|Contributions||Theory of two-level planning|
|Information at IDEAS / RePEc|
Kornai studied philosophy for two years at the Pázmány Péter University (now called Eötvös Loránd University) in Budapest. He gained his knowledge in economics on his own, and holds a candidate degree in the field from the Hungarian Academy of Sciences. He wrote that he chose to become an economist after reading Marx's Das Kapital. He started working on Szabad Nép, the Hungarian Communist Party newspaper, and rose to the rank of editor of news related to the economy, but after a few years of work, he was fired for lack of Communist convictions in April 1955.
From 1958 onward Kornai received many invitations to visit foreign institutions, but he was denied a passport by the Hungarian authorities and was not allowed to travel until 1963, after political restrictions had begun to ease.
From 1967 until 1992 he was a Research Professor at the Institute of Economics, Hungarian Academy of Sciences. He became a corresponding member (1976), then a member (1982) of the Hungarian Academy of Sciences. Kornai joined the faculty of Harvard University in Cambridge, Massachusetts, United States, in 1986 and was named the Allie S. Freed Professor of Economics in 1992. He retired from Harvard in 2002. In the same year, he became a Permanent Fellow of Collegium Budapest, Institute for Advanced Study. He is a Distinguished Research Professor at Central European University, and since 2011 also as a professor emeritus at the Corvinus University of Budapest.
In the late 1950s, he was among those who initiated the use of mathematical methods in economic planning. He elaborated the theory of two-level planning with Tamás Lipták and directed the first large-scale, economy-wide, multi-level planning project. Professor Kornai's early work Overcentralization (1953) created a stir in the West and conveyed for the first time his disillusionment with communist central planning.
His 1980 book Economics of Shortage is perhaps his most influential work. In it, Kornai argued that the chronic shortages seen throughout Eastern Europe in the late 1970s and which continued during the 1980s were not the consequences of planners' errors or the wrong pricing, but systemic flaws. In his 1988 book The Socialist System, The Political Economy of Communism, he argued that the command economy based on unchallenged control by a Marxist–Leninist communist party leads to a predominance of bureaucratic administration of state firms, through centralized planning and management, and the use of administrative pricing to eliminate the effects of the market. This leads to individual responses to the incentives of this system, ultimately causing observable and inescapable economic phenomena known as the shortage economy. Kornai is highly skeptical of efforts to create market socialism.
His later works, including The Road to a Free Economy (1990), Highway and Byways (1995), Struggle and Hope (1997) and Welfare in Transition (2001), deal with macroeconomic aspects and the interaction between politics and economic policy in the period of economic transition in the post-Soviet states. He later led a comprehensive research project, Honesty and Trust in the Light of Post-Socialist Transition at Collegium Budapest.
In 2007 Kornai published a book of memoirs, By Force of Thought, covering his research and the social and political environments in which he did his work. A new ten-volume edition of Kornai's major works began to appear in Hungarian from a Bratislava publisher in 2012.
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