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Private Enterprise vs. Government Control: An Organizationally Dynamic Comparison

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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. 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.
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    More about this item

    Keywords

    Organising production; public vs private enterprise; dynamic framework;
    All these keywords.

    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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