Abstract A discussion of the lessons of the experience of the first four years of the East European transformation. Attention is paid to the situation of the state-owned enterprises, the decline in the effective labor supply and in investment, land reform, the banking system, the theoretical significance of the ending of shortages, the contraindications for price liberalization, the social costs of transformation, the conflict between liberalism and democracy, and the relationship between European transformation and Asian reform. Use is made of a variety of empirical studies. J. Comp. Econom., August 1994, 19 (1), pp. 000-000. Amsterdam University, 1018 WB Amsterdam, Netherlands.