no market value changes, that is, none of the key financial signals that determine who gets credit, and who does not, and hence who produces what, and sells to whom, in a market economy. in short, none of the financial infrastructure which converts the changing valuations of consumers into market signals that direct production for profit are available. but it didn ’ t matter in the soviet - bloc economies. few decisions in those centrally planned systems were affected by the lack of a developed financial system. that centrally planned economies, as a consequence, were highly inefficient is best illustrated by the fact that energy consumed per unit of output was as much as five to seven times higher in eastern europe and the former soviet union than in the west. moreover, the exceptionally large amount of resources devoted to capital investment, without contributing to the productive capacity of these economies, suggests that these resources were largely wasted. regrettably, until the berlin wall was breached and the need to develop market economies out of the rubble of eastern europe ’ s central planning regime became apparent, little contemporary thought had been given to the institutional infrastructure required of markets. nonetheless, in the years immediately following the fall of the berlin wall many of the states of the former soviet bloc did get something akin to a market system in the form of a rapid growth of black markets that replicated some of what seemingly goes on in a market economy. but only in part. black markets, by definition, are not supported by the rule of law. there are no rights to own and dispose of property protected by the enforcement power of the state. there are no laws of contract or bankruptcy, or judicial review and determination again enforced by the state. the essential infrastructure of a market economy is missing. black markets offer few of the benefits of legally sanctioned trade. to know that the state will protect one ’ s rights to property will encourage the taking of risks that create wealth and foster growth. few will risk their capital, however, if there is little assurance that the rewards of risk are secure from the arbitrary actions of government or street mobs. indeed, today ’ s russia is striving to rid itself of a substantial black market intertwined with its evolving market economy. law enforcement in support of private property is uneven in its application. private security forces, to a large extent, have taken over protection, with results sometimes less than satisfactory. the shift of vast real resources from the defunct soviet state to private parties, whose claims in many instances are

to be free of hidden political manipulation. government censorship in any form renders information suspect. such information will be disregarded by market participants as virtually useless, requiring individuals to rely on rumor and other dubious sources of information. this leads to misjudgments about the changing patterns of consumer demand and hence significantly eviscerates the market ’ s effectiveness and its role in directing real resources to their optimum uses. most other rights that we americans cherish - - protection against extra - legal violence or intimidation by the state, arbitrary confiscation of property without due process, as well as freedom of speech and of the press, and an absence of discrimination - - are all essential to an effective, functioning market system. indeed a list or bill of rights enforced by an impartial judiciary is, and i hesitate to use the analogy, what substitutes for the central planning function as the guiding mechanism of a free market economy. it is these “ rights ” that enable the value judgements of millions of consumers to be converted through a legally protected free market into prices of products and financial instruments ; and it is, of course, these market prices that substitute for the state orders of the centrally planned economies. we depend on government in a free society to ensure those market “ rights. ” perhaps of greater importance, those rights can also be viewed as a list of prohibitions delimiting the actions of government. thus, the more effective the list is in constraining the arbitrary actions of government officials, the less it matters what they do. the tighter the proscription on government officials ’ discretion, the less arbitrary government power is available to the highest bidder. the democratic process, of course, is needed to ensure that the “ list of market rights ” has the continued sanction of the people. since any bill of rights specifies the limits to which government officials can infringe on the rights of individuals, the rational self - interest of the populace is always to protect and broaden individual rights. the self - interest of those officials who have the power to exert discretionary power in areas not specifically delimited by a bill of rights, is, too often, to broaden that scope. hence, authoritarian societies, even benevolent ones, are biased to restraining the rights of individuals generally and property in particular. clearly, not all democracies protect the private right of property with the same fervor. indeed, they vary widely. nor is it the case that all