The longest Econ Nerds video yet!
Poland is hot. Matt Yglesias wrote about it recently, and the country has been at the center of the “is Europe actually poorer than the US?” discourse. I started this video maybe three months ago, so I guess it’s well-timed.
Poland v. Russia is a good way into the larger story: how narratives get set, and which stories get told.
I remember in undergrad that shock therapy was just dismissed. “Well, that didn’t work.” Now it’s called neoliberalism, a term I never heard as an undergrad history major in the early 2000s. But by 2019, when I was teaching in that same history department, UCLA had multiple courses on the topic: all of how awful and what a failure it was. I wasn’t teaching one of them. I was teaching the Economic History of the U.S., and I found a working paper version of this Grier and Grier paper, which showed that the Washington Consensus (i.e. shock therapy, neoliberalism) worked.
I added it to my slides on the Cold War, but I wondered: why hadn’t the discourse been updated?
Well, the first draft of history is written by journalists and professors, who often have a strong anti-market bias. The initial sputtering of the Eastern bloc countries had this group taking victory laps. But the countries that persisted all succeeded in the long run, and it’s time for the second draft of history to be written.
As I dove deeper into the research, I found that it had moved well beyond the Grier and Grier paper. This was a fully developed literature. Essentially, here is the lay of the land:
Economic freedom reforms work if the country does not abandon them.
Failure of reform often has to do with political or cultural issues.
A special shoutout to Justin Callais, one of the authors of this research, who appears in the video.
Now, with every Econ Nerds video I try to add some fun element that separates it from a standard econ video. I rented a Cybertruck for the Cybertruck video. I lost weight for the weight loss video. I interspersed movie clips in the Witch Trial and Mariel Boatlift videos. For this one, I thought: let me hire some Polish people off Upwork and have them watch the video and react. It worked better than I could have hoped. Their personal experiences matched the video’s narrative almost perfectly.
Recommendations:
Two Tibor Rutar posts on the topic:
Jack Salmon on Economic Freedom
Vincent Geloso thread on much of the work cited
Full sources
Sources for examples of dysfunctional soviet economy:
Scott Shane, Dismantling Utopia (1994)
Cucciolla, Mario Riccardo (2017) The Crisis of Soviet Power in Central Asia: The ‘Uzbek cotton affair’ (1975-1991)
Ivashchenko, Y.V., Clapham, P.J., & Brownell, R.L. Jr. (2011). “Soviet Illegal Whaling: The Devil and the Details.” Marine Fisheries Review, 73(3): 1–19.
On Vodka Consumption
Razvodovsky, Y. E. “Alcohol consumption and liver cirrhosis mortality in Russia.” J Alcohol Drug Depend 2.152 (2014): 2.
Anti Shock Therapy pieces:
Stiglitz, Joseph, and Robert M. Pike. “Globalization and its Discontents.” (2004).
Rodrik, Dani. “Goodbye Washington consensus, hello Washington confusion? A review of the World Bank’s economic growth in the 1990s: learning from a decade of reform.” Journal of Economic literature 44.4 (2006): 973-987.
Klein, Naomi. The shock doctrine: The rise of disaster capitalism. Macmillan, 2007.
Recent research on the effects of Economic Freedom
Fraser Institute’s Economic Freedom Index: https://www.fraserinstitute.org/sites/default/files/2025-10/economic-freedom-of-the-world-2025-annual-report.pdf
Alvarez, Sean P., Vincent Geloso, and Macy Scheck. “Revisiting the relationship between economic freedom and development to account for statistical deception by autocratic regimes.” European Journal of Political Economy 85 (2024): 102577.
Billmeier, Andreas, and Tommaso Nannicini. “Assessing economic liberalization episodes: A synthetic control approach.” Review of Economics and Statistics 95.3 (2013): 983-1001.
Billmeier and Nannicini 2011, Oxford Bulletin of Economics and Statistics, “Economies in Transition: How Important Is Trade Openness for Growth?”
Callais, Justin T., et al. “Institutions Matter: Economic freedom and income mobility.” Economic Modelling (2025): 107351.
Callais, Justin, and Kerianne Lawson. “Underperforming reformers: Examining disappointing cases of economic reforms.” Kyklos 77.3 (2024): 593-615.
Callais, Justin T., and Andrew T. Young. “A rising tide that lifts all boats: An analysis of economic freedom and inequality using matching methods.” Journal of Comparative Economics 51.3 (2023): 744-777.
Grier, Kevin B., and Robin M. Grier. “The Washington consensus works: Causal effects of reform, 1970-2015.” Journal of Comparative Economics 49.1 (2021): 59-72.
Grier, Robin, and Kevin Grier. “The sequencing of economic and political reforms in Latin America.” Journal of Comparative Economics (2026).
Kantorowicz, Jaroslaw, and Rok Spruk. “Using synthetic control method to estimate the growth effects of economic liberalisation: Evidence from transition economies.” The World Economy 47.6 (2024): 2332-2360.
Kaul, A., Klößner, S., Pfeifer, G., & Schieler, M. (2022). Standard synthetic control methods: The case of using all preintervention outcomes together with covariates. Journal of Business & Economic Statistics, 40(3), 1362-1376.
Kochanowicz, Jacek, Piotr Kozarzewski, and Richard Woodward. “Understanding reform: the case of Poland.” (2005).
Lawson, Robert, Vincent Miozzi, and Meg Tuszynski. “Economic freedom and growth, income, investment, and inequality: A quantitative summary of the literature.” Southern Economic Journal 90.4 (2024): 1099-1135.
Petrarca, Ilaria, and Roberto Ricciuti. “Synthetic ‘real socialism’: a counterfactual analysis of political and economic liberalizations.” Economics and Business Review 1.1 (2015): 69-88.
Saccone, D., & Migheli, M. (2022). Free to escape? Economic freedoms, growth and poverty traps. Review of Development Economics, 26(3), 1518-1554.
