The Place of the Soft Budget Constraint Syndrome in Economic Theory

1998 ◽  
Vol 26 (1) ◽  
pp. 11-17 ◽  
Author(s):  
János Kornai
Keyword(s):  
Economic Theory ◽  
Budget Constraint ◽  
Soft Budget Constraint

scholarly journals Central banks: Hesitant guardians of equilibrium

2018 ◽  
Vol 68 (s1) ◽  
pp. 125-139
Author(s):  
Jerzy Hausner ◽  
Andrzej Sławiński
Keyword(s):  
Monetary Policy ◽  
Best Practice ◽  
Financial System ◽  
Central Banks ◽  
Budget Constraint ◽  
Soft Budget Constraint ◽  
Intellectual Heritage ◽  
Inherent Tendency

In our paper we focus on situations when central banks have to conduct monetary policy in a world in which they cannot rely fully on what is regarded the best practice and they have to cope with financial system inherent tendency to be unstable. Both phenomena are rooted in János Kornai’s intellectual heritage highlighting that economy tends to divert from equilibrium and that soft budget constraint erodes economic actors’ behavior.

Innovation in centralized organizations: examining evidence from Soviet Russia

2014 ◽  
Vol 41 (1) ◽  
pp. 123-139 ◽  
Author(s):  
Dmitriy Chulkov
Keyword(s):  
Decision Making ◽  
Empirical Evidence ◽  
Budget Constraint ◽  
Soviet Economy ◽  
Decision Makers ◽  
Economic Systems ◽  
Soft Budget Constraint ◽  
Content Type ◽  
Economic Decision Making ◽  
Constraint Model

Purpose – This study aims to examine the economic factors that determine innovation pattern in centralized and decentralized economies and organizations. Design/methodology/approach – Empirical evidence on innovation in the centralized economy of the Soviet Union is reviewed. Existing theoretical literature in this area relies on the incentives of decision-makers in centralized organizations and on the concept of soft budget constraint in centralized command economies and hard budget constraint in market economies. This study advocates applying the hierarchy/polyarchy model of innovation screening to explain the pattern of innovation in centralized economic systems. Findings – Screening and development of innovation projects can be organized in a centralized or decentralized fashion. The differences in innovation between centralized and decentralized economic systems may be explained by elements of the principal-agent theory, the soft budget constraint model, and the theory of decision-making in hierarchies and polyarchies. Empirical evidence shows a sharp slowdown in both innovation and economic growth in the Soviet economy following the economic decision-making reform of 1965. The theoretical explanation most consistent with this evidence is the hierarchy decision-making model. Originality/value – Comparisons of innovation in centralized and decentralized economies traditionally relied on decision-makers' incentives and the concept of soft budget constraint. Upon analysis of empirical evidence from the centralized Soviet economy, this study advocates explaining innovation patterns based on decision-making theory of hierarchy.

scholarly journals Introduction to the Kornai 90 Symposium

2019 ◽  
Vol 16 (1) ◽  
pp. 41-47
Author(s):  
Dóra Piroska ◽  
Miklós Rosta
Keyword(s):  
Budget Constraint ◽  
The Political ◽  
Soft Budget Constraint ◽  
Social Scientists ◽  
Research Results ◽  
Socialist System

AbstractThis introduction to the Kornai 90 Symposium briefly overviews János Kornai's rich scholarship with the aim of highlighting those features of Kornai's work that are of particular interest to institutional economists. Above all, the introduction browses through some of his main works, such as Overcentralization, Anti-Equilibrium, and Economics of Shortage, with a special emphasis on the soft budget constraint, The Socialist System, and Kornai's latest writings on Hungary's U-turn. We invoke the political contexts of these works to suggest their impact on Kornai's diverse questions, changing methods, and the constraint they put on his conclusions as well as on the reception of the research results. In the end, we underline that Kornai was an independent scholar with an interest in a variety of methods and approaches, who nevertheless, or maybe consequently, had a remarkable impact on the thinking of social scientists and practitioners alike. The four papers presented in the symposium are testimonies to the living impact of Kornai's oeuvre on institutionalist analysis today.

scholarly journals The pitfalls of a centralized bureaucracy

2019 ◽  
Vol 69 (1) ◽  
pp. 1-16 ◽  
Author(s):  
Chenggang Xu
Keyword(s):  
Transition Economies ◽  
Budget Constraint ◽  
Judicial System ◽  
Soft Budget Constraint ◽  
Incentive Mechanisms ◽  
Early Stages ◽  
Incentive Problem ◽  
The Relationship

The incentive problem is a vital issue in all transition economies and China is not an exception. This paper summarises how China partially solved this problem at early stages of post-Mao reforms and why the Chinese solution is only transitory, which explains severe problems that China is facing now. The paper also discusses the incentive mechanisms in the judicial system and the effect of the soft budget constraint (SBC) syndrome on incentives, including the relationship between institutions and innovation.

scholarly journals Bargaining Success of Chinese Factories

1992 ◽  
Vol 132 ◽  
pp. 1086-1100 ◽  
Author(s):  
Kevin J. O'Brien
Keyword(s):  
Local Government ◽  
Budget Constraint ◽  
The State ◽  
Government Agencies ◽  
Soft Budget Constraint ◽  
Financial Transfers ◽  
Bureaucratic Control ◽  
Conflicting Interests ◽  
Collusive Behaviour

Many scholars have analysed bargaining between supervisory bureaucracies and Chinese large and medium-sized factories. Walder identified a web of informal, semi-bureaucratic relationships that structures negotiations over revenues, payments and subsidies. Granick and Tidrick pointed out that divided bureaucratic control increases the parties to bargaining, while conflicting interests present opportunities to play supervisors off against each other. Huang found collusive behaviour that occurs when local government agencies and firms rob the state treasury by increasing central subsidies and reducing central exactions in exchange for fees that go directly to local coffers. Numerous authors have noted that the focus of bargaining has shifted from material to financial transfers and have used (or questioned using) Kornai's “soft budget constraint” to explain the persistence of bargaining since the onset of reform.

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