In responding to a letter from Janos Kornai, in which the Hungarian economist stated that Marxism was responsible for Bolshevism and Stalinism, Sen wrote-
... if I encounter an idea in Marx that I am inclined to reject after scrutiny, all I need to do is to drop that notion—and its implications—from intellectual acceptance.
The problem here is that if that 'idea' is an axiom or foundational assumption then 'rejecting it' entails rejecting the entire Marxist theory. Moreover, Marx makes a prediction- viz. Communism is inevitable. Either he is right or he is wrong. That is a decision his readers have to make for themselves.
But that selective exclusion would not force us to reject other Marxian ideas which seemed to me to be sound, such as “objective illusion” (from The German Ideology)
this is the notion that the ideas of the ruling class aren't really 'universal values'. Just because things are the way they are, this does not mean they could not be otherwise. But some 'revolutionary' ideas were simply silly. Marx tells us of 'a valiant fellow who had the idea that men were drowned in water only because they were possessed with the idea of gravity.
Marx was being silly. We float in water. Gravity does not matter. The fact that we don't possess gills is what prevents us breathing under water, like fish.
#If they were to knock this notion out of their heads, say by stating it to be a superstition, a religious concept, they would be sublimely proof against any danger from water. His whole life long he fought against the illusion of gravity, of whose harmful results all statistic brought him new and manifold evidence. This valiant fellow was the type of the new revolutionary philosophers in Germany.'
Sadly, Marx & Engels were describing themselves. They had an 'objective illusion' that they themselves were smart. They weren't. They were stupid.
Consider the following quote from the German Ideology- 'For each new class which puts itself in the place of one ruling before it, is compelled, merely in order to carry through its aim, to represent its interest as the common interest of all the members of society, that is, expressed in ideal form: it has to give its ideas the form of universality, and represent them as the only rational, universally valid ones.'
This was wholly false. The Brits became the ruling class in India by protecting all the ancient customs and laws and religions of the indigenous population. The class which gains power, be it by the power of the purse or the sword or superior administrative efficiency, retains it only by those means. True, a bunch of ranters may grab power during a period of instability, but if they don't solve the fiscal and the military and the administrative problem, their reign will be brief indeed.
Sen & Co suffered from a dangerous illusion- viz. that poverty could be cured by redistribution rather than by raising productivity. Objectively, they were wrong and thus they were increasingly disintermediated. Sen lived to see Manmohan become PM of India and then, more humiliatingly yet, Mohammad Yunus take power in his own ancestral Bangladesh.
Sen did not understand why Marxism became the official ideology of the greater part of Eurasia. It was because 'dictatorship of the proletariat' was militarily and economically feasible. Industrial workers could force peasants to hand over food and they could produce the weapons they would themselves use against invaders or insurgents. Since India refused to permit an industrial proletariat to develop, Indian Communism could never make a bid for absolute power. The soldiers were the sons of 'kulaks' and enjoyed killing brainy Bolshevik babus.
or the long-run superiority of distribution according to needs—when feasible (from The Critique of the Gotha Programme).
In which Marx said 'to each according to his contribution' till scarcity disappears. Sen thinks Marx meant the opposite of what he said.
Had I been a Marxist, I might have faced a problem in rejecting one of his ideas while accepting another.
Nonsense! Like Meghnad Desai, Sen could have been a 'Hayekian-Marxist'. But equally one could be a Jewish Pope who is also Empress of China.
But since I do not see myself as a Marxist, that choice is mine—not Marx’s.
It is one thing to pick and choose quotations from an author. It is another to say 'Marx said 'to each according to his needs' in his Critique of the Gotha Program when, the fact is, he said 'to each according to his contribution'.
For this reason, a non-Marxist has a liberty that a Marxist may not have in being able to choose with discrimination.
The reverse is the case. If you keep quoting the Bible and then confess you are an atheist, people think what you are exercising is not 'liberty' but 'hypocrisy' or 'stupidity'.
Interestingly enough, the liberty to choose one’s priorities, discriminating among them, is something on which Marx himself bestowed much praise.
Nonsense! The dude wasn't a libertarian nor, though a heavy drinker, did he demand the abolition of 'tied houses'- i.e. pubs forced to sell only the beer produced by the Brewery which owned them.
