“Autonomous Control of the Economic System“, co-author: Béla Martos. Econometrica, May 1973, Vol. 41, No. 3, pp. 509-528. Original: 5.45, in Hungarian, 1971.

Kornai János: “Autonomous Control of the Economic System“, co-author: Béla Martos. Econometrica, May 1973, Vol. 41, No. 3, pp. 509-528. Original: 5.45, in Hungarian, 1971.

Economethca, Vol. 41, No. 3 (May, 1973) AUTONOMOUS CONTROL OF THE ECONOMIC SYSTEM By János Kornai and Béla Martos1 The possible impact of autonomous control (vs. the price mechanism and directive control) on the functioning of an economic system is studied. It sheds some light on similarities among economic systems that are quite different in their higher functioning. The survival and stability conditions for a Leontief-type economy demonstrate the role stock signals can play in controlling the behavior of producers and consumers. Complicated systems fulfilling a number of duties are controlled, generally, by multi-stage regulators consisting of both simple and complex mechanisms. For example, some of the functions of the spaceship are controlled by simple, built-in servomechanisms ; others are guided half-automatically from the earth ; and still others are guided directly by handpower of the astronauts. Or let us take a higher living organism, the human body, say. Some of its functions, respiration, digestion, blood circulation, functioning of the heart, lungs, stomach, intestines, and kidneys are controlled by the autonomous (vegetative) nervous system ; other functions by the central nervous system. An economy is also a complicated system, fulfilling a great number of functions. Its processes are controlled by several kinds of mechanisms of low and high degree. The low degree mechanism, following the physiological analogy, is called autonomous (vegetative) control.2 The first section of our study explains the idea of the “control mechanism,” draws comparisons between the different mechanisms, and presents some empirical findings. Sections 2 and 3 analyze the autonomous control theoretically, with the aid of a general and a special model. In the fourth section we draw conclusions and comment on the previous theoretical analysis. 1. CONTROL MECHANISMS 1.1. Price Mechanism and Directive Mechanism For an abstract analysis of the functioning of the economic system we divide it into two spheres. The material and physical processes of the economy, such as production, displacement of products, and consumption, take place in the real sphere. The control sphere is to guide the real processes. It is here that the gathering, 1 This study is based on the ideas of economics and model building which J. Kornai set out in his book [4] and his paper [5]. The further development of his general model and the special model presented here are the common work of the authors; the analysis of the latter was done by B. Martos. The authors did their research in the Institute of Economics of the Hungarian Academy of Sciences. J. Kornai worked for six months with the Cowles Foundation for Research in Economics (Yale University, U.S.A.), on funds allotted by the Ford Foundation. We take this opportunity to express our thanks to the institutions that helped our research work. The authors wish to thank T. C. Koopmans for his helpful comments. 2 In the English language physiological literature, the adjective “autonomous” is used to indicate the low degree nervous system. Other languages, among them Hungarian, use the word "vegetative.” The analogous economic phenomenon we are presenting here is well described by both adjectives.