Why Poland wins

Why can Polish companies raise $1 billion a year by floating new stock in Warsaw while their counterparts in Prague come up with zilch? Andrei Shleifer of Harvard University thinks he has the answer and presented some of his latest research, joint work with Edward Glaeser and Simon Johnson, at the US Federal Reserve last month.
The answer, according to Shleifer, relates to quite diVerent approaches to Wnancial market regulation. Both Poland and the Czech Republic rejected communism in 1989 and quickly switched to similar market-building and stabilization policies. But Poland embraced strict enforcement by an independent Securities&Exchange Commission.
The Czech Republic took a hands-off approach, drawing inspiration from Chicago economist Ronald Coase, whose Coase Theorem states that markets produce efficient outcomes by themselves when property rights are well deWned and "transaction" costs are zero. Corrective action by government - through taxes, regulations or laws - isn't necessary.

But...

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