In a famous passage in The German Ideology, he recommends bringing “the conditions for the free development and activity of individuals under their own control,"
in which case there will be a smaller menu of choice
and notes that:
[it] makes it possible for me to do one thing to-day and another tomorrow,
what makes it possible? Marx says ' In communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow'. Marx was wrong. Even under Communism, women, not men, would give birth. The farmer could not also be a sailor. The fisherman would not be allowed to perform heart surgery.
to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have in mind, without ever becoming hunter, fisherman, shepherd or critic."
Rich people in Victorian England could certainly choose any or none of these activities. Working people could not. Marx is saying 'after scarcity has ended, no one will need to work from 9 to 5.
A skilled Marxist may be advantaged in being like a good fisherman, but a non-Marxist has the freedom either to choose or to abandon fish (“just as I have in mind”).
No. A good fisherman can decide to become a Marxist. A bad fisherman can't become good by either embracing or rejecting bits of Marx.
It is the freedom of the non-Marxist which I am emphasizing here—a freedom that Marx greatly valued.
Did Marx express delight when people disagreed with him? No! He poured the vials of his wrath upon them. Marx may have valued his own freedom strongly enough to run the fuck away from places where he might be put in jail. This did not mean he wanted Kings and Plutocrats to continue to enjoy freedoms they currently possessed.
We can choose some of Marx’s ideas, rejecting others (with or without making any use of them).
We can lie about Marx- did you know he advocated compulsory gender reassignment surgery for all male heterosexuals?- but, if we do so, people will simply think we are liars rather than that we are exercising our freedom.
Some of the sadder aspects of communist regimes tended to bring out only too clearly Marx’s role as a “ruler” rather than as an intellectual, competing with others—like Hume, Voltaire and Rousseau—for the acceptance of their respective ideas.
Marx and Engels had been Revolutionaries. If the 1848 revolutions had been successful, both would have been 'rulers'. Hume, Voltaire and Rousseau had no such ambitions. Lasalle, on the other hand, had a Napoleonic streak. Marx hated him.
And yet Marx himself was not the political ruler or leader of any state
but he wanted to be.
(any more than Rousseau or Hume was), and Marx’s “promotion” to infallible political leadership happened only after his death.
Because he kept saying all the other Leftists were stupid and evil while only he himself had uncovered the dialectical logic of History.
Marx can be seen in at least two different ways
the objectively right way which squares with the historical record or else a subjective and false way which, however, may enable us to 'virtue signal'.
and our respective interpretations of Marx partly reflect that dichotomy.
I see myself as someone who got a lot from Marx’s ideas and concerns, without
contributing anything of value to Economics or Philosophy
—and this is important to emphasize—ever becoming a “Marxist.”
Though he started of as the side-kick of Maurice Dobbs. Indeed, the Sen-Dobb thesis was Stalinist to the hilt. Confiscate productivity gains from workers so as to finance industrialization through 'Five Year Plans'.
I have always felt quite free to learn from Marx’s analysis without being under any obligation to be automatically a “supporter.”
Why be a supporter if that would entail having to surrender a portion of your wage to the property? Also, you would not be allowed to run off with your best friend's wife. Such behaviour was classed as 'bourgeois decadence'. Still, Sen wasn't a 'useful idiot' but only because he was a useless idiot.
Indeed, even as I saw that my intellectual horizon was being extended by Marx’s analyses, I did think that some of his ideas were, in my view, seriously mistaken.
'Objective illusion' was mistaken.
I do think, for example, that “the dictatorship of the proletariat” is an unsustainable idea
It worked. Trotsky got factory workers to kill 'Whites' and 'kulaks' who resisted food requisition. Later, Stalin collectivized the land which the peasants had seized for themselves during the Revolution.
and reflects some kind of muddled thinking by Marx—one with sad consequences for many.
Marx saw that the French peasant who received land after the Revolution were valiant soldiers for Napoleon. He could see the military potential of the industrial proletariat. In 1848, General Napier had shown the 'Physical Force' Chartists his canons. He had 'Physical Force'. They did not. But military technology was changing. Surely a day would come when the workers in the pistol or machine gun factory could seize control of it and arm their fellow workers? At that point, snipers could kill be artillery men before they could fire off their canons.
His lack of interest in how political power would be exercised—and even more in how it could be restrained (we do not find any significant discussion in Marx of a Galbraithian “countervailing force”)
Marx was suspicious of Trade Unions- in particular those of the highly skilled. They were likely to make common cause with the petit bourgeoisie and adopt Imperialism as their ideology.
