Shock Therapy–Good for the Heart

Over at Marginal Revolution, Tyler Cohen cites a paper that contrasts health data in Russia and the former Soviet Union with Poland and the Eastern Bloc countries that were essentially captured by Russia at the end of the Second World War.

The results are somewhat surprising. Given Poland’s greater growth, one might expect people at the margins to be healthier, such as the elderly. But it is among young males that the difference is most stark, as Russia has exploded in violence, alcoholism, unsafe sex, and smoking. This despite the fact that Poland opened its markets more completely to cigarette and alcohol advertising (advertising in general is more prevalent in Poland than in Russia).

The conclusion is that democracy and free markets are healthier than unfree markets and despotism, despite the relative availability of things to damage ourselves with.

I point to this mainly because the argument against shock therapy as opposed to gradualist reform has been that a sudden transformation to a free market is too hard on people. I have no doubt that it is in the short term psychologically harder than gradualism, but the data both within the two groups of countries and between supports the hypothesis that any delay in reform hurts far more than it helps.

I can assure you that despite the smaller moves toward a free market, even by 1993 Russians I met were far more distressed and discombobulated by changes than Poles I met. This also cannot be accounted for simply by arguing about relative wealth–the health statistics before transformation were roughly equivalent between Poland and Russia.

My hypothesis at the time was that the degree to which a country implemented and stuck to shock therapy was proportional to the amount of progress they made by the mid-nineties. Recent policy changes in the Eastern Bloc countries has damped the affects, but it still appears to be roughly true.

Shock therapy may cause you momentary mental distress, but in the long run, it’s much better for you.

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