Janos Kornai: a non-mainstream pathway from economic planning to disequilibrium economics

This paper first positions Janos Kornai in the controversies about the feasibility of socialist planning (Lange, Hayek). Kornai has leant in favor of Hayek's thesis contending that, without an actual market price system for conveying information to those who can beneficially use it, a socialist economy is impracticable. The paradox is that Kornai worked at the Computer Centre of the Hungarian Academy of Sciences in relation with the Planning Institute of the National Planning Office and conceived an algorithm for decentralized two-level planning, i.e., the best improvement ever brought into Lange's model of market socialism. This is due to Kornai being also involved in actual dysfunctions of central planning in Hungary (shortages) that he eventually theorized with disequilibrium modelling in his Economics of shortage. However, the latter departs from standard disequilibrium economics (Barro-Grossman) which has been joined by most former planometricians (such as Malinvaud for instance). Eventually Kornai adopted a more institutional approach for his recommendations as regards post-communist transformation into a market economy with a Hayekian flavor, in particular his support to an organic development of a privately-owned sector within a gradualist process instead of mainstream-supported overnight privatisation. His recent analysis of capitalism as a surplus economy shows the continuity of his non-mainstream view of disequilibrium over five decades. All this makes Kornai an original front-running researcher and breaking-through analyst, though somewhat paradoxical, and a quasi-heterodox economist, one foot in and one foot out of the mainstream.

Automated summary

Kornai supports Hayek's thesis that a socialist economy is impracticable without an actual market price system. He worked at the Computer Centre of the Hungarian Academy of Sciences and collaborated with the Planning Institute of the National Planning Office to propose a decentralized two-level planning algorithm, which improved upon Lange's model of market socialism. Despite his involvement in the dysfunctions of central planning in Hungary, Kornai ultimately adopted a more institutional approach for post-communist transformation into a market economy with a gradualist process, departing from mainstream-supported overnight privatization.