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The economics of institutions and comparative systems owes an enormous debt to János Kornai. This was well exemplified by Kornai (2014a), offering a synthetic characterization of socialism and capitalism, respectively, as shortage and surplus economies. I was very fortunate, over the last fifty years, to have had many opportunities to meet him and to talk to him, and to discuss these issues directly with him. János can be very persuasive, and over the years I have somewhat converged towards his views, but in this essay, I am going to rehearse one residual major disagreement on the shortage economy, and three reservations on capitalism as the surplus economy which, after discovering from talking to him that he was in basic sympathy with them, I have downgraded to qualifications.

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Since the first publication of Economics of Shortage in 1980, an entire economist generation has grown up, whose members are well-versed in numerous sub-themes of the economic sciences. They find their way around the most modern methodological schools, yet they know significantly less about the workings of the social systems. To the younger generations, the socialist system, whose heritage still lives with us and whose characteristic behavioural forms and attitudes have not yet disappeared at all from the economic practices of the post-socialist countries, seems like the distant past, just like the Turkish occupation or the Austro-Hungarian Monarchy.The target audience of Kalligram Publishing House is this generation, to the majority of whom János Kornai’s works will probably come as a revelation. The years of crisis — whose end is still far off — has made even those uncertain about the workings of economic systems, who have personal experiences of the decades of socialism. Therefore, it would be quite important for them to re-read Kornai’s works written during the socialist era in order to be able to grasp the workings of economic systems through the help of balanced and objective analyses. Moving beyond the momentary shocks and nostalgias, the older ones also have a great need to evaluate the roles of the market and the state in a bias-free manner resting on a solid theoretical foundation, to realistically see the mechanisms of shortage and surplus economies. This way it is perhaps possible to avoid “going down the same river twice”, which disappears somewhere underground and never reaches the sea.

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) = c o v   (   β 0 − 1 u i ) =   β 0 − 1 Σ ( β 0 − 1 ) ′ There are n ( n + l)/2 distinct covariances (due to symmetry) in Ω. The assumption that Σ is diagonal and contains n elements implies that one needs n ( n − 1)/2 further restrictions to

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