INFORMATION, BUREAUCRACY, AND ECONOMIC-REFORMS IN CHINA AND THE SOVIET-UNION

The argument in this essay can be reduced to the following form: the better a planning system is in terms of central planning techniques, the less likely it is to depart from central planning. The author proposes an information approach to explain why China launched economic reforms at a relatively earlier stage of development than did the Soviet Union. The claim is twofold regarding the connections between initiation of reform and information flows in China and in the Soviet Union. First, all else being equal, a bureaucracy better informed about economic conditions is more likely to pursue realistic economic objectives and its policies are less likely to induce macroeconomic instability. To the extent that macroeconomic instability activates a search for alternatives to the status quo, including reforms, a bureaucracy with better information-collection capabilities is less likely to initiate such a search and therefore less likely to initiate reforms. Second, policymakers choose between reforms and the strengthening of central planning as alternative solutions to the status quo. The choice of one solution over another depends on their relative costs. Again, all else being equal, the higher the costs of strengthening central planning (or reform), the more likely is reform (or strengthening of central planning) to be chosen. This essay focuses on one aspect of these costs-the costs of information provision.