EXPLANATION #2: Political differences explain the distinct reform outcomes.

Yasheng Huang's argument:

The greater the "sunk costs/sunk investments" of the public sector, the less likely leaders are to initiate reform.

Informational costs and the Russian Central Statistical Administration (CSA) v. the Chinese State Statistical Bureau (SSB).

• CSA was centralized; SSB was decentralized.
• The CSA needed more information about allocations and required monitoring of center-local and local-local transactions. SSB only had to monitor interprovincial exchanges.
• CSA was technically more advanced than the SSB.
• CSA had ministerial rank and its head was a member of the Central Committee. SSB administration was not as powerful.
• The SSB's weakness led to misallocation, gross fluctuations in prices.