were contingent on a deep-going methodological and discoursive
change in the economic profession throughout the region. Any East-West convergence in
institutionalism (even on the basis of ORDO liberalism) depended on a considerable
rapprochement between the Western languages of economics and the local ones. To put it less
politely, Eastern European economists could not hope, I believed, for success on the
international scene if they continued to insist on their homegrown “quasi-institutionalism, or,
more exactly, "speculative institutionalism" (think of the amorphous “plan-and-market” and selfmanagement discourses used by the reformers even in the late 1980s8). Normally, this kind of
institutionalist research program was less empirical and, at the same time, less abstract-axiomatic
than its major counterparts in the West.
With the rise of a new East-West combination in institutional economics, the theory of postcommunist transformation (a potential hotbed of institutionalist discoveries) could improve a lot,
I presumed. Learning might become a two-way street: economic sciences in the West would also
borrow scientific ideas from our region. For instance, Eastern Europe seemed capable of
delivering, via the economics of communism, the institutionalist theory of an unfeasible
economy, which could play a similar role to the one assumed by the perpetuum mobile in physics.
The same applied, I thought, to the institutions that came into being in the course of dismantling
the communist system: if described and analysed in a language understandable for Western
scholars, these institutions, together with their predecessors, might enrich some of NIE’s core
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concepts such as fuzzy property rights, informal institutions, incomplete contracts, informational
asymmetries, rent seeking, path dependency, etc.
These expectations reflected a rather cooperative and frictionless scholarly exchange with the
West. What we want to come in will arrive, and what actually comes in is the same as what we
originally intended to receive. Also, to use the language of political correctness, the institutionalist
economists in the region were portrayed not as handicapped or disabled but as differently abled
scholars who may have authentic products to sell. These products only need to be recycled,
repackaged and marketed intelligently. In optmal case, the Eastern and Western cultures of
institutionalism will complement each other and/or converge, that is, the incoming culture will
not eradicate and replace the indigenous one.
Besides the “discoursive turn”, I argued, the sociological context of economic sciences should
also change in Eastern Europe to promote convergence in institutionalist research programs.
Presumedly, party congresses, censored journals and politically embedded scholars will not
determine scientific progress any longer. At the same time, “secular” research communities, peerreviewed publications and the faculty library (or the faculty club for that matter) will become the
main vehicle of scholarly evolution. Eastern European experts will be subjected to the same kind
of rivalry in the academic market (locally and globally) as their Western colleagues, the patterns of
recruitment, promotion and mobility will also be similar, a good part of scholarly output will
come from private institutions of research and education, etc.
To sum up, the cast was presumed to include two “collective actors” (schools, paradigms) on the
Western side, while on the Eastern one I saw the vanishing textbook Marxists, the ex-reformers
(actually, at least two generations of them) and the “innocent youth” just appearing on the scene
of economic research. It was also quite reasonable to assume that generational differences would
matter. The younger you are, the greater your chances for receiving proper education in
neoclassical economics – a sine qua non of absorbing new institutionalist ideas (provided you want
to pursue institutionalist research anyway). Here two kinds of frustration may coincide. Both the
inexactitude of the verbal research techniques applied by the older colleagues, and the sterility of
certain just-acquired neoclassical models can prompt the young scholars to switch to NIE. While
being pushed by the former two, they are pulled by new institutional economics, a fresh and
fashionable subdiscipline that promises the best of old institutionalism and the mainstream
without making the researcher suffer from their alleged imperfections.
If that prognosis is not flawed, the neoclassical paradigm needs to be included in the group of
Western actors. Probably, the spread of this paradigm – so went my argument – would also
accelerate the diffusion of new institutional economics as an unintended by-product (or collateral
damage). However, at that time, I disregarded three other options:
a) ORDO would smoothly withdraw from the competition but NIE would not become a
real winner due, among other things, to its own poor performance.
b) Neoclassical theory would not produce its “Eastern dissidents” for quite some time,
moreover it would distance itself from NIE in certain respects.
c) Under post-communism, the economic profession would face an “anything goes” (more
exactly, an “any theory can melt into another”) situation, in which even hybridization
might turn out to be a too courageous working hypothesis.
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What was disregarded ten-fifteen years ago, has become reality, and a veritable surprise to me
today in reading the case studies on Bulgaria, Croatia, the Czech Republic, Poland, Romania,
Serbia and Slovenia, and making the one on Hungary.9
A few words on methodology
The surprise could not originate, I believe, in sloppy research techniques used by the authors of
the case studies. We did our best to gain a comprehensive picture of the reception of a large
variety of new institutional ideas in the region in both scientific research and higher education,
moreover, we did not disregard entirely how those ideas have been applied in the course of postcommunist transformation. In mapping NIE and its interdisciplinary environment, old
institutional ideas were not overlooked either. We avoided to base our conclusions on anecdotal
evidence, ideological prejudices and the like occuring so frequently when it comes to assessing
post-1989 developments in Eastern European economic thought. Instead of bashing
neoliberalism and shock therapy under the pretext of discussing NIE, or, on the contrary,
mocking at the survival of old-style research programs and the methodological imperfections of
the new institutional thinkers, we collected and cross-checked an unprecedented array of
empirical material by means of in-depth interviews (their number amounted to more than 50)10,
curricula analysis, literature review and participant observation.
Of course, the individual case studies vary in both depth of empirical scrutiny and explanatory
force. However, no economic subdiscipline has undergone such an intense research into its post1989 evolution in the region thus far. Although most of the authors were extremely committed to
the project and the interviewees ready to cooperate, the cultural encounters were almost
exclusively narrated from the perspective of the local experts. In the absence of Western partners,
the mirror image of the exchange of scientific cultures had to be constructed with the help of
circumstantial evidence. Another deficiency stems from the freedom enjoyed by the case study
authors in selecting the interviewees and composing the structure of the in-depth interviews.11
The interviews were not based on representative samples, the authors are in most cases members
of the scientific community, and the conversations did not follow a detailed questionnaire.
Actually, we conducted a kind of life history interview starting with the respondents’ first
encounters with „the West”. They were asked about their surprises/frictions/conflicts, the way
of coping with them, the ensuing compromises and the lessons they drew in the wake of the
encounters. We were interested in both the strictly scientific and the sociology of knowledge type
aspects of the encounters. In the end, our interview partners were asked about what they think
their Western colleagues may learn from them. As far as the case studies are concerned, they
focus on the structure and the sequence of the cultural encounters, and – possibly -- provide a
preliminary typology of the final outcomes.
To sum up, we preferred giving our interview partners much freedom in reconstructing their life
histories, and relying on the insider knowledge of the interviewers, to applying the established
rules of impartial and strictly structured interview-making. In a mapping-style project like ours,
such a deviation from the formal recipes is, in my view, acceptable, especially if the authors of the
case studies carefully compare the information gained from the interviews with the publications
and education programs of the research community in the respective countries. A regular survey
based on a standardized questionnaire and representative sampling can hardly be conducted by
skipping our mapping exercise.
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Three surprises
„Have Polish economists noticed institutionalism?”– asks Jacek Kochanowicz with a skeptical
undertone in his case study. The title of my own paper on Hungary („Missing a chance?”) reflects
similar doubts. Another author, Roumen Avramov says the following: „NIE’s presence in the
Bulgarian landscape of economic science is incoherent and lacking a critical mass. It can hardly
be considered as a compact current, able to counter-weight the dominant influence of
neoclassical economics … NIE is rather an archipelago of heterogeneous components with
differing weight, impact and institutional support.” Vojmir Franicevic speaks of „soft”
institutionalism (i.e., using NIE concepts when they „fit the story well”) and a passive reception
of new institutional economics in Croatia. According to Tjasa Zivko, „judging from Slovenian
economic reviews, we were able to identify only one economist who deals with NIE.” In Bulgaria
there is only one consistent curriculum of new institutional economics. In presenting the case of
CERGE in Prague, one of the most „Westernized” institute of research and education in Eastern
Europe, Alice Navratilova writes about the marginal role NIE plays in its programs.
