Kornai and the System Paradigm: Theory and Implication for the Socialist System

Mehrdad Vahabi

Keywords: 2. Theory of socialism and capitalism (keynote: Eric Maskin, area chair Attila Chikan, May 15 afternoon)

TL;DR: The evolution of Kornai's systemic a[proach in analyzing socialism and capitalsim from political neutrality to political centrality

Abstract: From his PhD thesis on Overcentralization (1956) until his latest works on Political Economy of Communism (1992) and Dynamism, Rivalry, and the Surplus Economy (2013), Kornai explores socialism and capitalism as two variants of ‘grand systems’. Systemic approach is Kornai’s method of analysis. However, systemic approach is not understood the same way in his long academic career. In Kornai’s theoretical framework during the seventies, general equilibrium theory was considered as a ‘system theory’ since it could permit to compare economic systems in a politically neutral approach. However, he later opposed general equilibrium theory to systemic approach because of its political neutrality and argued that systemic approach should include political-ideological factor as the first fundamental institution. His analysis of grand economic systems evolved from political neutrality to political centrality. My talk will be focused on Kornai’s evolution with regard to systemic analysis of socialism and capitalism.