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!