Kochanowicz says NIE was crowded out by neoclassical theory in his country. Horia Paul Terpe
and Dragos Aligica warn the reader that „the many signals that may indicate a new
institutionalism rhetoric should not be confused with the adoption of the real thing. Romanian
institutionalism ... has different roots and sources of inspiration.” Finally, Aleksandra Jovanovic
and Aleksander Stevanovic complain about „second best solutions” in the reception of NIE in
former Yugoslavia, and contend that „the Serbian academic community is still far away from
accepting” that school of economics. Institutionalism has not been institutionalized yet -- quite a
few authors play with the words (without knowing each other’s papers) in drawing their final
conclusions.
First surprise
The first surprise I had to digest was related to the origin of the melancholy bordering on
skepticism which permeated the individual case studies without exception, although only one or
two authors have some vested interest in developing new institutional economics in their
countries. Of course, no one could reasonably expect a high-quality breaktrough of the school
but some kind of a massive breakthrough seemed to be a safe prognosis in Eastern Europe. In fact,
expecting a series of original discoveries at the local level to be published by first-rate journals in
the US, or organizing departments of economics, research institutes, foundations and scientific
journals around the concept of NIE would have been a vast exaggeration underestimating the
minimum requirements of the intellectual gestation and institutionalization of scientific ideas.
However, slow infiltration, aborted takeover, eclectic borrowing, simulated appropriation, etc,
i.e., patterns of scholarly importation described by the case studies at great length, would have
been regarded as predictions of excessive pessimism one or two decades ago.
Indeed, the first pages of the case studies reflect the same lack of pessimism (or rather, cautious
optimism) as my above-mentioned prognosis on the affinity (resonance, to quote the Croatian
author) of Eastern European research traditions with the general thrust of new institutionalism.
The authors reiterate similar assumptions, according to which NIE would attract the attention of
the economists throughout the region because that school offers a paradigm they badly need, can
respect, understand and believe in, not to speak of the fact that the scholarly supply is wellmarketed. A special advantage of NIE is that it may serve as a „proxy theory”, says Avramov,
that can substitute other theories, fill the „gaps left by conventional economic thinking”, thus, it
can please even specialists of diametrically opposing persuasions.Also, adds Franicevic, it delivers
a language of radical change, creating cultural cohesion in the research community.
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The encounters with new institutional theories (and theorists) in the West began in Hungary,
Poland and Yugoslavia back in the 1980s or a little earlier. Initially, the demand was instinctive,
sporadic, accidental and issue-dependent. Typically, the Eastern European economist was
searching for a solution of a given problem (e.g., simulating private property in Hungary,
comparing economic systems in Poland, reshaping the federal system in Yugoslavia); browsed
through a small part of the Western literature; was enchanted by the cutting-edge results of some
of the new institutional thinkers (Armen Alchian and Harold Demsetz, Oliver Williamson and
Mancur Olson respectively)12 whose arguments he/she could (almost) follow by means of
mathematical knowledge attained, for instance, through studying the economics of planning and
self-management before. Although normally NIE (arriving in the region hand in hand with the
Austrian school)13 was packaged in radical libertarian rhetoric, it promised many local experts a
balanced view of government and market failures, a historical approach to the evolution of
institutions, multi-disciplinary analysis, etc, that is, scholarly cultures they were socialized in. The
economists in the region were filled with satisfaction in experiencing that at last they can put in
precise (yet spectacular) scholarly terms what they had only felt or presumed earlier, not to
mention the possibility of measuring the variables, testing the conclusions, etc.
NIE’s sporadic infiltration (through e.g., the publication of a volume on law and economics in
Hungary, a fellowship of Leszek Balcerowicz in Germany, and a visit by Steve Pejovich in
Belgrade) grew into a regular marketing campaign and a simultaneous buying boom in the late
1980s and the early 1990s. The campaign was operated mainly by North-American universities,
think tanks and foundations (George Mason, Texas, Atlas, Fraser, Liberty Fund, Coase Institute,
Bradley, etc.) in all countries of the region, mediated by joint research projects, seminars,
conferences, university courses, summer schools, translation programs and the like, and
reinforced by the prestige of the first Nobel Prizes given to some of the founding fathers of new
institutional thought.14 (Our non-institutionalist respondents do not miss a chance for dropping
sarcastic remarks on the snobbery of the new NIE fans in the region, and their „conspicuous
consumption” of scientific ideas.) The overall climate of reception became especially favorable
when the World Bank, the EBRD and some other international organizations and NGOs
replaced their Washington Consensus-style policies with the one using the „institutions matter”
rhetoric.
Thereby, a large window of opportunity was opened for all those economists in Eastern Europe
who were disappointed with the first moves of radical liberalization after communism including
shock therapy and mass privatization, or just with the free-market phraseology accompanying
them. The institutions-centered message from the West got considerably strengthened by the EU
accession, that is, by the very program of a comprehensive transfer of institutions as well as by
the contents of the acquis communautaire expressing a quintessence of European capitalism.
Consequently, in the Eastern Europe of the middle of the 1990s, you could join the NIE
universum with a middle-of-the-road social-democratic commitment, and you did not have to
quit it even if you cherished arch-libertarian views. NIE is a „tolerant discipline”, say the
Romanian authors. As a matter of fact, new institutional theories lost much of their critical
„otherness” by that time, and merged with neoclassical thought. Therefore, even those
economists began to flirt with them who were keen on not dirtying their minds with research
programs resembling reformist speculations under the old regime.
A new paradigm entered the economic sciences in the region, a small scientific revolution was in
the making, one could add with a bit of an exaggeration. This change was not forced upon the
„natives”. If it has begun to colonize them, then that was rather a sort of self-colonization. As
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Franicevic suggests, the push and pull effects complemented each other. The local economists
were prepared to leave the first stage of intellectual development, in which it was primarily their
„basic instinct”, originating under the old regime, that drove them to opt for new institutional
analysis. By passing through the stage of writing the first review articles and organizing the
introductory seminars to popularize the school of thought, they launched their first real research
projects to adapt and test foreign models of privatization, anti-trust regulation, corruption and
the like. The case studies contend that NIE got stuck in this introductory phase in many respects,
in other words, the rite de passage was interrupted or slowed down.
The narration of a steady inflow of new institutional economics stops in most case studies rather
soon, to be continued by a description of a stagnation process that has not reached its end yet.
With the exception of a few small islands of NIE at a university department or in an NGO (such
as the Department of Law and Economics at the Law Faculty of the Belgrade University or the
Institute for Market Economy in Sofia), one sees lonely scholars scattered all over the region
without any regularity. More exactly, there is a rule: no country in the region shows extraordinary
achievements (high or low) in developing new institutional economics, no matter if in a given
country economic sciences encountered the West earlier or later, more or less frequently,
profoundly or superficially, etc. Apparently, stagnation has an egalitarian nature.
As years go by, the inhabitants of the islands are happy if they can survive. They cannot hope for
dominating, not even strongly affecting their own research environment soon or ever. The typical
NIE specialist continues to popularize its own school, writes in domestic journals and apply
already existing (Western) knowledge. (As a Romanian respondent complains, „we are the
measurement guys at the end of the chain”). None of the case studies reports on an article
published by a local expert of new institutionalism in a Western journal of high reputation.