—seemed to me to be a notable lacuna in Marxian political economy.
Sen picks out the things which made Marxism feasible as a political program and calls them 'lacunae'. He truly has shit for brains.
Marx’s conceptions, aside from those that have remained rather pure (like “exploitation”),
which Morishima, Sen's colleague, erected into a 'fundamental theorem of Marxian economics'. Its utility is to show that if even one dick enters one vagina and jizzes without the woman jizzing equally and oppositely, then all Women are exploited. Only by chopping off all heterosexual dicks can Equity be achieved.
have been discussed so much, mixed with other approaches, that they come into our thoughts in very many different ways (for example, many people are surprised to learn that the idea that every person has many distinct “identities” had an early appearance in Marx’s Critique of the Gotha Programme)
Very true. Marx showed that Clark Kent was also Superman. This greatly influenced Nietzsche- right? Wrong. What Marx said was ' The first premise of all human history is, of course, the existence of living human individuals. Thus the first fact to be established is the physical organisation of these individuals and their consequent relation to the rest of nature....
The fact is that 'physical organization' refers to the physical body. Marx says identity is confined to that body. We don't also have an immortal soul nor is there anybody who appears as a wood-cutter over here but who is also the Emperor of China.
Men can be distinguished from animals by consciousness, by religion or anything else you like.
Men have names and addresses and dates of birth. If I catch hold of a cat thinking it is my cat, it has no way to convince me of my mistake. It has to scratch and bite me till I let it go.
They themselves begin to distinguish themselves from animals as soon as they begin to produce their means of subsistence, a step which is conditioned by their physical organisation.
This means men can tell you not just their own names but what belongs to them by reason of the labour they expended in producing it.
By producing their means of subsistence men are indirectly producing their actual material life.
Which is why you have to use a lot of force against them if you desire to take away their means of subsistence. Communist Parties in some countries were able to wade through a sea of blood to establish their absolute power.
Sen believes that Marx was for the 'Welfare State'. The truth is he bitterly opposed Lasalle's 'State Socialism' which envisaged massive state loans to found large-scale cooperatives that would eventually take over all industry and all branches of the economy. This process would culminate in socialism. Bismarck rejected this but did bring in collective insurance. This provided the impetus for the emergence of the Welfare State as opposed to the previous patchwork of assistance to the poor at the Parish level . Marx considered such 'reformism' to be reactionary.
the idea of the “welfare state” in post-Second World-War Europe did draw on Marx’s prioritization of needs (going beyond rewarding work) and of social sharing.
Marx objected to this type of charity more particularly if it was done by the State. Why? It would give the poor and the vulnerable a stake in the existing economic order. They would be less attracted to revolutionary politics.
European countries had been moving towards collective insurance and the State takeover of welfare functions from parishes from the 1890s onward. Marxists played no role in this.
Yet it also had other inputs, particularly from the empirical research—by R.J Hammond, Richard Titmuss and others—of social benefits of war-time sharing—particularly of food and medicine.
They looked at the outcomes of policies over which they, initially, had no influence. Sen must be aware that Leftists at the LSE hated Titmuss. Hammond's account of war-time rationing was read by Indians though Britain had far greater State capacity and esprit de corps. What worked during the Blitz for Britishers would not work for Indians.
A different—but related—point to this contrast is that Marxian inspirations have often been quite splendidly used in a productive way by non-Marxists who happen to sympathize with some parts of Marx’s general reasoning, including his radicalism.
Were they economists or political scientists? If not, what they produced or didn't produce is irrelevant.
There are lessons even in the contrast between Sergei Eisenstein’s work as a relaxed film director before the Soviet regime took firm and inflexible form (his film “Batleship Potempkin” is a good example of his work from that earlier period) and his work later on after he had become a celebrated citizen of the strongly disciplined USSR.
