Policymakers in Central and Eastern Europe are encountering difficulti
es in resolving the clash between market efficiency and distributional
equity. A similar tension characterized post-war Western Europe. Howe
ver, in Central and Eastern Europe expectations emanating from the pre
vious regime presume that distributional equity will compensate for th
e lack of market efficiency. The possible resolution of this tension i
s discussed in the cont ext of the privatization in Hungary.