University courses of new institutionalism do not offer a comprehensive picture of the school,
instead they focus on a narrow selection of „famous” authors. Just a few classic volumes written
by leading theorists of new institutionalism were translated in each country, however, their local
adherents normally do not publish books. In Serbia the NIE specialists are regarded as members
of „a minority with great credibility” as Jovanovic and Stepanovic assert. Nevertheless, in most
countries of the region their professional authority dwarfs even by that of the average
mainstream economists. Similarly, a renowned institution such as the Institute of Economics in
Budapest or the CERGE in Prague can easily afford to operate basically without any contribution
by the school’s local representatives.
Second surprise
Interestingly enough, the NIE scholars in Eastern Europe do not have to face the usual dilemma
of inclining to the neoclassical paradigm per se or rather to the old (or new-old) institutionalist
schools because the latter are so weak in the region – yet another surprise to someone like me
who expected Ordo liberalism to flourish in our countries after 1989. Under post-communism,
however, NIE has no Western rival inside institutionalism as well as no ally outside.
The American-type old institutional thought ranging from Thorstein Veblen, through John
Galbraith all the way to Geoffrey Hodgson has never been too popular in Eastern European
economic thought. However, the German/Austrian tradition influenced the economists in EastCentral Europe (less in Serbia, Romania and Bulgaria, of course) even under communism, no
matter how ambivalent that tradition may be. Despite their heated controversies, the German
historical school, part of the old and new Austrian economics, and ORDO15 are similar in
pursuing research programs that prefer verbal to formalized approach, dynamic to static analysis,
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and historical to abstract-axiomatic methods to understand the evolution of economic
institutions of capitalism. Moreover, the ideas of the „social market economy” or Hayek’s and
Schumpeter’s theories of the market, entrepreneurship, economic knowledge, etc., arrived in
Eastern Europe around 1989 in large waves. Yet, only a few of our case studies portray these
schools as important actors of economic sciences in the region today.
ORDO is cultivated only in small conservative universities in Hungary; one finds in most
countries Hayek societies, clubs, institutes but they are noisy rather than strong in scholarly
production. The marginal role played by the libertarian wing of old institutionalism is evidenced
by the example of the neo-Austrians in Romania who, believe it or not, flirt with the Orthodox
religion. The initial attraction of the German/Austrian tradition has faded, and the enthusiastic
rhetorical appropriation at the turn of the 1980s and 1990s was not converted into deep-going
research activities. Hence, in contrast to my expectations, the rivalry for the minds and the hearts
of the Eastern European economists does not take place between two kinds of institutionalism
but between new institutional and neoclassical economics. Why do I speak of a rivalry? In
principle, their cooperation could also be frictionless due to the neoclassical foundations of NIE.
The latter can’t help associating itself with the former but why is the mainstream reluctant to
identify itself with new institutional thought in Eastern Europe? (More exactly, why is it more
reluctant to do so here than in the West?)
First of all, the representatives of mainstream economics contend that they have already
identified with NIE by incorporating many of its discoveries into the main body of neoclassical
thought or its applied subdisciplines. Secondly, they claim that there are no significant new results
produced by new institutional economists on the basis of past or present experiences in Eastern
Europe to incorporate. Thirdly, they tend to discover some dark spots in the genealogy of NIE in
the region. Providing easy refuge for former textbook Marxists and reform economists (that is,
„speculative”, „soft”, „quasi-” institutionalists, to cite the case study authors) to survive after
1989, and offering a good pretext to avoid renewing their research techniques constitute the two
main resons for suspicion. (As one of my interviewees exclaimed, „when will they learn at last to
set up an equation?” Or to quote a Czech respondent, „they do not know the stuff”.) Ironically,
in organizing NIE into a professional association in some of the countries, its protagonists were
exposed to the goodwill of ex-Marxist converts, too.
Who among the mainstreamers would then be willing to cooperate with (or, horribile dictu, leave
the mainstream behind to join) such partners/competitors without scruples even if he/she were
not content with the local quality of neoclassical economics? That quality is, by the way, a
frequent target of criticism by the NIE specialists who are convinced that the mainstream
invaded the region not in its „high culture” version but as a mass commodity reminding the
observer of the produce of third-rate American universities, with a neophite commitment to
model-building, excessive abstraction and neoliberal dogmatism.
Third surprise
Mutual recriminations are not completely unfounded in a larger context of post-communist
scholarship in economics (and most of the social sciences) either. Our case studies suggest that
currently in Eastern Europe virtually any paradigm/discourse/rhetoric can couple with any other.
That was the third – probably most shocking – surprise to me in this project. Of course, as a
Hungarian citizen, I am most impressed (to be sure, negatively) by the story of „Karl Marx learns
microeconomics”, which demonstrates a strange coalition of thoughts and interests between a
very old professor of the history of economic thought, an old expert of verbal-style international
economics, a former party apparatchik in the Central Committee (today a professor of public
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choice) and a young specialist of micro-economics who has strong Marxist/anti-globalist views; a
coalition cemented in an opposition to teaching modern neoclassical theories. Unfortunately, this
is by no means an exotic example, just like the above-mentioned oxymoron of „Hayekian
orthodoxy” in Romania is not either. Let me stress that all this is happening almost two decades
after the Eastern European revolutions. To be sure, the „first push” confounding German social
liberalism, Austrian evolutionary thought and new classical liberalism was also a perplexing
venture. Another Romanian invention, namely, combining the German historical school,
structuralism, nationalism, old-style development theory and new institutionalism, also gives birth
to an interesting creature.
Concepts come and go, and the rate of fluctuation of their representatives is rather high: talented
young experts may leave the scene overnight. Franicevic brings the example of his colleague who
after having done interesting research on the informal economy in the spirit of new institutional
economics, jumped into studying the sociology of sexuality. One of the Croatian respondents
calls himself a „survivalist”, another one an „eclecticist by default”. Kochanowicz considers new
institutional economics a „passing interest” in Poland. One of our Bulgarian interview partners
says this: „There is no inconvenience in declaring yourself a follower of one and later another
theory. A wise man keeps under control the instruments and the concepts he uses.”
In sum, much of the limited success of NIE in the region may be attributed to its own weak
performance (that was partly unavoidable), the fact that its potential ally turned into a rival in
certain respects, and to the „anything goes” situation of the economic profession as a whole.
There are, however, quite a few other reasons for the stagnation that followed the promising
start. Part of them is to be found in the field of the sociology of science. Did Western supply
diminish and/or become less attractive for the Eastern European economists? Did the wheels of
the mediation mechanism start to squeak? Or did local demand ebb? I think all these factors were
in a sense instrumental in the slowdown of reception of new institutional ideas.
Obviously, the potential supply of NIE theories did not decline (just the opposite is the case) but
the attraction stemming from the novelty of exchange of ideas and the fact that the school
became fashionable in the region around 1989 definitely decreased. On the supply side, the
scholarly interest shrank owing to the gradual consolidation of economic sciences in Eastern
Europe, which followed certain Western norms, nonetheless did not result in breath-taking
discoveries. The „missionary” stage of exporting new institutional ideas to the „savages” was
continued by the rather boring process of piecemeal – and partly unsuccessful -- construction
and legitimation in the second half of the 1990s. The Western think tanks, foundations,
specialists, etc., began to withdraw from the region, leaving the new „converts” behind. The latter
had to prove how one does institutionalist research without experiencing long-term institutional
change in the region – a contradictio in adjecto revealed by many case studies.
