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The Socialist SystemThe Political Economy of Communism$
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Janos Kornai

Print publication date: 1992

Print ISBN-13: 9780198287766

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198287763.001.0001

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Shortage and Inflation: The Causes

Shortage and Inflation: The Causes

Chapter:
(p.262) 12 Shortage and Inflation: The Causes
Source:
The Socialist System
Author(s):

János Kornai (Contributor Webpage)

Publisher:
Oxford University Press
DOI:10.1093/0198287763.003.0012

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

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