Innovation and dynamism - Kornai J#225;nos - Nyit#243;lap.pdfVIP

Economics of Transition Volume 18(4) 2010, 629–670 DOI: 10.1111/j.1468-0351.2010.00396.x Innovation and dynamism Interaction between systems and technical 1 progress ´ Janos Kornai Collegium Budapest, H-1014 Budapest, Szentharomsag u. 2, for correspondence; Harvard University, Cambridge, MA, USA; and Central European University, Budapest, Hungary. E-mail: kornai@colbud.hu Abstract Literature on post-socialist transformation usually deals with the political, eco- nomic and social sides of it, although there have also been important changes in the field of technical advance in the last twenty years. One of capitalism’s main virtues is the strong incentive it gives to dynamism, enterprise and the innovation process. Every revolutionary new product (for civilian use) has been brought about by the capitalist system. The socialist system was capable at most of developing new mili- tary products. The article analyzes how far the radical difference can be explained by the innate tendencies and basic attributes of the two systems. Our daily lives have been transformed by these new products (for instance, the sphere of informa- tion and communications by the computer, the mobile phone and the internet). While many people see all these as favourable changes, fewer discern the causal relation between the capitalist system and rapid technical progress. Yet the usual syllabus of microeconomics does not enlighten students on this important virtue of Received: March 29, 2010; Acceptance: March 29, 2010 1 ´ I express my gratitude to Philippe Aghion, Julian Cooper, Zsuzsa Daniel, Zsolt Fekete, Thomas Geodecki, ´ ´ ´ Philip Hanson, Jerzy Hausner, Judi