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>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 of
>a socialist economy do not provide the incentives to commit economic
>resources to innovation, whereas the de facto mechanisms of a capitalist
I have not studied this argument by Kornai - where does he make it ?
Innovation is a big subject I suppose, and we should get down to specifics.
I would argue that some types of "innovation" are simply not desirable to
have in a socialist economy. That is to say, "last years model" may be
perfectly okay to use this year, and the next. Do we really need e.g. 50
different kinds of washing powder or 500 different types of cars ? Would it
not suffice and be more efficient to produce maybe 10 types of good
reliable washing powders and 100 types of cars of really good quality ? I
am referring here to senseless product differentiation by the "de facto"
mechanisms of a capitalist economy which masquerades as "innovation"
(clothing would perhaps be a different story).
>I can appreciate the desire to defend socialism against an apparent attack.
>This is not one. Kornai would, I think, describe himself as a socialist. He
>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.
Certainly I agree we cannot blame "stalinism" for everything, and we do
have to consider questions of economic rationality and efficiency. I
mention Stalinism only because I feel the subject of socialist economy is
often approached technocratically in the economic literature, i.e. without
reference to the influence of politics, culture and historical
circumstances. A long time ago Ernest Mandel gave some reasons for caution
in extrapolating general theories from the concrete attempts to build
"According to the method Marx applied to the study of the capitalist mode
of production, a systematic analysis of the general characteristics of the
transitional period would be possible only with the appearance of this
economy in its already mature and stabilised form. It is unlikely that
future history will consider the present economy of the USSR as this form -
not to mention the other countries with a socialist economic base. It seems
indeed possible to draw some economic conclusions from the already rich and
varied experiences of all these countries. However to systematise these
experiences in the form of a general economic theory of the transitional
period seems premature, if not impossible, both because of the absence of
more mature forms of this economy and the difficulty of separating out what
is peculiar to the specific context of its emergence in a backward
environment from what corresponds to its deeper historical nature" (E.
Mandel, Economics of the transition period. In: E. Mandel (ed), Fifty Years
of World Revolution 1917-1967, p. 275-6).
Be that as it may, we should of course try to remain realistic in our
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