February, 2020

Kornai goes to Kenya

  • Peter Leeson

    Senior Fellow, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
  • Colin Harris

  • Andrew Myers

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Read the article here.

János Kornai developed soft budget constraint logic to explain the socialist world’s dysfunctional economies. We extend his logic to explain dysfunctional land reform in the developing world. International development organizations such as the World Bank provide support for land privatization to developing-country governments, softening their budget constraints. Softer budget constraints encourage developing-country governments to pursue land privatization even when its social value is negative. Kenya’s land reform program illustrates the soft budget constraint syndrome.