On the demand side, the desire to borrow new theories diminished due to the declining interest
of the agents of post-communist transformation in system-wide institutional change, the
competition by the surviving old institutionalists, and the ensuing frictions in establishing NIE as
an integral part of the research community. As a consequence, new institutionalism became less
attractive for the neoclassical scholars as well. They are also on an exciting learning curve,
exploring the secrets of the Grand Theory with its numerous booming applications that, as
mentioned before, have already included NIE-type solutions. „If I use nice rhetorical twists like
„path dependency”, do I learn anything tangible about the economy, will I be able to make
rational predictions?”, asked one of my interview partner, a macro-theorist by profession.
Furthermore, what had been an advantage in the beginning, namely, the closeness of NIE to the
politics of the transformation, apparently turned into a disadvantage. Neoclassical experts in
12
Eastern Europe were always inclined to talk about a low level of sophistication and a high level
of contextuality of even the most celebrated new institutional theories in the West (a Czech
interviewee speaks of a „blind spot” of institutional analysis). Today, witnessing how the postcommunist governments improvise large-scale institutional change using old and new
institutionalist rhetoric, these experts also challenge the pride of institutional thinkers who like to
contrast the „realism” of their teachings with the „sterility” of neoclassical thought. In the Czech
Republic, for instance, the voucher privatization scheme based on Austrian evolutionary
principles triggered sarcastic remarks on the part of neoclassical scholars. For them the stagnation
of NIE in our region did not come as a surprise at all, and today they think twice before joining
that „ghetto” after having been released from their own one called euphemistically „mathematical
economics” some years ago. In the neoclassical research community „the saturation point has not
been reached yet”, says one of the Polish respondents.
A reason for optimism?
In the light of the eight case studies, this is how I see the pessimistic logic of the
slowdown/stagnation in receiving NIE in the region:
1.) The enhanced expectations about a successful breakthrough by NIE coupled with the
modest scholarly results of the school at the local level and the dubious fame of some of
its representatives led to a frustration in the economic profession as a whole.
2.) Therefore, NIE did not receive the necessary support from the local experts of
neoclassical economics to either improve the methodology or solidify the institutional
position and prestige of the school in the framework of joint ventures.
3.) As a result, NIE was unable to go beyond its introductory phase: the institutional
instincts of the Eastern European economists could not develop into authentic new
research programs yielding important results thus far. They are marking time somewhere
between old and new institutionalism. As stated by the authors of the Croatian,
Hungarian and Romanian studies, NIE did not manage to build up its own epistemic
community in the region.
Is there an optimistic logic as well? Most case study authors presume there may be one. Their
skepticism is combined with an implicit assumption that in Eastern Europe new institutional
economics is in a state of silent accumulation, it is like a subterranean river that may burst out
soon. They refer to NIE specialists (predominantly young ones) who make huge efforts to launch
new university courses that will result in new experts and publications with some delay. They also
call the readers’ attention to other social sciences such as sociology (Poland, Bulgaria, Hungary),
law (Serbia), political science (Croatia), psychology and history, which often apply new
institutional concepts in their borderlands to economics. Frequently, new institutional arguments
are used in scientific debates without referring to their original sources. In other words, the case
studies speak of an „invisible proliferation” of NIE in the academia and beyond without calling it
so. Public policy and corporate governance are highlighted in particular as fertile grounds for the
diffusion of the whole philosophy of the school and for the mushrooming of NIE models
ranging, for instance, from deregulation of public health care to devising the incentives of an
intrapreneurship scheme. What did not work well in the academia, might do so in everyday
economic life. Of course, the results vary: while new institutionalist concepts were successful in
the pension reform, says Kochanowicz, they did not fare well in reshaping health care in Poland
thus far. The Croatian case study reports on the success story of public finance.
13
I am talking here about presuming an optimistic scenario because our project did not envisage a
systematic study of cultural encounters in the field of „practical institutionalism”. It may well be
that Western-born institutionalist ideas are borrowed by the local actors at a much larger scale
and greater speed in the daily practices of business and government than in the academia. In this
case the mediation of cultural exchange rests on private for-profit organizations (consulting
firms, transnational companies, etc.) and powerful international agencies (EU, World Bank,
EBRD, etc.). Lengthy selection processes geared by academic deliberation are frequently replaced
in practice by an almost automatic takeover of certain institutionalist concepts no matter if one
has to deal with a franchising scheme, a regulation model of public utilities or a privatization deal.
Of course, many of these concepts are adjusted to become applicable under local circumstances.
Unfortunately, the huge number of such exciting cases of cultural encounters surpass the
boundaries of the present study. Nevertheless, the papers on the think tanks (such as the CASE
in Poland and the IMAD in Slovenia) may give an insight in how NIE ideas travel from the realm
of science to the real world. In any event, following system-wide transformations such as
constitutional changes or privatization, in which new institutionalism was often confined to play
an auxiliary/ideological role, Eastern Europe entered a stage in which the tasks of fine-tuning and
smart selection of institutions are among the first priorities.
Cultural encounters: changing structures and sequences
Let me recapitulate the current history of new institutional economics in the region using the
language of our project. I will start with the structure of encounters, that is, the configuration of
the key actors, the loci of their encounters and the major cultural components exchanged in the
course of encounters. Then the sequences of the encounters will be put under scrutiny. Finally, I
will venture to construe a tentative typology of the outcomes.
Key actors of the encounters
An extraterrestrial observer would probably witness, landing in Eastern Europe, a general
breakthrough of standard neoclassical thought (in the younger generations) and the continuation
of quasi-institutionalist research (by the older ones). The cast of the post-communist play of
economic sciences in the region would therefore include one foreign and two indigenous
collective actors.16 From inside, however, we may see a much larger cast:
16
17

There were indeed radical changes, in particular, in university education where
mainstream neoclassical theory crowded out textbook-Marxism, driving many of their
representatives out of the profession, or into subdisciplines (such as public policy or
comparative economic systems) that enabled them to drift toward the speculative
institutionalism of the reformers, or even NIE. (Proficiency in mathematics proved to be
a very efficient hurdle in joining the mainstream whereas new institutionalism was more
permissive.)17

In the wake of the neoclassical breakthrough there appeared a small number of devoted
NIE specialists who were preoccupied by self-legitimation, understandably so, writing
promotion-style papers and initiating basic courses to introduce the school rather than
initiating pioneering research projects. They were surrounded by a broad belt of
14
symphatizers, fellow-travellers (coming from other institutionalist tendencies, even
outside economics) who protect but also loosen up the paradigm.

Indeed, speculative institutionalism has remained the main genre of economic research
although speculation became less and less tantamount to analytic imprecision, shaky
realism, wishful thinking and self-censorship imprinted in reformist thought under
communism. The “role model” of the older generations of economists throughout the
region, Janos Kornai who has superseded most of his colleagues in systematic description
and accurate analysis, opened up, albeit in his proverbially cautious manner, toward
Western institutionalist paradigms at the turn of the 1980s and 1990s. By and large, he
borrowed from both ORDO and NIE, less instinctively than before, and paid a great deal
of attention to non-subscribing to any of them wholeheartedly. In words, he has kept
equal distance to them until now, in deeds, however, especially as far as the choice of
methodology is concerned, he showed propensity for using verbal/historical schemes and
modelling whole systems instead of testing established NIE models or inventing new
ones in the world of the post-communist transformation.18

This overall refinement in institutionalist research was less of an imported than
homegrown nature, it was due to an endogeneous “cleaning process”, stemming from the
fall of the ideological walls of reformism, rather than to learning from the Western
colleagues.19
Apparently, this image differs in substance from the one formed by the extraterrestrial observer.
In terms of the present configuration of collective actors, the case studies shed light on changes
in traditional institutionalist research programs, and NIE is also seriously reckoned with.
