ABSTRACT
For more than 40 years after World War II, almost half the world’s population operated under autocratically governed command economies. In those countries the means of production were owned by the state, purportedly in the collective name of the people. It is easy to understand what happened in the Central and Eastern European economies. The means of production were owned by the state. One of the main ideological justifications for state ownership was the state’s commitment to use proceeds from the collectively owned goods to furnish economic entitlements–a welfare floor–to all. The classic suggestion for dealing with a commons problem is to introduce market signals through privatization. Entitling the participants to specific portions of the resources, and giving them the rights to trade the entitlements, generates incentives to move to an efficient outcome. Privatization has shown some immediate positive effects, such as the availability of certain consumer goods, and the enrichment of successful entrepreneurs.
