Final answer:
Nations transitioning from central planning to a market system face high transaction costs due to issues like corruption, legal instability, and the challenges of integrating with global financial flows.
Step-by-step explanation:
When nations attempt to move quickly from central planning to a market system, they face the obstacle of high transaction costs primarily because of the challenges involved in transitioning from an economy with extensive government control to one that is driven by market forces. One substantial difficulty faced in this process is the presence of widespread corruption and lawlessness, as seen in the case of Russia's transition. Additionally, economies shifting towards market systems often encounter issues such as an uneven distribution of income, increased pollution, depletion of natural resources, and political unrest. These challenges can complicate the establishment of a new economic framework and result in high transaction costs. Furthermore, in the context of globalization, efforts to limit or control international financial flows can have severe practical difficulties. National governments might tax financial transactions within their own borders, but this can be easily circumvented by companies operating in jurisdictions with more favorable conditions, such as the Grand Caymans. Therefore, nations involved in international trade must also participate in the movement of international capital, which adds complexity to managing economic transitions.