Loci of encounters
The studies offer a large variety of places/occasions, in/at which Eastern European economists
have been meeting “the West”. The massive inflow of scientific ideas in- and outside
institutionalism reflected an unequal exchange insofar as, on the whole, the local partner was not
able to “pay” for the import commodities with a sufficient amount of domestic products of
similar value/quality. However, the fact that the power relations between the exporter and the
importer were clearly asymmetric (in particular, in mainstream economics) did not mobilize the
conventional tropes of cultural imperialism in the minds of the interviewees. On the contrary,
they remembered events that demonstrate a low grade of Westernization in their own
professional career with some sense of shame. They spoke of self-Westernization rather than
Westernization to emphasize the intentionality of the process. Most of them regarded selfWesternization as a mission: it is them who wanted to take over Western ideas; in other words,
they invited the West instead of being occupied by it. Consequently, they regard the diffusion of
economic science from the West with satisfaction instead of suffering from exclusion and
depreciation. According to their narratives, the loci of encounters were primarily determined by
them (under local political and/or financial constraints, of course) instead of being forced by the
Western partners onto them.
The encounters were therefore not spontaneous: to exaggerate a little in the style of the older
respondents, the East picked and chose from the Western menu, following its own scientific
18
19
15
taste. It was not a “take it or leave it” situation; one could borrow the “good” West while leaving
the “bad” one in the shop of foreign ideas, as one of my interviewees remarked20. In that
imaginary shop the commodities were often earmarked with a country or city name: German
social liberalism, Austrian economics, French theory of regulation, Chicago School, etc. The
respondents were referring to this diversity rather frequently, thereby challenging that the
encounters would represent an essentially two-person game: the East meets the West.21 This
geographical challenge led the respondents living under the more liberal communist regimes to
recalling quite a few events (study trips, conferences, guest-professorships, etc.) – all serving as an
evidence for the multitude of the loci of cultural encounters already back in the 1960/70s.
In contrast to the thesis of self-Westernization, these memories reveal the accidental nature of
some of the early encounters and the rigidities of the later ones, especially in the pre-1989 period.
Initially, personal ties, common nationality, even a blank letter of invitation to a conference could
lay the foundations for a long-time scientific cooperation with the Western partner.22 Frequently,
the Eastern European scholar entered that particular room in the imposing building of Western
economic thought, the door of which was first opened for him/her by the partner. (A Polish
interviewee mentions the Ford Fellowships in this context.) In the lack of alternative encounters
and rivalry for his/her mind, this kind of initiation may have had lasting consequences. (For one
of my interlocutors from the middle generation, it was the mere view of the abundance of books
on NIE in an open-shelf library of a state university in the US that gave the last push to engaging
in that subdiscipline.23) This circumstance becomes telling in a comparison with the members of
the younger generations who have had the privilege to face the entire academic market (both the
market of ideas and the labor market, including the market for higher education) in the West.
Although in their case once-for-all enchantment is less frequent24 and one particular locus is not
so decisive, the younger respondents did refer to major influences exerted by their Western
professors as well as their first co-authors, project partners, etc. surprisingly often.
Today, many of these Western professors, co-authors and project partners can also be
encountered in the capitals of the region (for instance, in CERGE, CASE and the CEU, or in a
joint EU research project managed by an old Academy of Sciences institute). To complicate the
issue, the Western professor can actually be a repatriate or an Easterner who was educated in the
West. There he/she may have been taught by an Easterner, or, vice versa, the professor may be a
Pole teaching a Czech student, say, standard macroeconomics at the Moscow University. Hence,
the geographical place of the encounter has become relativized. What really matters is the
intellectual origin of the given cultural good, whereas the national origin of the person by whom
(or the place in which) it is transmitted is of secondary importance. (Cf. the large network of
CASE in the ex-Soviet republics, or the Russian NIE textbook at the Sofia University.)
Nevertheless, the “mass exodus” by students to the West in our days demonstrates that the
direction of cultural importation did not change substantially. More importantly, the interviews
suggest that higher education has become the primary locus of encounters. Maybe, the number of
joint East-West projects in economic research, as well as of study trips by Eastern European
scholars, has grown nearly at the same pace as that of the attendance of foreign universities by
students from the region during the past two decades but their net intellectual impact dwarfs by
the formative experiences gained in the course of university education. Probably, it is only the
longer guest professorships (or research stays) that compete with higher learning in terms of the
intensity of appropriation of scholarly cultures. In other words, scientific coexistence matter as
20
21
22
23
24
16
much as the openness of “young brains” if it comes to cultural exchange. (As mentioned above,
the thousands of encounters that take place in economic practice, where the scholar puts on the
hat of the advisor, are not dealt with in this study.25)
The distribution of the Western places mentioned in the interviews show a peculiar balance
between Europe and America. In contrast to my expectations, neither a special attraction by
German scholarship (e.g., Freiburg or Marburg, i.e., centers of ORDO liberalism) nor the
dominance of the NIE strongholds (George Mason University, University of Texas, Washington
University, St. Louis, etc.) are noticeable. With the exception of the ex-Yugoslav colleagues (and
one Bulgarian respondent), just a few of the institutionalist authors in the region were
taught/influenced by a prominent Western expert of NIE, and the number of joint projects with
them is also very small.26 As a rule, the local experts interested in institutional economics met
second-rate members of the school (e.g., in the framework of training programs, summer
schools, etc.), and encountered the top scholars in the subdiscipline at international conferences
or guest lectures delivered by them in the region.27
As mentioned above, the encounter need not be physical; cultural imports take place in a much
larger quantity and higher quality “spiritually”, in reading a journal article or a book without
meeting their authors in person. The interview narratives as well as the references in the literature
reviews and the university syllabi display a virtual reading list, in which Friedrich Hayek is on the
top followed by leading American scholars (many of them Nobel Prize winners) such as James
Buchanan, Ronald Coase, and Douglass North whereas the names of ORDO liberals like Walter
Eucken and Wilhelm Röpke are hardly ever cited. At the same time, Alchian, Demsetz, Furubotn,
Olson, Pejovich, Williamson and others also pop up in the interviews. It goes without saying that
such rankings are affected by intellectual fashions, scientific prestige and the contingencies of
publishing. Reading original texts is a rare exception, as Franicevic remarks “textbooks are the
main locus of encounter”.
Although important readings can be identified by means of solitary detective work, they are
usually suggested to the scholar by other members of the research community. Certain research
and education institutions provide a larger room for cultural encounters than others (in no
necessary correlation with the size of the institution). Also, with the same openness for cultural
exchange, different institutions mediate/promote different encounters. In the international
universities of the Eastern European capitals, for example, the frequency and depth of physical
encounters with Western scholars are by definition greater than in the national ones, and
currently it is more likely that the Belgrade University will host a NIE-type course while in the
German-language Andrássy University in Budapest, ORDO will be preferred by the professors.28
Components of the encounters
What are those elements of scientific culture, which have been offered by the local economists
for transnational exchange in institutionalist research or received by them through that exchange
during the past two decades? If we had decided to examine in depth also the sociology of
knowledge-type aspects of the encounters, we could find quite a few elements in the interviews,
which demonstrate the takeover of publication patterns, career routes or ways of research
organization (cf. the Croatian and Hungarian case studies). I seriously doubt, however, that these
would include a single case of cultural transfer from the East to the West. Probably, the same
25
26
27
28
17
applies to the inherent scholarly attributes. In the lack of mirror interviews, it is hard to know
whether or not Western scholars could make use of the research hypotheses, methods and results
growing out of the tradition of speculative institutionalism, or – recently -- of an almost nonexistent East-West dialogue within the NIE paradigm. In any event, the Eastern European
respondents seem extremely uncertain about the impact of the local profession upon economic
sciences as a whole in the West. “We are still in the phase of imitation”, as one of them stated
with some indignation in his voice29. In Hungary, under the pressure of the closing question on
mutual learning, there were only two interviewees who mentioned, with full conviction, the name
of Janos Kornai and his works on the post-communist transformation as “export goods”30.