This is nonsense. Eisenstein was a Red Army soldier who was promoted for producing effective propaganda. Following the Party line, he initially was a 'Proletkult' theatre director scoring his first success with a 'Eccentricism' influenced production of a play by Ostrovsky. He was also a theoretician who was wise enough to keep in step with the ever-changing Party line. To say 'Potemkin' or 'Strike' were 'relaxed' is simply false. They were highly mannered. This drew criticism, more particular after Potemkin became a world-wide success. Eisenstein then promised to embrace 'social realism'- the new dogma of the party. Still, if his brief stint with Paramount in Hollywood had been a success, he have remained in the West. The truth was his 'formalism' did not match the new aesthetic of the talkies which eschewed grand Guignol gestures. Still, Eisenstein's skills as a sycophant finally won over Stalin and so he got to make Nevsky which then paved the way for his hagiography of Ivan the fucking Terrible.
To take a sharper example,
A stupider example. Eisenstein was a Party hack. Picasso wasn't.
Pablo Picasso’s politics as a member of the Communist Party may have benefitted both from
the fact that Stalin had helped the Spanish Republicans and were doing the heavy lifting in the war against Hitler.
his political understanding and from the distance at which Picasso placed his work from the details of his political beliefs. That distancing did not affect the excellence of such paintings as “Guernica” which
was disliked by the Soviet Union as was 'massacre in Korea'
were clearly political and influenced by Picasso’s political sympathies. However, as his agent and dealer, D-H. Kahnweiler, claimed, Picasso “has never read a line of Karl Marx, nor of Engels of course."
But Picasso was aware that the Anarchists had been pretty shit in the Spanish Civil War. Anyway, the French Communist Party might take power. The Americans might prefer this if the aim was to contain Germany.
Familiarity with Marx’s understanding of the world did benefit Picasso’s vision,
though he did not in fact have any such understanding himself.
but it would be hard to speculate what degree of closeness—and distance—may be most productive in one’s relation with Karl Marx.
For a painter or a plumber- none at all. Economists and Political Scientists, however, have to make a decision- was Marx right or was he wrong? The answer, sadly, is he was wrong. It is true that the 'dictatorship of the proletariat' can be achieved, but the difficulty is how to stop proles from running away from it.
However, having an understanding of Marx may not be such a terrible thing to happen to a non-Marxist.
Terrible things would have happened to Sen in his natal Bengal if he had come out as a critic of Marx. Still, once Mamta came to power, there was little point pretending to be a crypto-Marxist.
Turning back to Kornai- who regained salience with his powerful attack on Orban a decade ago- it is important to understand that he had abandoned Marxism way back in 1956. He was very much part and parcel of the Western 'positive' Econ tradition though, no doubt, he wished to be useful to his country and thus had to make compromises- e.g. only publishing what the Party would consider permissible.
Bernard Chavance writes-
In Contradictions and dilemmas (1986), Kornai wrote that we are faced with inescapable dilemmas resulting from the conflict of different value systems.
Why? The answer is 'concurrency'. There is no 'natural' way to choose which value to prioritize. The thing is bound to be arbitrary. But this also means resources will be invested in 'gaming the system' so as to get more favourable results. But, this is like 'rent dissipation'- i.e. is wasteful.
For instance, 'there is a contradiction between the efficiency conditions on the one side, and the ethical principles of solidarity and security on the other.
Either 'solidarity' raises efficiency (e.g. allocative efficiency improves if you help me when I need help and I reciprocate or 'pay it forward') or it does not. If the thing results in 'rent dissipation'- e.g. everybody going on strike to raise their relative wages- then there is a nuisance which must be curbed. The same thing can be said about 'security' which reduces Knightian Uncertainty and thus is 'regret minimizing'.
With his well-known image of the supermarket he criticized the notion of an optimal economic system as naive and said that all real economic systems are organic wholes, containing good and bad features.
There may be occulted 'linkages' such that policies aimed at one sector of the economy have unintended consequences elsewhere.
They consequently constitute « package deals », it is not possible at will to choose only the beneficial and to exclude the detrimental components of different systems – as unemployment for capitalism and shortage for socialism.
It may not be desirable to get rid of unemployment or shortages. It is a good thing that I am unemployed though there is a big shortage of Algebraic Topologists. This is because I have shit for brains and ought not to be employed doing anything which requires a high IQ.
He concluded with a kind of impossibility theorem:
It seems to me that it is impossible to create a closed and consistent socioeconomic normative theory which would assert, without contradiction, a politico-ethical value system and would at the same time provide for the efficiency of the economy.
In other words, Sen & Co are seeking to do the impossible- or, rather, pretending to seek to do it.
