The Kornai–Lipták Two-Level Planning Idea Is Very Much Reminiscent of the Taylor–Lange Market Socialist Models

As noted above, Kornai’s earlier ‘‘critiques’’ of socialism were very much half-hearted in that, although they sought to bring a larger part of the socialist economy within the purview of markets or ‘‘quasi-markets,’’ they still saw a significant and important role for state ownership and central planning of the economy. One of Kornai’s most well-known contributions to this area was ‘‘Two-Level Planning,’’ which he coauthored with Tamás Lipták, who did the mathematical modeling in the paper (Kornai & Lipták, 1965). This work extended previous work Kornai conducted with Lipták, which used mathematical methods to tackle various aspects of efficient planning under market socialist type arrangements.

The Kornai–Lipták two-level planning idea is very much reminiscent of the Taylor–Lange market socialist models described 30–35 years earlier in the throws [throes] of the early stages of the socialist calculation debate with Austrian economists Ludwig von Mises and F. A. Hayek (see, for instance, Lange, 1936; Taylor, 1929). The Taylor–Lange model worked as follows: let there be a market in consumer goods and labor but leave the means of production in government’s hands. The central planning office will set prices for producer goods and on the basis of these ‘‘accounting prices’’ producers will be instructed to set price equal to marginal cost and to combine resources in such a way as to minimize average cost. Of course, the initial administered prices will be wrong. At these non-equilibrium prices some goods will sit unpurchased; for others there will be excess demand. The resulting shortages and surpluses will signal to planners how they need to modify prices to bring the economy into equilibrium. Through trial and error the planners will engage in a kind of Walrasian auctioneer tattonement [tâtonnement means “groping”] process that will eventually converge on or approximate general competitive equilibrium. This equilibrium will have the same efficiency properties that general competitive equilibrium has in the Walrasian world in which producers’ goods are privately owned. . .  

—Peter T. Leeson, “We’re All Austrians Now: János Kornai and the Austrian School of Economics,” in vol. 26, pt. A of Research in the History of Economic Thought and Methodology, ed. Warren J. Samuels, Jeff E. Biddle, and Ross B. Emmett (Bingley, UK: Emerald Group Publishing, 2008), 212-213.