ABSTRACT
One could have thought that with its renowned record of setting the stage for world peace, the Marshall Plan could have established the basis for the economic transition in the post-Cold War period. Although the Plan holds some far-reaching lessons, it took place in a radically different political, security, social, and economic context. This chapter analyses the four phases of the transition, the economics of war, the economics of conflict resolution, the economics of peace, and the economics of development to help the debate of how each can contribute to or derail efforts of war-torn countries to move to a path of peace, stability, and prosperity. It establishes the fundamental difference between post-conflict economic reconstruction and normal development. The main objective of economic reconstruction, the economics of peace, should be to avoid the recurrence of conflict, which calls for conflict-sensitive policies and rules out optimal economic policies.
