Kornai

János Kornai is a Hungarian economist known for his pioneering analysis of socialist economies and the transition to market-based systems. His work centers on how institutional design and incentives shape economic performance under central planning and how reforms unfold in practice.

A central contribution is the concept of soft budget constraints, which describes how state-owned enterprises often expect continued government support, leading to inefficiency and excessive investment. Kornai also analyzed the shortage economy typical of planned systems, arguing that chronic scarcities arise from the structure of the economy itself rather than merely from underfunding. His book Economics of Shortage helped articulate these ideas and their implications for economic policy.

Kornai’s work on reform and transition emphasized that rapid liberalization without corresponding changes in institutions and governance can be unstable. He argued that successful transition requires strengthening property rights, enterprise autonomy, and policy credibility, alongside price liberalization. His influential book The Socialist System provides a comprehensive account of the political economy of communism and its functioning.

In addition to his theoretical work, Kornai held academic positions in Hungary and abroad, including a long association with Harvard University, and advised governments and international organizations on economic reform. His research has influenced scholars and policymakers in Eastern Europe, Central Asia, and beyond, making him a central figure in the study of socialism, reform, and economic transition.