The Governmental Entrepreneurship
Haijiu Zhu
Zhejiang Gongshang University
July,21,2012
• 1.Introduction
• 2. How to evaluate the governmental entrepreneurship?
• 3. Go beyond the distinction between the market and the government.
• 4. How governance failure happened?
• 1.Introduction• During the the Socialist Economic Calcul
ation Controversy happed last centry , the Austrians have proved the planned economy must fail.
• It means the big government is undesirabe.
• But the question left to be answered is whether a small government is desirable?
• In fact, to most of the economists, the government is indispensable.
• According to their view, the government will play an important role in the fields of mar
ket failure,even to economic growth.
•
• For example:• Douglass North:Only a government is capable of cr
eating and enforcing impersonal rules.
• Tony Fu-Lai Yu:The role of the government’s intervention in Asia NIEs(Newly Industrializing Economies ),such as Taiwan,Singapore and South Korea cannot be denied.
• C.Polanyi:the road to the free market was opened and kept open by an enormous increase in continous,centrally organized and controlled interventionism.
• Which raises the following questions:
• Is the government necessary or not?
• Should the Austrians agree with most of the economists?
• How to understand the relationship between the market and the government?
• These are the questions that have not been completely answered in the Socialist Economic Calculation Controversy .
• To solve the dilemma,the concept The Governmental Entrepreneurship should be introduced.
• What is the Governmental Entrepreneurship ?
• The entrepreneurship exists in the government sector.
• The related concepts are the public entrepreneurship and political entrepreneurship.
• -The public spirit of the private agents, such as NGO.
• -The creativity of the politician who introduce political innovations.
• 2.How to evaluate the governmental entrepreneurship?
• Positive or negative?
• According to the efficiency criteria(utilitarianism), it seems that the governmental entrepreneurship could be positively evaluated.
• The governmental entrepreneurship is regarded as the main driving force for the economic development.
• “Chinese Model”
• Under the pressure of the performance evaluation, the local officals usually try their best to exercise their entrepreneurship.
• e.g.to be alert to the opportunities(I.Kizner)
• “The local officals’ hard work brings about success of Chinese economy.”
• “The current Chinese institution is the best institution in the history of humankind”
• “The copmetition between the local governments”
Steven Chang
• But also according to efficiency criteria, it seems that the governmental entrepreneurship could be negatively evaluated.
• -Inflation
• -Corruption
• -Pollution
• -Unsustaintable economic development.
• So the efficiency criterion is biased.
• Are there any other criterions that we can use to evaluate the governmental entrepreneurship?
• Rothbard:
• -The fundamental principles(the natural law,ethic,etc).
• According to the fundamental principle standard, governmental entrepreneurship is destructive.
• -What guides the officals’ action is not the principles,but the regulations,and the order from the superiors.
• They innovate to maximize the government’s interest,or their own interest, usually by redistribution of the wealth.
• E.g.The local government can sell the land to the investors at below the market price.
• They make their profits at the price of others!
• The entrepreneurs in private sectors have to innovate to meet the demand of the consumers in order to survive.
• But the government officials need not make such kind of innovation.
•
• “The predation in the private sector is illegal, but in the public sector it is the standard way of doing business ”(Holcombe,R.G)
• Why the governmental entrepreneurship is usually oriented to the wrong direction ?
• -The government itself is an organization violating the basic principle.
• The government can be understood as the sole agent of institutional coercion .(J.Huerta de Soto )
• Although it can not be denied that the government could do right things at some aspects,such as enforcement of the law, providing the public service,etc.
• But we should not confuse the rightness with the legitimacy(necessity).
• The right things they have done can not justify the government.
• 3.Go beyond the distinction between the market and the government.
• The question what the mainstream economics usually asks is “what the government should do ” .
• Is it a right question?• It seems that there is an invisble hand guiding th
e government to do what the market needs.• The government is omnipotence as god!•
• The Public Choice School try to find a way to enhance the efficiency the government, and the Constitutional Economics try to find a way to limit the power of the government.
• All these theories assume the government is necessary.
• But is it true that the government is necessary ?
• If we insist on the distinction between the market and the government,the answer will be yes.
• But if we start from the individuals and the principles that discipline them,the answer will be no.
• .
• The latter allow us to image an ideal society:
• “Autonomy in every field”.
• There will be numerous organziations providing all kinds of service.
• The “public service” never means the service that could only be supplied by the public sector.
• The market itself is a public goods (Ostrom,E)
• It is not the abstract entity,the government,but the individual man in each field of society provides us what we need!
Eduction
Health care
Enforcing rules
Transportation
Foods,shoes…
Fig.1 The ideal society:network of private agencies
• How the various kinds of activities coordinated each other?
• -By the price,the law and the ethic (in the market)
Enforcing rules
Health care
Eduction
Transportation
Defense
shoes
foods iphone
cars
Fig.2 The current situation :one big government and the market
intervention to the market
Government
market
• Which society is better?
• governance failure:a society with a government , even a small government.
• -market failure
• -government failure
• Government means governance failure?!
• 4. How governance failure happened?
• It is not a matter of failure or success, but how much failed.
•
The worst The optimal
Fig.3 The Spectrum of Governance
Totalitarian or
Stalinism
democratic/constitutional
Autonomous
Hobbesian Jungle
State capitalism
• Why the right ones are better than the left ones in governance?
• -less coercion
• -more opportunities to exercise their entrepreneurship to serve the consumers.
• The problem is why a better governance is always scarce in the world?
• The entrepreneurs with both conscience and capability are scarce.
• -They find and enforc the basic principles. (conscience)
• -They provide better service than that now provided by the government.(capability)
government
The market
Fig.4 With the efforts made by the entrepreneurs, the government will shrink and disappear
• Conclusions:• The efficiency(Utilitarianism) cannot be us
ed to justify the government.• The matter of governance is largely a matt
er of belief,moral, culture and tradition.• Anarchocapitalism is desirable and possibl
e.• The government is result of evil, rather tha
n an evil but necessary.
• Thank you!