To explain the coexistence of economic freedom and big government, this paper distinguishes between big government in the fiscal sense of requiring high taxes, and big government in the Hayekian sense of requiring knowledge that is difficult to acquire from a central authority. The indicators of government size in measures of economic freedom capture the fiscal size but ignore the Hayekian knowledge problem. Thinking about government size in both the fiscal and Hayekian dimensions suggests the possibility of Hayekian welfare states where trust and state capacity facilitate experimentation and learning, resulting in a public sector that is big in a fiscal sense but not necessarily more vulnerable to the Hayekian knowledge problem. Pensions in Sweden are used as a case to illustrate the empirical relevance of the argument. The new pension system represents big government in a fiscal sense, but by relying on decentralized choice it requires relatively little central knowledge.

The paper explores how elites can develop capacity for collective agency through coordination.. The challenge for elites is to simultaneously deter the state from abusing power while at the same time relying on it to discipline defectors in their midst..The basic insight holds that the credibility of the state's threats depends on the cost of carrying them out, which elites can control. The elites can coordinate by being compliant when the ruler's threats serve their collective interest, which by reducing the cost of carrying them out make them more credible. On the other hand, their coordinated non-compliance has the opposite effect...

Part of the debate fueled by cryptocurrencies has revolved around the question of what we call money. This paper identifies two traditions in monetary theory that have tried to answer that question. On the one hand, the money or non-money view follows a strategy proposed by a version of philosophical essentialism, in which there is a set of defining characteristics of money that make it categorically different from other things used in transactions. On the other hand, the liquidity degree view emphasizes that the multiple objects that circulate as a means of payment differ in their degree of acceptability. Since there is no absolute standard of liquidity, a precise dividing line between money and non-money cannot be drawn. We challenge the money or non-money view, arguing that there is nothing in the nature of money that can be interpreted as a natural kind essence by which money can be categorically separated from non-money.

This 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.

This article investigates farm investment behaviour and the presence of soft budget constraints in the agricultural sectors of three Central and Eastern European countries – Estonia, Hungary and Slovenia – using individual farm accountancy panel data for the 2007–2015 period. Gross farm investment is positively associated with gross farm investment for the previous year, growth in real sales and public investment subsidies. Mixed results for debt square and cash flow variables imply that the different investment behaviour of farms pertains to different structures of investment sources among the countries under analysis. A particularly significant negative cash flow coefficient implies strong soft budget constraints for Estonian farms, while insignificant cash flow coefficients imply weak soft budget constraints for Hungarian and Slovenian farms.

János Kornai's pioneering scholarship examined the mechanisms of the socialist system. Following the collapse of the Soviet Union, Kornai's main focus was on the transition process in former socialist countries in central Eastern Europe. This paper builds on Kornai's work on the socialist system by analyzing horizontal bargaining within every political branch in contemporary China. I argue that this horizontal bargaining within the party is enhanced by the vertical bargaining. Incorporating Kornai's work on socialism, the “party chief and mayor” template extends the bargaining model from one key figure and one group in the “king and council” template to two key figures and their respective confidants. In addition, it incorporates institutional constraints into the graphical model. It also defines a “collective decision probability function,” which shows how the party chief and mayor model reaches “checks and balances” that limit the policy space, regardless of whether the policy is exogenous or endogenous.

Economic reforms and political changes often take place simultaneously. The outcomes of reforms in transitional countries depend on the sequence of these changes. Kornai developed his transition framework based on Central and Eastern Europe, and extended it to Asian nations. This article builds on Kornai's model and the institutional dialogue of economic development to construct and apply a model of transformation for Latin America. The aim is to better explain the relationship between institutional transformation and developmental outcomes over time. Our analysis utilises historical information and the views of current political leaders in Argentina. The analysis performed reflects on institutional performance, and evaluates the applicability of the proposed Latin American transition framework in practice. Based on the empirical evidence presented, we argue that economic transition is a path-dependent phenomenon, and that our model explaining the interaction of economic and political changes provides an explanation for the performance of institutional transformation in Argentina.

Research on populism has gained importance in the light of the recent global populist surge. Political scientists have become concerned with the problem of authoritarian populism, examining how illiberal, anti-pluralist populist parties have degraded liberal democracies. Economic research on recent forms of populism, although also growing, lack a comprehensive conceptual approach. This paper reduces this gap by conceptualizing authoritarian populism in terms of political transaction costs, arguing that its primary function is to vertically integrate political exchange under conditions of general franchise. If successful, authoritarian populist regimes internalize a large share of political transaction costs inherent in decentralized democratic political exchange. This entails a degraded version of democracy, eliminating a significant part of substantial electoral choice. Through weakening impersonal collective political contracting, authoritarian populists bring back private political contracting as a dominant political coordination mechanism, effectively re-feudalizing democracy.