Włodzimierz Brus

Repressed Inflation and Second Economy under Central Planning

Repressed inflation arises under central planning when excess demand on the consumer goods market does not lead to appropriate price increases. If prices in the second economy are allowed to increase the excess demand would seem to disappear. In reality this process would only partly take place and “speculative” money balances for future purchases in the first economy would arise. The accumulation of these balances is a rising function of the price-difference (between the second and first economy) ratio and of the probability of buying on the first market in the future, and a falling function of the pure rate of time preference.

Political system and economic efficiency: The east European context

Abstract Sections 1 and 2 reexamine the proposition about democratization of socialism as a factor of economic efficiency—in the light of the challenge contained in the article by Stanislaw Gomutka, “Economic Factors in the Democratization of Socialism and the Socialization of Capitalism” ( J. Comp. Econ. , Dec. 1977, 1 , 4:389–406). The author takes issue with Gomulkas conclusions, which view democracy as of little relevance for economic efficiency under socialism. Dissident views on the link between democracy and efficiency are discussed. Section 3 goes beyond this controversy in an attempt to analyze the prospects and efficiency aspects of a limited change within the existing Soviet-type political system (“Kadarism”).

Product Market and Capital Market in the Light of the Experience of the Hungarian New Economic Mechanism

Economists are seldom — many would say never — lucky enough to have their theoretical propositions tested empirically in a way sufficient to pronounce on the validity of the theories. The ceteris paribus clause is usually the main culprit: ‘other things’ are simply not equal … We cannot pretend therefore that the experience of the Hungarian New Economic Mechanism (NEM) provides us with the decisive proof of the virtual impossibility of expecting product markets to operate properly without simultaneously opening up these markets for factors of production, especially the capital market. Nevertheless, the fact that most analysts of the experience of the Hungarian NEM point to this flaw in the 1968 blueprint as the major reason for the new system falling short of expectations has to be taken as an important point of departure both for practical thinking on reform and for theoretical considerations (or reconsiderations, as in our case).