A formalized “shortage economics” Anna had run across had been pioneered by one János Kornai, a Hungarian economist who had lived in the Soviet-controlled era. Anna found certain insights of his useful, particularly those having to do with hoarding.
One day when she was visiting with Frank and Edgardo after a meeting in the Old Executive Offices, she showed Kornai’s book to them. Edgardo happily pored over the relevant pages, chuckling at the graphs and charts. “Wait, I want to scan this page.” He was still the happiest purveyor of bad news, and indeed had recently confessed that he was the one who had started the Department of Unfortunate Statistics, no surprise to his two friends.
“See?” Anna said, pointing to the top of one diagram. “It’s a decision tree, designed to map what a consumer does when faced with shortages.”
“A shopping algorithm,” Frank said with a short laugh.
“Have we made these choices?” Edgardo asked.
“You tell me. Shortages start because of excess demand, a disequilibrium which leads to a seller’s market, creating what Kornai calls suction.”
“As in, this situation sucks,” Edgardo said.
“Maybe. So the shelves empty, because people buy when they can. Then queuing starts, either as a physical line or a waiting list.”
“I like this term ‘investment tension,’ ” Edgardo said, reading ahead on the page. “When there aren’t enough machines to make what people want. But that’s surely not what we have now.”
“Are you sure?” Frank said. “What if there’s a shortage of energy?”
“It should be the same,” Anna said. “So, in a ‘shortage economy’ you get shortages that are general, frequent, intensive, or chronic. The twentieth-century socialisms had all these. Although Kornai points out that in capitalism you have chronic shortages in health care and housing. And now we have intensive shortages too, during the blackouts. No matter what the product or service is, you get consumers who have a ‘notional demand,’ which is what they would buy if they could, and then ‘completely adjusted demand,’ which is what they really intend to buy knowing all the constraints. Between those you have ‘partially adjusted demand,’ where the consumer is ignorant of what’s possible, or in denial, and still not completely adjusted. So the move from notional demand to completely adjusted demand is marked by failure, frustration, dire rumors, forced choices, and so on down his list. Finally the adjustment is complete, and the buyer has abandoned certain intentions, and might even forget them. Kornai compares that moment to workers in capitalism who stop looking for work, and so aren’t counted as unemployed.”
Frank read aloud, “ ‘A curious state of equilibrium can arise,’ ” and laughed. “So you just give up on your desires! It’s almost Buddhist.”
“I don’t know.” Anna frowned. “ ‘Forced adjustment equilibrium’? That doesn’t sound to me like what the Khembalis are talking about.”
“Although they are making a forced adjustment,” Frank mused. “And would probably agree we are forced to adjust to reality, if we want equilibrium.”
“Listen to this,” Edgardo said, and read: “ ‘The less certain the prospect of obtaining goods, the more intensively buyers have to hoard.’ Oh dear, oh my; here we are in a partially adjusted demand, but we don’t have monetary overhang, or even a black market, to take care of some of our excess demand.”
“So, not much adjustment at all,” Frank noted.
“I’ve seen examples of all these behaviors already at the grocery store,” Anna said. “The frustrating thing is that we have adequate production but still have excessive demand, because people don’t trust that there will be enough.”
“Maybe thinking globally, they are right,” Edgardo pointed out.
“But see here,” Anna went on, “how he says that socialism is a seller’s market, while capitalism is a buyer’s market? What I’ve been wondering is, why shouldn’t capitalism want to be a seller’s market too? I mean, it seems like sellers would want it, and since sellers control most of the capital, wouldn’t capital want a seller’s market if they could get it? So that, if there were some real shortages, real at first, or temporarily real, wouldn’t they seize on those, and try to keep the sense that shortages are out there, maybe create a few more, so that the whole system tipped from a buyer’s to a seller’s market, even when production was actually adequate if people trusted it? Wouldn’t profits go up?”
“Prices would go up,” Edgardo said. “That’s inflation. Then again, inflation always hurts the big guys less than the little guys, because they have enough to do better at differential accumulation. And it’s differential accumulation that counts. As long as you’re doing better than the system at large, you’re fine.”
“Still,” Frank said. “The occasional false shortage, Anna is saying. Or just stimulating a fear. Pretending we’re at war, all that. To keep us anxious.”
“To keep us hoarding!” Anna insisted.
Edgardo laughed. “Sure! Like health care and housing!”
Frank said, “So we’ve got all the toys and none of the necessities.”
“It’s backwards, isn’t it,” Anna said.
“It’s insane,” Frank said.
Edgardo was grinning. “I told you, we’re stupid! We’re going to have a tough time getting out of this mess, we are so stupid!”