It is impossible if that theory seeks to be realistic and wishes to take into account the true behavioural characteristics of people, communities, organisations and social groups. (Kornai, 1986, p. 137)
We don't know those characteristics in different states of the world. If we did we would know if this kid is capable of becoming a great basket-ball star while that other kid could be the next Terence Tao. Anyone with the ability to spot talent of this sort could get very rich as a scout or 'head-hunter'.
5A task of research was to find an answer to the question: « what compromises between the different normative principles are brought about by the social forces of the different social systems »? (ibid., p. 137-138).
This is not a task for 'research'. It is 'discovery' made by the people empowered to make the compromises. However, what is easier is to do what was previously done and then hire some guy to pretend that it represents 'ethical' investing or diplomacy or whatever.
6Keynes had a similar attitude, when in « The end of laissez-faire » (1926) he insisted on distinguishing the assessment of capitalism from the point of view of comparative economic efficiency or from a moral perspective. These two approaches led to opposing conclusions in his eyes, and he famously stated that acceptable compromises had to be searched for: « Our problem is to work out a social organisation which shall be as efficient as possible without offending our notions of a satisfactory way of life. » (Keynes, 1926, p. 294)
The whole world would soon realize that economists like Keynes had shit for brains.
7A second stance in Kornai is linked to the idea that you cannot add up or aggregate the different assessments of diverse phenomena to reach a kind of unified utility function (Kornai, 2013a).
But you can get a good enough measure of real GDP and thus future Tax Revenue. Work to raise that in a sustainable fashion.
He gave in 2006 a quite unique appraisal of the experience of the great transformation in Central and Eastern Europe:
some countries preferred to 'front-load' the pain of austerity and thus were able to have a shake-out followed by rapid and sustainable growth. Others were complacent or corrupt. Ukraine should be wealthier and more secure than Poland. But it refused to make the difficult choices.
in a long-term perspective, it was for him a success as a swift and peaceful historical change that took place in the direction of the main tenets of Western civilization, capitalism, and democracy, but in an existential and middle term perspective for the populations who went through numerous hardships it represented a failure. « I keep two accounts and not one, and do not merge them. On one account, I gladly acknowledge a great success at the level of world history: a system was created superior to the former one, without bloodshed, with incredible speed. On the other account, I have the list of good and bad experience in everyday life; much joy and much pain. I consider it both sensible and defensible to say that what has happened in this region can be simultaneously considered a success in terms of its global historical significance, and a failure in many important aspects because it caused pain, bitterness and disappointment for so many people. » (Kornai, 2006a, p. 241)
Kornai didn't predict that Orban would offer a better deal to middle class families and thus get a lock on power.
His moral reflections in his autobiography also contained an analogous view – where he hinted with irony at a « methodological advance » – about the assessment of personal life actions: « I do not believe that the wrongs done by a person in one stage of his or her life can be righted by useful service to humanity in another stage. We need at least two accounts here. In one the wrongs indelibly remain, but we must of course strive to gather as many and as effective a body of good deeds in the other account. » (Kornai, 2013a, p. 10; 2006).
Why? One may point to a chap who devotes himself to arcane research and say 'that fellow is a parasite. He rides his own hobby horse while being fed at the expense of the productive people in society.' Yet some such people may make discoveries of enormous benefit to the whole of society. One day soon, Socioproctolgy will be recognized for what it is- viz. a cure for insomnia.
1.3. Supremacy of democracy
Thirdly, we also find a distinctive judgment – at some variance with the dilemma and compromise view – that could be coined Kornai’s axiological primacy of the political. He dismissed as « repugnant » the tradeoff that some posit between democracy and growth for China, being disposed to renounce the former for the benefit of the latter (Kornai, 2014, p. 11).
Who will fight a war against the Red Army to liberate China from the iron grip of the Party? Consider the fate of the Chinese Republic which quickly degenerated into War Lordism and the Japanese invasion.
He put forward his lexicographic ordering of preference between ultimate values. « Of primary value are democracy and the values closely tied to it, such as respect for fundamental human rights. Abandoning those cannot be compensated for with material goods, faster growth, or great welfare. There is no tradeoff whereby it would be “worth” sacrificing a slice of democracy for a rise in GDP ».
Kornai was wrong. If India could be ruled by a Dictator (it can't because 'assassination tempers autocracy) people would vote for such a Dictator even if he or she decides to establish a dynasty- like the one in North Korea.
