The Unassuming Economist

From VoxEU post by Gérard Roland:

“The great Hungarian economist János Kornai, who passed away in October 2021, was a pioneering analyst of shortages, socialist economies and the economics of transition to a market economy. This column outlines what made him one of the most important intellectuals of the twentieth century.

The famous Hungarian economist János Kornai has left us. He was one of the most important intellectuals of the twentieth century. He suffered personally from both Nazism and communism, the two totalitarian regimes of the twentieth century. As a young Jew growing up in Budapest, he lost his father and a brother to the Nazis. Like many young Jews in Central Europe who survived the holocaust, he was for a couple of years an enthusiastic supporter of communism, the arch-enemy of Nazism. He became disillusioned after a few years, especially when learning about the Stalinist purges in Hungary in the early 1950s. He had been a journalist at that time.

His doctoral dissertation in economics, Overcentralization in Economic Administration, was full of facts about the flaws of central planning and represented a great breath of fresh air in the intellectual atmosphere of the times. He defended that dissertation just before the Soviet repression of the Hungarian revolution of 1956. His defence was attended by a big crowd and was one of the important intellectual events of that year. Given the visibility of his doctoral thesis, when the repression came, he lost his job at the Institute of Economics (later a hotbed of thinking about reforms), was interrogated, and eventually got marginal jobs, first at the Light Industry Planning Bureau and later at the Textile Industry Research Institute. 

Instead of becoming discouraged or cynical, he used the free time he had in these obscure jobs to study economics seriously and to get better acquainted with economic research that was being practiced in the West, on the other side of the Iron Curtain. His work on two-level planning with Tamás Lipták was published in Econometrica and became an important paper in the literature on the economics of planning. This earned him the recognition of top economists of the time: Kenneth Arrow, Leonid Hurwicz, Tjalling Koopmans, Edmond Malinvaud and others. The Hungarian authorities, who were more liberal than other communist regimes, even allowed him to travel to conferences in the West, albeit under heavy supervision of the secret police. 

Instead of ‘just’ becoming Central and Eastern Europe’s top economist (together with the more senior Leonid Kantorovich, the inventor of linear programming, who received the Nobel prize in 1975), he wrote in 1971 a book with the provocative title Anti-Equilibrium that represented a thorough criticism of the relevance of general equilibrium theory, the crown jewel of economic theory. That book also proposed to add considerations related to the informational sphere of the economy, developing themes such as informational asymmetry, bargaining, conventions, routines, aspirations – topics that would be developed later by other economists.”

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