A contribution to the debate on the systemic properties of monetary production economies from a Kornaian perspective

Zsolt Gilányi

Keywords: product market excess supply systems, monetary production economy, realization problem, nominal growth imperative

TL;DR: As suggested by Kornai, the sign of the aggregated product market excess supply is a key systemic property to classify economic systems.

Abstract: Different economic systems have different systemic properties. The systemic property of the sign of the aggregated product market excess supply defines three categories: economies of shortage, product market equilibrium systems, and product market excess supply systems. In both A hiány (1979, The Shortage) and The Socialist system, Kornai (1992) showed that socialist production plans, postulated with the aim of realizing input-output plans, imply economies of shortage. Mainstream economics showed that in market economies, business plans postulated with the aim of realizing profits imply the property of product market equilibrium systems. In the Anti-equilibrium Kornai (1971) argued that the profit maximization rule has more drawbacks than advantages for economic theorizing. Recent advances in heterodox economics suggest that the real problem is not the maximization rule, but the profit aim itself. The business plans postulated with the aim of realizing strictly positive net retained earnings exclude the property of the product market equilibrium systems; these business plans imply the property of product market excess supply systems. We show that the property of the product market excess supply system manifests itself in both the realization problem and the nominal growth imperative, while these phenomena are absent in product market equilibrium systems.