The principal standard is the rule of a democratic regime. « If that requirement is met (or approximately met), then and only then can we start to weigh the secondary, tertiary etc. criteria. And if the assessment has reached that point, it becomes possible to consider tradeoffs among the secondary, tertiary, etc. criteria. » (Kornai, 2013a, p. 9)
One may equally say 'the first priority is the establishment of Islamic rule. Once that is established, we can have elections. The Creator must be served before his creatures can be served.'
Kornai’s approach of democracy had a specific tone. He usually referred to a minimalist and procedural definition inspired by Schumpeter, underlining the dismissible character of the government:
a popular uprising can cause the elected leader to flee. De Gaulle initially fled from Cohn Bendit and his revolting fellow students.
A “democratic minimum” is fulfilled if a government of a country comes into power as a result of a competition for the votes of the citizens and can be removed from office within the framework of a civilized process without a palace putsch, military coup, assassination, or revolution. (Kornai, 2006a, p. 215)
India meets this condition but only because Rahul doesn't want to meet the same fate as this Daddy and his Granny.
On the relation between capitalism and democracy, Kornai moved away from Schumpeter, who thought democracy could evolve outside capitalism. His essential point was that « capitalism is a necessary, but not sufficient condition of democracy » .
India isn't Capitalist. At the time when its first general election, under universal adult suffrage, was held, only about twenty percent of the population was wholly within the 'cash nexus'.
We observe that he did not attempt to develop the theoretical reasons for such a thesis, it was for him, as it were, a conclusion derived from historical observation.
which ignored large swathes of Africa and Asia.
A similar position may be seen in his 1990 article where he asserted the historical strong links between private property and market coordination on one hand, and between state property and bureaucratic coordination on the other, as another argument against market socialism that would attempt to combine state ownership and market coordination – a case of « weak links » (Kornai, 1990).
Kornai was aware that all was not well in Tito's Yugoslavia. What he, and everybody else, failed to predict was that the 'divorce between ownership and control' in Western economies would lead to the rise of mega-billionaires like Musk who would have outsize political influence.
Beyond Kornai’s courageous and early critique of the decline of democracy and the shift to autocracy in Orbán’s Hungary, we see that his last great study published was dedicated to the evolution of political regimes in the capitalist post-socialist world, where he found about one tenth of the population living in democracies and nine tenth in autocracies and dictatorships (Kornai, 2016b).
Just say 'countries will be ruled they always have been ruled' and you have hit the mark.
2. Kornai, Marx, and capitalism
12Amartya Sen discusses the relation of Kornai to Marx, focusing on the questions of equity, power, and freedom. We observe that Kornai abandoned marxism in the 1950s, defined himself as an anti-marxist in the last decade, and stated that in his eyes Marx had a responsibility in Bolshevism and Stalinism (Kornai, 2009). But his relation to Marx’s thought cannot be reduced to such statements. Theoretically, the latter remained a major influence on Kornai’s Weltanschauung. In his article « Karl Marx through the eyes of an East-European intellectual » he wrote:
I sought to integrate various schools of thought. If forced to name those who have influenced me most, I mention the names of Schumpeter,
who was an odd sort of Marxist
Keynes
who, in Malthus, has a common intellectual ancestor with Marx and Lasalle
and Hayek,
there were Hayekian Marxists- like Meghnad Desai-in the Eighties.
but first on the list comes the name of Karl Marx. (Kornai, 2009, p. 982-983)
Which is why Kornai was a bit krap.
13The author of Capital was at once an economist, a sociologist, a political scientist, and a historian;
He was none of these things. He was a journalist of a polemical and paranoid type.
he « was the great pioneer and incomparable practitioner of the system paradigm ».
Which is wholly useless.
Alluding to his contrasting view of socialism as a shortage economy
i.e. features 'repressed inflation'
and capitalism as a surplus economy,
Nonsense! A Cartel would prefer to create an artificial shortage and to allocate goods through other than open market processes. When I was in School, our teacher explained that some Levi jeans were deliberately damaged so they could be sold as 'seconds'. This was pure price discrimination. In monopolistic competition, you may deliberately create a shortage- e.g. a restaurant with a long waiting time which does not raise prices because of the 'scarcity indicates quality' fallacy.
he also notes: « I learned mainly from Marx how important it is to study and explain the persistent deviations from market equilibrium » .
Like what? A 'reserve army' of unemployed people keeping wages down? But, during booms, there was no such reserve army.
