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Private Enterprise vs. Government Control: An Organizationally Dynamic Comparison

Author

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  • Pelikan, Pavel

    (Research Institute of Industrial Economics (IFN))

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. 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.

Suggested Citation

  • Pelikan, Pavel, 1985. "Private Enterprise vs. Government Control: An Organizationally Dynamic Comparison," Working Paper Series 137, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0137
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    References listed on IDEAS

    as
    1. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
    2. Forte, Francesco, 1982. "The Law of Selection in the Public Economy as Compared to the Market Economy," Public Finance = Finances publiques, , vol. 37(2), pages 224-245.
    3. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58, pages 211-211.
    4. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    5. Richard R. Nelson, 1981. "Assessing Private Enterprise: An Exegesis of Tangled Doctrine," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 93-111, Spring.
    6. Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-595, September.
    7. Sidney G. Winter, 1971. "Satisficing, Selection, and the Innovating Remnant," The Quarterly Journal of Economics, Oxford University Press, vol. 85(2), pages 237-261.
    8. Demsetz, Harold, 1969. "Information and Efficiency: Another Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 12(1), pages 1-22, April.
    9. Arrow, Kenneth J & Lind, Robert C, 1970. "Uncertainty and the Evaluation of Public Investment Decisions," American Economic Review, American Economic Association, vol. 60(3), pages 364-378, June.
    10. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
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    More about this item

    Keywords

    Organising production; public vs private enterprise; dynamic framework;

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

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