Typically, our interlocutors talked, in a self-critical fashion, about data gathering (i.e., empirical
studies) and the adjustment of a small number of models borrowed from the West as the main
contribution of the local research community to the development of new institutional economics
at the moment.31 The literature review provides the same modest picture showing rather few and
rather small indigenous discoveries in and around NIE. It may well be, however, that authentic
ideas/models of universal importance are already hiding in an unpublished PhD dissertation
written by a young Slovene or Bulgarian expert in a foreign university, or in a paper submitted to
a leading English-language journal of the profession (e.g. the Journal of Law and Economics or The
Journal of Institutional and Theoretical Economics).
The choice of those scholarly components, which are taken over by institutionalist experts in the
region from the West in the course of the cultural encounters is considerably larger (though not
as large as we originally expected). Undoubtedly, learning the know-how of writing a research
proposal, designing and testing a mathematical model, or structuring a scientific paper can be
rather tedious. Interestingly enough, on the whole the respondents did not have reservations
about abstract-analytical components of the NIE models per se. Nonetheless, some of them
found the models they borrowed still too sterile, verbally simplistic, i.e., being almost as “far from
our real world” as neoclassical models are normally.32 Obviously, the old idea of a specific
“Central European wisdom”, based on both the ironic complexity of the region’s history and a
traditional all-social-science approach developed in the region to understand that complexity, has
not vanished entirely. That is what Avramov aptly calls “old institutionalist imperialism” that
applies the logic of social sciences to economics.
The respondents also contended that an exciting research question that cannot be proved yet,
may be worth more than an impeccable standard model built around a boring problem. “We
hated the ‘garbage in – garbage out’ schemes already in the Stalinist political economy, didn’t
we?”, asked one of my interviewees.33 Preciseness, even if coupled with complex mathematical
procedures cannot substitute for “real” relevance. I could almost grasp the tacit wish of some of
my interlocutors: “lend us the basic concepts of NIE and let us bother about their application”.
In the project’s language that would mean a selective appropriation of a cultural package. The
respondents (above all those belonging to the older generations) tended to assume that they can
open the package of new institutional economics and choose one or two notions from it.
Moreover, in the case of the selected notions they thought they would have an opportunity to
contract, expand, recombine or reinterpret them at will. According to their narrative, what they
really wanted to have were the subdiscipline’s fundamental notions such as transaction costs,
principals and agents, property rights regimes, social cost, rent seeking, etc., that is, the basic raw
29
30
31
32
33
18
materials, and were convinced that they would be able to process them, especially if it comes to
research on their own economy, at least as finely as their Western colleagues do. The literature
reviews show a similar picture: one can hardly find one-to-one transfers in the articles, the
borrowed models are frequently transformed (often simplified even dulled and, occasionally,
totally distorted) while being transferred.34 The university curricula tend to suffer from the usual
dichotomy: they include some of the classical fields of NIE on the one hand, and (what is partly
overlapping) present the recent Nobel Prize winners of the school on the other.35 Meanwhile,
most of them disregard the burning question of how NIE could contribute to the understanding
of communist and post-communist economies.
Sequences of cultural encounters
What kind(s) of cultural dynamics can one expect to unfold from the interplay of actors in the
above structure of encounters? The case studies demonstrate a rather uniform sequence,
ironically, however, with a great variety of outcomes.
When asked about the first encounters with the West, the interviewees recall their preliminary
expectations as a blend of benevolence, ignorance and fear from inferiority. The first
surprises/shocks were due to that mixed attitude. As regards the world of economic ideas, the
older respondents clearly remember an intense admiration of the methodological rigor (axiomatic
approach, meticulous testing, etc.) and objectivity of their Western partners as well as the
instinctive reservations they felt over methodological individualism, the models of high
abstraction, the concept of pure rationality, etc. While during the 1960s and 1970s, the members
of the older generations of experts (the “pioneers”) were more ignorant about economic science
in the West than their younger colleagues later, they were more skeptical as well, and also less
fearful. They still trusted in some sort of convergence between communism and capitalism (and
between their political economies), cast doubts upon the universal nature of Western theories36,
and were convinced that they enter the joint venture with a precious asset, the science of “real”
planning. Thus, the “I have never thought that I am so uneducated”-type surprise was partly
compensated by the certitude of “I know something they don’t ”.
This conviction was complemented by presuming other intellectual advantages that range from
historical awareness, through skills in multi-disciplinary studies to greater realism in economic
thinking. The members of the younger generations of Eastern European economists, however,
who met Western economic sciences during the 1980s and 1990s, knew them much better, and
converted the utopia of convergence into the much less self-confident program of catching-up.
Meanwhile, they feared from getting stuck in the inferior state of a junior partner for a lengthy
period, who copies/applies Western scientific models and, in exchange, delivers empirical data to
the West.
Hence, the older specialists experienced a whole series of surprises in the beginning, I mean,
surprises that basically stemmed from ignorance, and the shock(s) came later, parallelly with the
fading of the scholarly interest of the Western colleagues in their (instinctive, speculative)
institutionalist achievements in reforming central planning. No matter if the reforms aimed at the
optimization of the planning procedures or at combining them with the market, the
representatives of both reformist schools (ironically, the “plan doctors” and the “reform
mongers”37) complain that they suffered from exclusion and marginalization after 1989 the latest.
34
35
36
37
19
They were not listened to and/or left out from important scientific encounters with the West,
and neglected or ignored by the rapidly solidifying “domestic West”, dominated by the
“neophytes”, as they say, among their younger colleagues.
The coping strategies have changed accordingly. The initial surprises resulted in a great variety of
adjustment techniques, rather pro-active ones, which aimed at a gradual and selective
incorporation of Western ideas while hardly anything happened in adapting the sociological
conditions of science to Western standards. “We were sitting in our offices in the Academy of
Sciences institute, reading a lot, writing one unreasonably long, politically loaded paper every
three year, and did not really care for publishing it”, said one of my interlocutors38.
Despite conscientious learning during the period between the mid-1960s and the mid-1980s, the
half ameliorist – half oppositionist core of the research program of the pioneers proved to be a
vast obstacle at the end of the 1980s when the objective of improving real socialism lost its
remaining legitimacy. In their case, the ensuing successive marginalization could lead to a sort of
intellectual paralysis, passive resistance, a petering out of the Westernizing fervor, a “leben und
leben lassen” attitude or even resentment producing mildly anti-Western attitudes. The least one
can say is that in the long run no obsessive adjustment to the West can be observed in this group.
With time, it is rather a passive combination of indigenous and foreign research methods, and a
natural slowdown of innovation that characterize the oeuvre of the older generations. The fact that
the radicals among the reformers had an opportunity to continue promulgating reformist ideas as
“transformers” after 1989 both in the government and in the organization of academic life,
largely contributed to the peacefulness of this cultural compromise.