The Socialist System, published in 1992, presents grand dynamics of socialism with its emergence, institutional forms, development, laws of motion, and eventual crisis and collapse, which have a decisive and unique marxian flavour.
In other words, the thing was garbage.
2.1 High incomes, inequalities and innovation
14In a friendly comment, Sen imagines what could have happened if Kornai had taken up Marx’s line of thought and expanded it in the direction of « incentive compatibility », about distribution questions.
Marx was not a fool. He knew that the rich and the talented would run the fuck away from regimes they found personally 'incentive incompatible'. The question was, would the productivity of the land and factories they left behind be impaired? The answer, sadly, turned out to be 'yes'. Get rid of the Jew and the guys who look a bit Jewy and other guys who do the kind of high IQ stuff Jews are good at and, what happens? You lose the fucking Second World War because the guys who can discover how to make nuclear bombs have found refuge in America.
However, while Kornai generally characterized high inequalities as a feature of capitalism, and mentioned equity on his list of important values, he often opposed what he saw as marxist or populist views on this topic. The conservative colour that Sen disliked in the american title of The Road to a Free Economy (1990), was seen in his attitude towards income inequalities. In his Essays on the Nature of the Capitalist Economy, he underscored in a schumpeterian spirit the innovation impulse and resulting dynamism as great positive characteristics of capitalism and viewed the « huge rewards » expected by potential innovators as a necessary incentive for risk-taking (Chavance, 2015).
He was behind the times. The Econophysicists and even some Social Choice mavens were groping towards the notion that volatility drives liquidity drives Capital markets. Creative destruction was about more than innovation. It was about a realignment of control rights under a Social Contract that is necessarily incomplete.
After the 2008 financial crisis, when public opinion was « upset by skyrocketing earnings of many business people and top managers », and demanded measures against such tendency, he asserted: « Although the anger is morally justified and psychologically understandable, nevertheless an (unpopular) caveat is needed. » How difficult it would be to imagine « the work of an honest and competent jury […] able to draw the line between a well-deserved and an undeservedly high reward. I am not prepared to propose a practical decision, but just want to draw the attention to the two (mutually contradictory) aspects of very high business income. » (Kornai, 2013b)
What nobody understood was that the Fed taking on more and more 'down-side' risk and doing Quantitative Easing would result in the absurdity of billionaires like Trump getting big big cheques from the Treasury. He should have been thanking Obama, not pretending he was born in Kenya.
It is all the more striking to see how in his last publication, as Amartya Sen observed, the great thinker somewhat altered his general historical and theoretical assessments.
He didn't like Orban.
Recalling his expectations in Hungary in 1956, in view of all further historical developments, he had a disillusioned and bitter thought.
'Now I see that my expectations about the benefits to come from capitalism and democracy were unrealistic.
What is realistic is to admit that a highly productive people who are determined to become yet more productive, will do well regardless what type of political or economic regime they have.
More than six decades later, the image formed in me is much more sober. I know how much injustice and inordinate income-inequality is born of capitalism.
It is unjust that Beyonce earns much more than me just because she is pretty and talented whereas no one wants to see my booty shake.
The institutions of democracy are unable to prevent the abuse of power and corruption, albeit to different degrees in different countries. (Kornai, 2021)
This depends on the independence and reliability of the judiciary and other statutory bodies which are meant to act as 'checks and balances'. That in turn depends on the ethos of the people of the country. I recall a talk given by a leading Indian barrister at the LSE. Actually, I am lying. I don't recall what he spoke about. It was above my head. But, later on, at the bar, he spoke to us students in Hindi. He said 'English Justice worked in England because the English considered it shameful to lie on oath. In India, you were considered a fool if you didn't lie your head off when facing a Judge.'
János Kornai gained a large recognition in different strands of economic thought.
No, but he provided a bridge for economists in Communist countries to, timidly, move towards less stupid economic policies. Sen could have done the same but couldn't be arsed. Manmohan shone in that respect.
His work always aroused interest and debates, including of course criticism. Usually, he did not enter directly in controversies with his opponents, but later modified his ideas if he recognized value in their commentaries. The respect he obtained from his followers and his critics alike was a consequence of his intellectual and moral integrity.
Whereas Sen is reviled by non-Bengalis because he doubled down on virtue signalling by telling stupid lies.
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