Disequilibrium models of investment

Abstract

Investment processes in the centrally planned economies (CPEs) are characterized by persistent shortages and disequilibria. This assertion is accepted almost unanimously in the literature. Several authors, notably Kornai (1980), go even further and attribute the responsibility for all shortages in the CPE to the state productive sector which is characterized by permanent excess demand, spilling over into the consumption goods market. Such a spillover may or may not exist, but the striking fact is that the discussion of disequilibria and shortages in CPEs usually focuses — and the structure of this volume confirms it — on analysis of the consumption goods market. This is probably due in part to the lack of challenge similar to that offered by Richard Portes, for the study of the consumption goods market. Portes’ questioning of the conventional wisdom, according to which there exists a permanent excess demand for consumer goods in the CPEs, provoked a lot of criticism and protests but also stimulated a number of theoretical and empirical studies. Consequently, Western macroeconomics, in its quantity rationing version, and disequilibrium econometrics have been successfully applied in recent years to the study of the consumption goods market. As far as the investment sector is concerned, the permanence of excess demand is accepted by the partisans of the shortage school as well as by those of the disequilibrium school, and there are very few attempts to verify that hypothesis empirically.