The Kornai Effect and Soft Budget Constraints

Pun, Wing Chung

doi:10.1006/jcec.1995.0004

Cited by 7 publications

(6 citation statements)

References 4 publications

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“…o Market demand gets out of control, even though some of it is not actually covered by available funds (see Chapter 4 of this volume: the 1983 study written with Jörgen Weibull, entitled "Paternalism, buyers' market, sellers' market" and these articles: Goldfeld and Quandt 1988Magee and Quandt 1994;Pun 1995;and Quandt 2000). Demand "runs away.…”

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confidence: 99%

The soft budget constraint

Kornai¹

2014

Acta Oeconomica

104

100

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The author’s ideas on the soft budget constraint (SBC) were first expressed in 1976. Much progress has been made in understanding the problem over the ensuing four decades. The study takes issue with those who confine the concept to the process of bailing out loss-making socialist firms. It shows how the syndrome can appear in various organizations and forms in many spheres of the economy and points to the various means available for financial rescue. Single bailouts do not as such generate the SBC syndrome. It develops where the SBC becomes built into expectations. Special heed is paid to features generated by the syndrome in rescuer and rescuee organizations. The study reports on the spread of the syndrome in various periods of the socialist and the capitalist system, in various sectors. The author expresses his views on normative questions and on therapies against the harmful effects. He deals first with actual practice, then places the theory of the SBC in the sphere of ideas and models, showing how it relates to other theoretical trends, including institutional and behavioural economics and theories of moral hazard and inconsistency in time. He shows how far the intellectual apparatus of the SBC has spread in theoretical literature and where it has reached in the process of “canonization” by the economics profession. Finally, he reviews the main research tasks ahead.

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confidence: 99%

The soft budget constraint

Kornai¹

2014

Acta Oeconomica

104

100

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“…The Kornai effect was later extensively formalized by Goldfeld and Quandt (, , ); Ambrus‐Lakatos and Csaba (); Scott (); Magee and Quandt (); Pun (); and Prell (). For a detailed survey, see Vahabi (, ).…”

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confidence: 99%

“…The Kornai effect was later extensively formalized byGoldfeld and Quandt (1988, 1992; Ambrus-Lakatos and Csaba (1990);Scott (1990);Magee and Quandt (1994);Pun (1995); andPrell (1996). For a detailed survey, seeVahabi (2001Vahabi ( , 2005.4 Xu (1998, 1999) tried to explain the miracles and bubbles in Korea and Taiwan on the basis of the SBC Alexeev and Kim (2008).…”

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confidence: 99%

Soft Budget Constraint Reconsidered

Vahabi

2011

Bulletin of Econ Res

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This paper demonstrates that Kornai's original concept of the soft budget constraint (SBC) as a theoretical innovation in micro-theory disguises income redistributions that are essentially macroeconomic relationships. The SBC also postulates a competitive market economy as the benchmark of hard budget constraint (HBC) and efficiency. A recent formal theory explains the SBC as a component of profit-maximizing strategic behaviour. From this perspective, the SBC can be integrated into the new microeconomics, but it loses its specific institutional connotation and its macroeconomic dimension. The SBC is thus included in ubiquitous market-type relationships, particularly complete (optimal) contractual arrangements.

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“… 7 The “Kornai effect” was extensively formalized later on by Goldfeld and Quandt (1988, 1992, 1993); Ambrus-Lakatos and Csaba (1990); Scott (1990); Magee and Quandt (1994); Pun (1995); and Prell (1996). For a detailed survey, see Vahabi (2001, 2005).…”

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confidence: 99%

Soft Budget Constraints and Predatory States

Vahabi

2012

Review of Radical Political Economics

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The concept of the soft budget constraint (SBC) was initially formulated by economist Janos Kornai in the context of socialist economies. I argue that the SBC can be regarded as the political economy of a predatory state in both the so-called socialist and capitalist economies. The hard budget constraint (HBC) is not related to an ideal competitive market economy but to a household level budget constraint, particularly by salaried members of the population in both types of economies. JEL codes: D20, E20, P2, P5

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The Kornai Effect and Soft Budget Constraints

Cited by 7 publications

References 4 publications

The soft budget constraint

The soft budget constraint

Soft Budget Constraint Reconsidered

Soft Budget Constraints and Predatory States

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