Working Paper No. 137

Private Enterprise vs. Government Control: An Organizationally Dynamic Comparison


It is noted that modern economics cannot decide which economic system is the best way of organizing production. In particular, support is given to Nelson (1981) who claims that modern economics does not provide any substantial argument in favor of private enterprise being the best. However, rather than concluding that government control or socialist planning could do at least as well, this essay explores the alternative hypothesis that the organizationally static framework of most of modern economics is too narrow to see the entire truth.

Connected to Schumpeter's and Hayek's approaches, an organizationally dynamic analytical framework is outlined and shown to reveal important advantages of private enterprise, in particular of contestable private enterprise with equitable risk assignment. This argument is qualified by showing that even such a system may suffer from organization failures which can be alleviated by selection-neutral industrial policy, including government entrepreneurship on underdeveloped markets.
 

Elgar Companion to

Social Capital and Health

Martin Ljunge okt 2018.jpg

Martin Ljunge, IFN, is the author of a chapter, "Trust promotes health: addressing reverse causality by studying children of immigrants", in a new book edited by Sherman Folland and Eric Nauenberg. The cutting edge of research is presented, covering the ever-expanding social capital field.

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