Diffuse rights in search of an agent: A property rights analysis of the firm in the socialist market economy

It is a long-standing tradition of property rights analysis to apply its powerful methodology to both centralized (Soviet-type) and worker-managed (Yugoslav) enterprises, as well as to those that are co-determined.¹ Recent changes in Poland and, in particular, Hungary² seem to offer a new arrangement of property rights for market-oriented socialist firms.³ The purpose of my property rights-based analysis⁴ is to point out some transaction costs that result from those arrangements. The case of the Hungarian firm will be used as the primary example. Section I of the paper offers a description of the Hungarian firm, including its relations with government agencies. In section II, the formal legal arrangement is examined using tests of efficiency offered by property rights analysis. I then turn, in section III, to consider the political position and social responsibilities of the Hungarian firm; and in section IV I survey some possible market-oriented arrangements.