Overcentralization in Economic Administration: A Critical Analysis Based on Experience in Hungarian Light Industry

Overcentralization in Economic Administration (Oxford, 1959) was the first book written by an Eastern European and published in the West that openly criticized socialist central planning. In this work the distinguished economist János Kornai begins a lifelong study of the economic organization of centrally planned economies. Professor Kornai's aim in this book was to observe the reality of the working socialist system, and to draw conclusions that were not distorted by the laws of Marxist political economy. He provided a lucid and coherent account of conditions, along with normative recommendations which influenced the Hungarian reform process, culminating in the economic changes of 1968. Professor Kornai identified several systematic failures of the centrally planned economy and gave a prescient account of weak economic performance and eventual disintegration. His argument for radical rather than partial change makes this book essential reading for those interested in the economics of transition in Eastern Europe.

Table of Contents:
List of tables I: THE SYSTEM OF INSTRUCTIONS II: INCENTIVES FOR TOP MANAGEMENTS III: SOME USEFUL AND HARMFUL TENDENCIES WHICH RESULT FROM THE JOINT EFFECTS OF PLAN INSTRUCTIONS AND INCENTIVES IV: RELATIONSHIPS BETWEEN ENTERPRISES. THE ROLE OF ENTERPRISES AS BUYERS AND SELLERS V: EXCESSIVE CENTRALIZATION AS A SOCIO POLITICAL PROBLEM VI: ATTEMPTS TO DEVELOP LOCAL INITIATIVE AND AUTONOMY FOR ENTERPRISES Notes on the Book's Previous and Subsequent History

About the Author :
János Kornai was Professor of Economics Emeritus at Harvard University and Corvinus University of Budapest.

Review :
Review from previous edition Kornai found little evidence of comprehensive planning. Instead, he determined that the planning system consisted of quarterly gross output orders that could readily be manipulated by managers and had to be fulfilled at any price. Kornai's Overcentralization already contained the seeds of Kornai's later key findings of the dysfunctionalities of socialist planning; namely, soft budget constraints and the shortage economy. Kornai's most important finding was largely overlooked throughout the socialist world-that the planned economy could not be reformed by partial measures. Kornai's interest in methodology arose from the inadequacy of existing economic theory, both Marxist-Leninist and Western mainstream, to help solve major topical economic problems. He used the methodology that he developed to analyse concrete economic issues. The major economic problem that he analysed was the reform of the bureaucratic-command system in his native Hungary. His PhD thesis, which was published in English translation as Overcentralization in economic administration was a detailed account of some problems of that system. He was involved in plans to reform it. However, it became very obvious that there was no economic theory that could provide guidance for reformers. Some people were attracted to market socialism, but Kornai rejected it both in theory and as a basis for improving the Hungarian economic system. The Hungarian Janos Kornai is the most famous, and certainly the most influential, economist to have emerged from postwar Communist Europe. His reputation is based on three books, Overcentralization, Economics of Shortage, and The Socialist System, which knocked away the intellectual foundations of the publicly owned, bureaucratically planned economy.