Consumption and Price [antikvár]

INTRODUCTION This book is a summary of the findings of my investigations that went on for almost one and a half decades in the field of consumer prices and for almost two decades in that of consumption proper. It has been during the last ten years or so that problems of consumption and prices, together with their interrelations, have come to the centre of attention. The analysis of consumer prices began in 1956 at the Institute of Economics of the Hungarian Academy of Sciences which had been founded not long before. That inquiry set itself a double task. It intended to explore, mainly and above all, how consumer prices were actually set in Hungary; what principles prevailed and what problems were encountered in the practice of consumer price formation. The aim of the project coincided with the main effort present ever since the foundation of the Institute — to learn how the socialist economy is functioning. At the beginning there were the textbooks of political economy and other theoretical studies which described ideal, harmonious relations, confounding wish and reality, on the one hand, while on the other, there was practice which operated by an established routine. Theory was by no means a generalized model of practice. At any rate, one could not learn from theory what the practice of price formation really was. Nor could one learn it from the prescriptions laid down in ministerial resolutions and instructions. At first approximation it looked as if consumer price formation were a complete mess, with no principles at all, and chance and willfulness prevailing. This belief was supported by the fact that by that time the sociahst management had already established an almost decade-long practice that the 'price-setters' had performed their routine work as if by instinct. As a matter of fact, most of them performed the complex and responsible task of price-setting well, considering the given framework. It was a fault attributable to the gap between theory and practice and not to the price specialists that, when setting consumer and producer prices, they frequently could not tell what interrelations they considered, what viewpoints and interests they expressed and how they harmonized them. The first task was to find a common language with those who set the prices. This was made difficult by the fact that the 'price people' were distrustful of the theoreticians — and not quite without reason. They did not like spending hours with consultation, when in the end merely a thousand-and-first schematic 'theoretical' study was born, or, two examples, torn out of context, became parts of a university lecture, under the pretext of 'actualizing'. All those who were engaged in the inquiries into the economic mechanism at the time know these difficulties all too well. As regards the methods of investigation, we learned much from the research of János Kornai.