Markets and Government in Advanced Market Economies: Experiences and Lessons

In this chapter I will identify and discuss several guidelines for policymakers responsible for designing market and government institutions in emerging market economies. The guidelines are based on the experience of a number of advanced market economies. The focus is on the role of governments in creating or fostering the development of market institutions and ‘rules of the market game.’ Yet, my contribution is not a recipe for the creation of markets or the transformation process in general. No blueprint will be outlined here. In any event, this would be a futile exercise because the transformation of planned economies is an extremely complex political, social, and economic process. It is characterized by many unexpected problems, unintended consequences, spontaneous processes including the emergence of new market institutions, errors, and learning-by-doing. It is, indeed, to a large extent sailing in uncharted waters. Although the objective or direction of change might in very general terms be clear, the exact road toward that goal is by definition less obvious