Working Paper Series
Private Enterprise vs. Government Control: An Organizationally Dynamic Comparison
Abstract: 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.
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.
Keywords: Organising production; public vs private enterprise; dynamic framework; (follow links to similar papers)
JEL-Codes: D23; D70; L10; (follow links to similar papers)
70 pages, January 1985
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