The Governmental Entrepreneurship

1. The Governmental Entrepreneurship Haijiu Zhu Zhejiang Gongshang University July,21,2012

2. 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?

3. 1.Introduction • During the the Socialist Economic Calculation 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?

4. 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 market failure,even toeconomic growth.

5. For example: • Douglass North:Only a government is capable of creating 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.

6. 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?

7. These are the questions that have not been completely answered in the Socialist Economic Calculation Controversy .

8. To solve the dilemma,the concept The Governmental Entrepreneurship should be introduced. • What is the Governmental Entrepreneurship ? • The entrepreneurship exists in the government sector.

9. 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.

10. 2.How to evaluate the governmental entrepreneurship? • Positive or negative?

11. 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”

12. 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)

14. “The local officals’ hard work brings about success of Chinese economy.”

15. “The current Chinese institution is the best institution in the history of humankind” • “The copmetition between the local governments” Steven Chang

16. But also according to efficiency criteria, it seems that the governmental entrepreneurship could be negatively evaluated. • -Inflation • -Corruption • -Pollution • -Unsustaintable economic development.

17. So the efficiency criterion is biased. • Are there any other criterions that we can use to evaluate the governmental entrepreneurship?

18. Rothbard: • -The fundamental principles(the natural law,ethic,etc).

19. 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.

20. 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!

21. 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.

22. “The predation in the private sector is illegal, but in the public sector it is the standard way of doing business ”(Holcombe,R.G)

23. Why the governmental entrepreneurship is usually oriented to the wrong direction ? • -The government itself is an organization violating the basic principle.

24. The government can be understood as the sole agent of institutional coercion .(J.Huerta de Soto )

25. 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.

26. But we should not confuse the rightness with the legitimacy(necessity). • The right things they have done can not justify the government.

27. 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 the government to do what the market needs. • The government is omnipotence as god!

28. 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.

29. 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. • .

30. The latter allow us to image an ideal society: • “Autonomy in every field”. • There will be numerous organziations providing all kinds of service.

31. 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)

32. It is not the abstract entity,the government,but the individual man in each field of society provides us what we need!

33. Enforcing rules Health care Foods,shoes… Eduction Transportation Fig.1 The ideal society:network of private agencies

34. How the various kinds of activities coordinated each other? • -By the price,the law and the ethic (in the market)

35. intervention to the market Enforcing rules shoes Transportation Health care foods iphone Defense Eduction market cars Government Fig.2 The current situation :one big government and the market

36. Which society is better? • governance failure:a society with a government , even a small government. • -market failure • -government failure • Government means governance failure?!

37. 4. How governance failure happened? • It is not a matter of failure or success, but how much failed. The worst The optimal democratic/constitutional State capitalism Totalitarian or Stalinism Autonomous Hobbesian Jungle Fig.3 The Spectrum of Governance

38. 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?

39. 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)

40. The market government Fig.4 With the efforts made by the entrepreneurs, the government will shrink and disappear

41. Conclusions: • The efficiency(Utilitarianism) cannot be used to justify the government. • The matter of governance is largely a matter of belief,moral, culture and tradition. • Anarchocapitalism is desirable and possible. • The government is result of evil, rather than an evil but necessary.

42. Thank you!