The narratives of their younger colleagues display a different kind of adaptation strategy but a
rather similar compromise. Their initial Westernizing fervor was largely home-made, that is, it
was due to what they called a “wishy-washy” takeover of Western economic ideas by the
pioneers, including the speculativeness of the dominant institutionalist research programs. As a
rule, the younger scholars were not so much surprised by the richness of economic sciences in
the West, or by the way in which their institutions operate, as by the fact of their own
insignificance in the international market of ideas.39 An important – sociological – difference that
may explain this attitude is that they usually met the West at an early stage of their scholarly
career, typically as graduate students, who did not receive the same respect in the Western
academia as their predecessors (whom they thought to have overtaken in the meantime) had
received. In addition, they were/are exposed to global competition, and -- in contrast to the older
colleagues -- they cannot withdraw behind the Iron Curtain any longer to feature as “local
heroes” there.
Although, unlike their predecessors, they did not put faith in making universal discoveries on the
basis of communist planning or market socialism, they also trusted in some value of their specific
empirical knowledge gathered under late communism and the post-communist transformation.
According to a widespread view in the 1980s and 1990s, the coupling of that knowledge with a
general devotion to Western scholarship (essentially, to the neoclassical paradigm) would be the
winning combination; a devotion that is possibly not too rigid in terms of methodology but, at
the same time, less permissive than the “pick and choose” mentality of the older colleagues.
Thus, they did not completely renounce the beliefs of the pioneers in the (exotic) uniqueness of
economic thought produced by the communist and post-communist world.
The illusion of a specific -- Eastern European -- ability to make scientific discoveries begins to
backfire in our days when the novelty of the post-communist transformation is petering out, and
38
39
20
the great inventions based on the “Great Transformation”, including institutionalist discoveries,
are hardly to be seen. The ex-communist economies are becoming “boringly normal”, and the
younger generations have to decide whether they want to adjust to the “grayness”. In any event,
insisting on the thesis of exoticism/exceptionalism may also be derived from the vested interests
of the majority of the research community.
To the satisfaction of the pioneers (they hardly conceal their gloat in the interviews), their
younger colleagues have eventually arrived at the same crossroads: either they make further steps
in the dead-end street of “Eastern exceptionalism” or put up with the “universal boredom” of
economic sciences all over the world. “What you call boredom is of much higher scientific quality
than the one you have ever achieved”, the members of the new generations respond angrily.
However, with quite a few of them, this response has by now got permeated by slight doubts
about the excellence of economic thought in the West. Skepticism may stem from the fact that,
although the massive inflow of Western economic ideas, including institutionalist ones, helped
comprehend and control quite a few processes of the post-communist transformation, it has not
resulted yet in a coherent set of research hypotheses concerning the new economic order. On top
of it, the takeover of Western ideas did not offer the younger economists either as prestigious
(heroic) social roles in their own countries as the ones played by their predecessors some time
ago, or a more profound scholarly emancipation in the West.
All in all, the strategies of coping with the unpleasant surprises seem to have led in both
generational groups to a selective reception of Western ideas, a combination of imported
knowledge with the local one, to processing and reprocessing. With learning, the intellectual
surprises receded, which did not exclude greater personal culture shocks occasionally. As a rule,
however, the surprises were not followed by heated and lasting conflicts between the two worlds
of ideas. Instead of culture wars one sees unilateral adjustment (by the East) up to a point, in
Hirschman’s terms, weak voice and rare exit. Although peace is not unconditional and eternal,
utopian expectations that usually serve as sources of conflict slowly disappear, as do frustrations
in their wake. Since the early 1960s, neither Eastern exceptionalism nor an uncritical emulation of
the West have ever been all-exclusive options in Eastern European economic thought but the
cultural compromises between them have changed considerably.
If one examines the sequences of adaptation in terms of old versus new institutionalism, then the
lack of harsh cultural conflicts between the East and the West become even more transparent.
For the radicals among the pioneers, an elegant switch from the world of the socialist market
economy to that of the social market economy (i.e., a switch between two types of old
institutionalism) did not cause enormous intellectual pains. Those of them who were well versed
in mathematical analysis, even a next step leading to new institutional economics, was feasible.
Ironically, for their younger colleagues it has been almost equally difficult to reach NIE. They
came too late to be enchanted by Hayek, Eucken and others and probably too early to consider
NIE as the greatest attraction. In their scholarly development, the formative experience was the
neoclassical breakthrough that has continued to promise them exciting and lucrative expeditions
to the unknown. To cite a Hungarian respondent, “If the neoclassical paradigm is a cage, it is a
very large and beautifully equipped one”.40
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„Irregularities”
To sum up, the East-West encounters in new institutional economics display a great number of
peculiar traits, that is, irregularities as compared to a simplistic scheme consisting of two actors of
different cultural assets and a linear sequence leading the Eastern actor from his/her preliminary
expectations, through the first surprise/friction/conflict and the process of coping with them, to
the final cultural compromise.
The case studies demonstrate a multiple locality of the encounters within the individual countries
(not to speak of the whole region). Different encounters or different phases of the encounters
unfold at different places often simultaneously, mobilizing different subsets of actors. Place can
also be a relatively neutral, virtual and even almost irrelevant factor. A case with multiple locality
provides the actors with the possibility of learning from each other and with a larger selection of
roles in cultural exchange, that is, with more flexibility to pursue ambiguous strategies of cultural
adaptation, represent hybrid solutions, even to simulate adjustment (or non-adjustment).
As to the time frame, important processes of cultural exchange may have taken place before the case
came into being. Preliminary adjustment may in turn determine even the final outcome of the
cultural encounter in advance. The encounter may include different activities performed by
different actors at same time. In other words, diachronic and synchronic developments may
alternate, upsetting any linear sequence that would connect the initial recognition of cultural
difference with a final compromise. Similarly, time is not “even”: normally, encounters have large
gaps and dense intervals, and sometimes move in cycles. The point at which a given encounter
seems to end may be just a break in the sequence or a beginning of a new cycle.
As regards the main actors, the case studies display a large diversity of configurations, much larger
than expected. The foreign and indigenous actors are not separated by a Chinese Wall (local
advisors, assistants, cultural brokers, repatriates, etc.) The main actors may change phase by phase
or place by place of the encounter, while learning from each other in their own group as well.
The partners can also be virtual/imagined but actual coexistence and a community of interests
matter. Occasional meetings and “remote control” may result in rigid frontlines and simulation
while cohabitation helps forge actual compromises. From among the usual sociological indicators
(profession, age, sex, locality, etc.), it is the age and the previous experience of the actor gained in
the realm of the partner which shape the encounter the most.
The learning and adjustment process may get stuck or derail, the partners can skip certain stages,
starting new cycles, etc. The expectations can be high and low, negative and positive, the conflicts
can be soft and hard, the partners can be passive and pro-active, the coping strategies can be
instinctive and conscious, the conflict resolution can be spontaneous and
mediated/institutionalized, etc, not to speak of a great number of intermediary types.
The case studies reveal many more irregular sequences and also more spontaneity than originally
expected. The initial expectations can be extremely fragmented and/or do not inevitably conflict
with the first experiences in the course of the encounter (say, the West meets the “most
Westernized East”). If nonetheless a cultural gap emerges, and coping strategies are formulated
(instead of sheer improvization) then the gap will not necessarily disappear forever after a
compromise was found. Anyway, the compromises are shaky and renegotiable, simulated
solutions and relapses may occur rather often.
The instability of the compromises notwithstanding, most of the sequences of cultural
adjustment point to a partial convergence of economic cultures between East and West. For us
the fact of convergence was no original discovery. The same applies to its partial nature. Among
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our working hypotheses, hybridization, that is, limited convergence has always had a prominent
place. However, hybridization may have many faces, and we were interested precisely in the
differences between the hybrid types. We have hardly met fierce conflicts (“clashes of
civilizations”) between the partners, and lasting difficulties with no hope for improvement. Yet,
even if one witnesses voluntary takeover rather than imposition, the adaptation processes are
lengthy.
