Heterodoxies in the Work of János Kornai: How Far from the Mainstream?

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Abstract

One of the most important synthetist of the practical socialist theory is János Kornai. In his works he tempted to describe the working mechanism of the socialist economy in actual practice.

The first part of the paper is to gather special keywords and analytical tools of Kornai’s description. As economist, the main tool is the description of demand and supply without the mathematical formalization of demand and supply functions, and without any Marshall crosses. Instead of them, the theory is based on quantity (stock, slack, shortage, forced substitution), on friction (caused by rigidity, resistance, and information asymmetry), and on soft budget constraint.

In the second part, we investigate if the tools and keywords correspond to economic streams. The first apprehension is that economy (either capitalist or socialist) is declared to be far from Walrasian equilibrium. The conservators of this “non-equilibrium” steady-state are the different forms of friction. The rigidity is one of the main keywords of the New Keynesian theory, surpassing price rigidity that was headstone of Keynes’s General Theory. Kornai attends to the adjustment of quantity (and not, or barely price), but he applies neoclassical analytical tool set (marginal analysis, comparative statics to separate substitution and income effect, etc.) in some (but rare) formal analysis. The soft budget constraint theorem determines the impossibility of neoclassical results because under those conditions the demand theoretically is not limited, but it is in reality. The removal of this contradiction requires devices borrowed from other social sciences.

Finally, the third part sets a question: the characteristics of Kornai’s description may be interpreted as the specialty of socialism (i.e. Kornai had no choice, the practical socialism has classical, neoclassical and new Keynesian features), or it is just his own logic that made his analyses such mixed. The answer is double. As Kornai did not take on the mathematical formalization of his theory, he had not to pin down himself to any theoretical economic school. His works about the socialist economy are decisively descriptive, as a non-market economy cannot be seen through the applied neoclassical algebra.

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