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Published online by Cambridge University Press: 18 June 2009
Western visitors to those parts of the world that before 1991 were politically organized as the Soviet Union have been impressed by the attitudes of persons toward behavior in ordinary exchanges, attitudes that seem to be so different from those in Western economies. The essential elements of an “exchange culture” seem to be missing, and this absence, in itself, may be central to the effective functioning of market economies. Individual participants in ordinary exchange relationships in Western economies act as if they understand the simplest of all economic principles, namely, that there are mutual gains from trade, that the benefits are reciprocal, that exchange is a positive-sum game. This “as if” understanding, which remains perhaps below our level of consciousness in the West, is largely missing from the public attitudes of citizens of the former Soviet Union, who behave as if the gains from trade do not exist, or at least are one-sided rather than mutual.
1 See Buchanan, James M., “Tacit Presuppositions of Political Economy: Implications for Societies in Transition” (George Mason University, Fairfax, VA: Center for Study of Public Choice, 1991)Google Scholar, mimeograph. The present essay builds on, extends, and modifies the arguments of this earlier paper.
2 Labor markets may seem to offer an exception to the generalizations suggested here. Sellers of labor (a service) sometimes advertise their availability, but more often it is buyers of labor (employers) who advertise to attract sellers. The absence of homogeneity among separate units demanded (that is, the variation in skills and qualifications among potential employees) may offset, or even reverse, the direction of effect emphasized here generally.
3 The relationship between differential asset specificity as between parties to contract, and the vulnerability to opportunistic behavior, has been discussed by Alchian, Armen and Woodward, Susan, “Reflections on the Theory of the Firm,” Journal of Institutional Tlicoretical Economics (Z. Ges. Staatswiss), vol. 143, no. 1 (1987), pp. 110–37.Google Scholar
More generally, economists have analyzed the effects of asymmetric information in the operation of exchange. The pioneer in these efforts was Akerlof, George, “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” Quarterly Journal of Economics, vol. 84 (08 1970), pp. 488–500.CrossRefGoogle Scholar
4 Levy, David, “The Bias in Centrally Planned Prices,” Public Choice, vol. 67, no. 3 (12 1990), pp. 213–26.CrossRefGoogle Scholar
5 For a generalized discussion, see Buchanan, James M., Tollison, Robert D., and Tullock, Gordon, eds., Toward a Tfteory of the Rent-Seeking Society (College Station: Texas A&M University Press, 1980)Google Scholar, and especially my introductory paper, “Rent Seeking and Profit Seeking,” pp. 3–15.Google Scholar
6 Kirzner, Israel, Competition and Entrepreneurship (Chicago: University of Chicago Press, 1973).Google Scholar
7 Schumpeter, Joseph A., Theorie der wirtschaftlichen Entwicklung (Leipzig, 1912)Google Scholar; English translation, Theory of Economic Development (Cambridge: Harvard University Press, 1934).Google Scholar