Returning to the real world of NIE’s reception in Eastern Europe, the following „irregularities”
could be discerned (following the above logic):
1.) By and large, the place of encounters proves to be neutral as far as the individual
countries or subregions (East-Central Europe and South-Eastern Europe) and the virtual
character of the exchange of ideas are concerned.
2.) Adjustment is a one-way street (it rests on imitation and recombination rather than
invention) but it has its own limits. At its Eastern end, the local actors hardly learn from
each other across the country line.
3.) Open resistance and dedicated emulation are rare, eclectic and simulated adaptation is
fairly frequent.
4.) Preliminary adjustment is crucial, diachronic processes are typical, the period of highintensity encounters is followed by stagnation with a slight hope for a new upswing.
5.) The cast of main actors changes a few times in the course of the encounters.
6.) The encounters are basically geared by „remote control”, actually, a rather weak one
challenged by powerful local pressure in- an outside the academia. With the consolidation
of the economic profession, the configuration of the agents of mediation has changed
substantially.
7.) The age of the actors is a highly relevant parameter, especially due to the fact that the
adjustment process took new dimensions in 1989.
8.) Similar sequences of adjustment lead to different outcomes.
9.) Part of the initial expectations (suspicions, stereotypes) survive even after the
compromise has been forged. Deviations from the compromise are just mildly punished.
10.) For the time being, the emerging compromise seems to be closer to the Eastern point of
departure (old institutionalism) but a parallel compromise, the takeover of the
neoclassical school is rather near to the Western one. Supported by the neoclassical
constituents of new institutional economics, the NIE hybrid may „go West” in the future,
and the current encapsulation may turn into a new opening.
11.) The chance for a smooth evolution from old to new institutionalism has not been
exploited. The old epistemic community began to disintegrate but remained strong
enough to prevent the consolidation of a new one. Its strategy was involuntarily assisted
by the fading interest of NIE’s Western core in the development of the schools at the
periphery and by the suspicion felt by the potential local ally. The strength of the first
push evaporated, and the outcome of the stagnation (silent accumulation?) is uncertain at
the moment.
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On the outcomes of encounters: understanding cultural hybrids
For the time being, the case studies are rather far from offering a meaningful typology of the
emerging cultural compromises. The following preliminary types rest as much on thought
experiments as on a rough analysis of the studies. It seems, however, clear already at this point
that one cannot expect to arrive at an extremely asymmetric dual scheme, on the one side of
which, we would see a small homogeneous group of specialists devoted to new institutional
economics, while on the other a vast number of economists of neutral or even hostile
persuasions would throng. I hope the following metaphoric designations (originating to a large
extent in my case study on Hungary) will contribute to constructing a more sophisticated
typology featuring also other mixed cases (the list displays no ranking order).
Refuge seekers. They “escape into” NIE from textbook Marxism and moderate reformism (or, for
that matter, from structuralism) as half-converts („we always have been institutionalists in a
sense“); resist the neoclassical theory by accusing it of formalism, lack of social relevance,
excessive trust in rational choice, legitimizing neoliberal policies, etc.; are not familiar with its
mathematical methods; interpret/distort and teach rather than develop the subdiscipline; may use
NIE in its diluted (quasi-liberal) form as a cover discourse to prove innovative spirit and survive
in the academia; a group that has become rather small by now.
Intransigent verbalists. Arriving from the camp of (radical) reform economists, they improve the
research program of speculative institutionalism; borrow some of the core concepts of NIE (or
the shells of these concepts) for the sake of description and explanation; have mild reservations
about the neoclassical paradigm; may understand the mathematical gist of its models but do not
engage in building them; their choice is to be explained by intellectual inertia and taste rather than
hostility toward NIE; use NIE rhetoric against the Washington Consensus; still constitute the
majority of the institutionalist research community in Eastern Europe. While the refuge seekers
simulate adjustment, the verbalists may resist adaptation openly.
ORDO rearguard. This tiny group consists of a.) former reform economists who continue to trust
in the pragmatic concept of Soziale Marktwirtschaft but ignore ORDO’s (neo)liberal message; b.)
scholars who subscribe to the Christian-Socialist interpretation of the school and also ignore the
(neo)liberal message; c.) evolutionary economists who embark upon a Hayekian extension of
ORDO41; with the exception of the latter, they do not overlap with NIE and acknowledge its
methodological virtues.
Indifferent “mainstreamers”. A large group of neoclassical economists, emerging as a research
community in the 1990s, overwhelmingly young and middle-aged experts, who are immersed in
(teaching) their own discipline; are happy to swim in the mainstream; watch NIE as a “little
brother” with some condescension or disinterest/ignorance, not to mention the suspicion of
logical impurity due to its closeness to the real world and other institutionalist traditions; they
may become a reservoir of the next type in the future. At the moment, they keep a distance to the
whole game of adjustment played by NIE.
Pragmatists (practical institutionalists). They are also neoclassical experts, ready to experiment with
NIE models without scurples; their number is growing in government and business organizations
(in particular, in the advisory boards and analytical departments of these); applying existing
models is their main contribution but the experiments may well result in scientific discoveries,
too.
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“Neophytes”. A name given both by old institutionalists and neoclassical theorists to a small group
of dedicated followers of new institutional economics; they do not rebel against the “imperialism
of the mainstream” but would feel uneasy if they had to work with models of very high
abstraction; are in close contact with new classical liberals working in other social sciences as well
as with moderate neoclassical economists; in their case, the task of establishing and protecting the
identity of the school in the region may take away energy from innovation within the
subdiscipline.
Transdisciplinary supporters/challengers. As doing institutionalist research is no privilege of the
economists, and as the post-communist transformation inspires economic sociologists, economic
historians and experts of law and economics 42 to take part in the discussion on privatization,
liberalization, etc., several NIE concepts such as property rights, networks, hierarchies, social
capital, path dependency, etc. have also appeared on the scene of East-West encounters in their
interpretation. As regards methodology, they often remind the observer of the innovative wing of
the “verbalists”.
Potential synthesizers. This is a small group of middle-aged economists who came from the vicinity
of radical reform economists but missed logical precision and empirical depth in the research
programs of the leading reformers, and found many of their institutionalist concepts parochial,
speculative and politically ambiguous. In learning the neoclassical paradigm during their thirties,
they did not cease to be interested in the institutional aspects of the post-communist
transformation (e.g., capital and labor markets) and lose their ability to make verbal analysis in a
multi-disciplinary context either. Their neoclassical-style research projects are not devoid of NIE
concepts but whether or not these concepts will find a privileged place in their scientific work is
yet to be seen.43
Western “free riders”. The designation is probably too provocative. I think of those neoclassical or
new institutional scholars in the West who fill the market niche emerging as a result of the
imperfections of the work of the local NIE specialists. Rather often, the division of labor is still
traditional: to put it simply, the Westerners bring theoretical skills and bargaining power in the
academic market while their Eastern European colleagues deliver data, local knowledge and
“exoticism” needed to justify the project.
The usual caveat applies: if filled up with names, the above typology would become more
nuanced, yielding a few additional types, especially if we apply a muddling-through
(improvization, bricolage) hypothesis to the reception of new institutional economics in the
region. Also, one can be persuaded to abandon any attempt at classification. The latter alternative
would rely on a pessimistic view of the current state of economic sciences in Eastern Europe, to
which I alluded already on the introductory pages of this paper. Accordingly, the economic
profession is confronted with a situation, in which practically any theory can melt into another
without special difficulty.
If that became the basic instinct of the local experts, repressing their institutionalist propensities, it
would be too easy to write papers on current intellectual history of economic sciences in the
region. But would it then make any sense to deal with current history any longer?
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