Shortage and Inflation: The Causes

János Kornai

in The Socialist System

Published in print May 1992 | ISBN: 9780198287766
Published online November 2003 | e-ISBN: 9780191596551 | DOI:

Series: Clarendon Paperbacks

 Shortage and Inflation: The Causes

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An examination is made of the multiple causes of the two related phenomena of shortage and inflation in the classical socialist system, addressing these causes at both the micro and the macrolevel. The first two sections of the chapter contrast the behaviour of the firm in short‐ and long‐term decision making under the capitalist system, with that under the socialist system. The next seven sections discuss the behaviour of the bureaucracy managing production; the role of relative prices; repressed inflation in interfirm relations and in the consumer sphere; excess demand on the macrolevel; the propensity to inflation, and the relationship between shortage and inflation; and the self‐inducement and reproduction of shortage. The last two sections give an overview of the socialist system–specific nature of the causes of shortage and inflation, and point out the economic inefficiency and lack of innovatory technical progress in the system.

Keywords: bureaucratic control; causation; classical socialism; decision making; economic inefficiency; inflation; innovation; prices; shortage; socialist systems

Chapter.  16115 words. 

Subjects: Economic Systems

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