This paper examines trends in world military expenditures and offers an econometric examination of their determinants in 125 countries from 1972 to 1988. A simultaneous equation framework based on a public choice model shows military expenditures as a ratio of GDP to be influenced by the level of GDP, central government expenditures, other financial indicators, the form of government, and geographical characteristics of countries. The study also examines the opportunity cost of military expenditures and analyzes the budgetary trade-off between military, social, and development expenditures. Although military expenditures may benefit a given country, they may also have a negative impact on the welfare of rival nations. Hence a coordinated reduction in military expenditures that does not alter the strategic balance will increase economic wellbeing in the world.

This paper addresses two related questions: How has the transformation from a centrally planned to a market economy affected the second economy and how has the second economy influenced the transformation? The existence of a second economy compensating for some faults of the planned economy has been a contributing factor in the non-violent transformation of the Hungarian economy. Transformation is making the concepts of a first and second economy obsolete. The informal economy, which is replacing the second economy, differs from the latter in its degree of internalization, and in relying upon fulltime rather than part-time work. It is also increasing in size. The social impact of the informal economy is also different, increasing income inequality and regional disparities, thus replacing the gradations of social differences found in the multi-coloured activities of the second economy with sharper black and white differences. The analysis is illustrated with data from Hungary before and after the transformation.

Changes of labor market attitudes in a post-centrally planned economy are examined on the basis of survey data in terms of the production and utilization of human capital; work incentives and rewards; private ownership and job allocation; work perspectives and unemployment; and the role of the state. The transitory period is confused. The transformation of post-communist countries is being carried out when the era of market regulation is over in the West and state guardianship in the labor market is being eroded, but in Central and Eastern Europe the inheritance of institutions and attitudes from the era of central planning remain palpably present, and surveys show that the population of working age has not yet fully perceived the extent of what is required to achieve the transformation to a market economy.