Soft Budget Constraints and Predatory States

The concept of the soft budget constraint (SBC) was initially formulated by economist Janos Kornai in the context of socialist economies. I argue that the SBC can be regarded as the political economy of a predatory state in both the so-called socialist and capitalist economies. The hard budget constraint (HBC) is not related to an ideal competitive market economy but to a household level budget constraint, particularly by salaried members of the population in both types of economies.