ABSTRACT

Proactive price reform means taking intentional steps to reduce price distortions or to correct them. Such things include releasing prices from price controls so as to enable them to approach market-determined rates. Where the market is not effective, they include taking administrative action to set prices in ways that will realize a balance in supply and demand as much as possible. Voluntary actions involve recognizing the negative effect that price distortions have on resource allocation, as well as the negative side effects they have on income distribution. They involve taking action to reduce those distortions. The passive form of price evolution points to ways in which reform measures already being taken in other areas unavoidably have a “transmission effect” that influences prices as well. The transmission effect was not intentional. Rather, it is uncontrollable. This transmitted response gradually must be accepted in the form of price changes.