June 18, 1991
"The Free Market in Soviets' Eyes"
San Jose Mercury News
By Timothy Taylor
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AFTER SEVEN decades of living with a planned economy and communist propaganda, are Soviet citizens supportive of free markets?

The question has enormous practical importance. At least in theory, the economic policies of the Soviet government could be changed expeditiously. But if economic reform in the USSR requires growing up new generations of citizens who are willing to live with free markets, then efforts at reform seem rather pointless.

To address this issue, a telephone survey about public attitudes toward free markets was carried in New York and Moscow by Robert Shiller, a professor of economics at Yale University, together with Maxim Boycko and Vladimir Korobov of the USSR Academy of Sciences. Their results are discussed in the June 1991 issue of the American Economic Review.

Seven of the 36 questions they asked are presented in the chart at right.

For example, they found that Soviet citizens were generally just as willing as Americans to admit that price changes caused by surges in demand or other changes in market conditions were "fair," as illustrated by the answer to Question 1.

Soviets did not seem to have a greater concern for equality of income, as shown by their answer to questions like 2, and they believe as heartily as Americans that pay incentives make a difference in how hard people work, as shown by their answer to Question 3 and others like it.

In fact, in scenarios like Question 4 Soviet citizens showed a greater willingness to believe that market forces are responsible for price changes, while U.S. respondents believed that nameless "speculators" were more likely to be at work.

Answers like these imply that when a Soviet official explains how "the people" don't understand markets and aren't willing to accept them, that official may be referring primarily to "the people" who stroll the halls of power, rather than the actual population.

Answers to some of the other questions, however, showed some ways in which Soviets may be less amenable to a market economy.

Questions like 5 and 6, for example, attempt to probe into how comfortable people are with money transactions. The Soviets, with an economy based on barter, hoarding and standing in line, seem less comfortable with money transactions than do Americans.

In another set of questions, like question 7, Soviets expressed more distrust of businesses pursuing their self- interest than do Americans. However, as the authors point out, few Soviet citizens have met a private businessman in the American use of the term, so this distrust may be based on feelings about current Soviet managers.

Besides conveying a warm, fuzzy feeling that perhaps the Russkies aren't all that different from us normal Americans, the survey findings imply that if the Soviet government can actually carry out meaningful economic reform -- and clearly, this is an "if" of heroic proportions -- the people of the Soviet Union will be at least somewhat willing to give it a chance.

However, average Soviet citizens don't yet believe that such a reform is actually likely to happen.

WHAT ABOUT MARKETS?

Researchers carried out a telephone poll of 391 Moscow and 361 New York residents.

1. A small factory produces kitchen tables and sells them at $200 each. The factory can't meet demand for the tables, so it raises the price by $20. Is this fair?   USSR US Yes 34% 30% No 66% 70% 2. What inheritance tax rate for really wealthy people should we have?   USSR US Average tax rate desired 39% 37% 3. Do you think that people work better if their pay is directly tied to the quantity and quality of their work?   USSR US Yes 90% 86% No 10% 14% 4. If the price of coffee on the world market suddenly increased by 30 percent, what do you think is likely to be to blame?   USSR US Intervention of some government 17% 13% Bad harvest/changes in demand 51% 36% Speculators who raise prices 32% 51% 5. Suppose that you agreed to lend a friend some money for six months. Suppose banks are offering interest rates of 3 percent per year. Would you charge him interest on the loan?   USSR US Yes 6% 29% No 94% 71% 6. If you went on a vacation with friends and there were a lot of shared expenses, would there be a careful accounting of who spent what and a settling of accounts afterward?   USSR US Yes 30% 47% No 70% 53% 7. Do you think that those who try to make a lot of money will often turn out to be not very honest people?   USSR US Yes 59% 39% No 41% 61% Source: Robert J. Shiller, Maxim Boycko and Vladimir Korobov

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