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> Kornai's contention is that this not correct. If a firm faces massive
> effective demand, which equals or outstrips its capacity, then the easiest
> way to fulfil that demand is by producing last year's model--and devoting
> no resources to innovation. To coin a phrase, notional innovation simply
> requires freedom, but actual innovation also requires time and money.
> Kornai puts a very serious argument forward that the de facto mechanisms
> a socialist economy do not provide the incentives to commit economic
> resources to innovation, whereas the de facto mechanisms of a capitalist
> economy do.
> I can appreciate the desire to defend socialism against an apparent
> This is not one. Kornai would, I think, describe himself as a socialist.
> was simply trying to explain the huge differences in effective product and
> process innovation between the capitalist and socialist block without
> having recourse to "Stalinism" as the explanation of everything. He was
> also, I expect, trying to inform those who might wish to bring about
> socialist states that they could not "utopianly" rely upon the socialist
> economy generating innovation unless it was "scientifically" planned for.
I think that Kornai's arguments are serious and worth addressing. But one
should be aware of the extent to which he changes his position in parallel
with the evolution of the Hungarian intelligentsia into a new bourgeoisie.
In the early 70s he was presenting exactly the opposite argument with
respect to information. In his book Mathmatical Planning of Structural
which I bought in Budapest in the mid 80's he argues that the great
merit of socialism was that it abolished commercial secrecy and allowed
information about internal enterprise plans to be distributed.
On the question of excessive demand. This was certainly a characterisitic
feature of the east european economies, but it does not need to characterise
a communist economy. If the state allows some price flexibility and raises
sufficient taxes to finance its expenditure the surplus cash balances
that were characterisitic of the socialist economies can be eliminated.
In our book, Allin and I suggest that labour tokens might even be date
stamped, losing validity after a year.
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