Apparently yesterday Janos Kornai died in Budapest at the age of 94. He was the greatest analyst of the socialist system there was. Indeed, his personal life saw the full history of it in in his native land of Hungary, where, being Jewish, he barely survived the Nazi period there, with that inclining him to support the Stalin version of centrally planned command socialism, which took control of Hungary by the end of the 1940s. But as the 1950s proceeded he began to see its problems and his PhD defense in 1956 just prior to the Hungarian uprising against Soviet rule that year was a major public event that led to him spending time in jail and then a long period in trivial jobs, after having held some highly responsible positions earlier in the 1950s.
This period led him to privately study broader economics, including what was going on in the West. This led to two great books. The first in 1971 dealt directly and critically with established western economics, Anti-Equilibrium, identifying problems with general equilibrium theory that are now so widely recognized they are in textbooks, things like externalities and informational asymmetries. The latter followed by one year Akerlof’s publication in the QJE of his lemons paper, which earned a Nobel Prize. But Kornai was ahead of him and independent of him, but, well.
The more important book, the one he really should have gotten that trip to Stockholm to shake the hand of the Swedish monarch, was his 1980, The Economics of Shortage. This reflected him being brought back into a position of more responsibility and respectability, especially during a period when Hungary under Janos Kadar pursued its market socialist “goulash communism.” The key Nobel-worthy idea in that book was that of the “soft budget constraint,” another item now in textbooks. He noted that if a firm is state-owned it may not feel pressure to be efficient as it can count on the state to bail it out if it gets into trouble. Of course this idea is relevant far beyond market socialist systems into lots of actually existing market capitalist systems where large corporations can get the political system to bail them out, even though they are privately owned. This is a form of rent seeking, and arguably Kornai should have shared the prize with the late Gordon Tullock and Anne Krueger, who actually coined the term “rent seeking.”
As it was, a post on Facebook by Kornai’s former coauthor, Gerard Roland, reports that in the late 1990s he was indeed apparently on track to get that visit to Stockholm. But he did not get it. I am going to report from private information that why that did not happen was because of his personal relationship with the then dominant figure of the econ Nobel committee, Jurgen Weibull. Apparently Weibull was married to Janos’s daughter, and just about at this time when he was a leading candidate to get it, that marriage broke up in a bad way, and apparently this led Weibull to turn against Kornai for the prize.
Kornai wrote much else, including probably the definitive analysis of socialist economies in his `1992 The Socialist System, written after the end of the Soviet system, including in Hungary. More recently he publicly opposed the anti-democratic tendencies of the Orban government in Hungary and denounced it as an unacceptable “U-turn” against democracy and human rights. It is ironic that his death followed an election in Hungary where Orban’s opponents appear to have finally agreed to unite to overthrow Orban. That may or may not happen, but I can appreciate that the declining Kornai might see this as a time to finally check out, may he RIP.
I am going to add here something possibly inappropriate, but, well, it is an old joke about Janos Kadar, a man who imprisoned and then later elevated Kornai, the “goulash communism” leader who played a dicey game with the Soviets, pulling as far away from them as possible while still kowtowing to them.
So, Kadar meets with some high Soviet official. This official asks him:
“Comrade Kadar, what do you think of Policy X?”
“Well, Comrade Soviet Official, Marx said…”
“Excuse me, Comrade Kadar, but we want to know your opinion of Policy X.”
“Well, Comrade Soviet Official, Lenin said… :
“Excuse me, Comrade Kadar, but we want to know your opinion of Policy X”
“Well, Comrade Soviet Official, I can provide that, but I want to assure you that I completely disagree with that opinion.”
Anyway, again, RIP Janos Kornai.