Role Of The State In The Economy

Up-to-date, holistic and comprehensive discussion of public expenditure, its history, value for money, risks and remedies.

This paper discusses the role of the state from a historical perspective. It outlines how that role has changed over the past hundred years and discusses the forces that have promoted the changes. In the period between 1913 and 1980, there was a large increase in public spending in industrial countries and a considerable expansion in the role of the government in the economy in all countries. The paper also outlines the intellectual developments that, starting in the 1970s, have brought about a reaction to the large role that the state has come to play in the economy.

The American economy has provided a level of well-being that has consistently ranked at or near the top of the international ladder. A key source of this success has been widespread participation in political and economic processes. In The Government and the American Economy, leading economic historians chronicle the significance of America’s open-access society and the roles played by government in its unrivaled success story. America’s democratic experiment, the authors show, allowed individuals and interest groups to shape the structure and policies of government, which, in turn, have fostered economic success and innovation by emphasizing private property rights, the rule of law, and protections of individual freedom. In response to new demands for infrastructure, America’s federal structure hastened development by promoting the primacy of states, cities, and national governments. More recently, the economic reach of American government expanded dramatically as the populace accepted stronger limits on its economic freedoms in exchange for the increased security provided by regulation, an expanded welfare state, and a stronger national defense.

Recoge: Introduction Peter J. Boettke and Peter T. Leeson PART ICLASSICAL ARGUMENTS FOR LAISSEZ FAIRE 1. David Hume (1985 [1777]), ‘Of the Independency of Parliament’, in Eugene F. Miller (ed.), Essays: Moral, Political, and Literary, Essay VI, Indianapolis, IN, USA: Liberty Fund, Inc., 42–46 2. David Hume (2000), ‘Of the Origin of Justice and Property’, ‘Of the Rules, Which Determine Property’ and ‘Of the Transference of Property By Consent’, in David Fate Norton and Mary J. Norton (eds), A Treatise of Human Nature, Book 3: Part 2: Section 2, Section 3 and Section 4, Oxford, UK and New York, NY, USA: Oxford University Press, 311–31 3. Adam Smith (1961 [1776]), ‘Of the Sources of the General or Public Revenue of the Society’, in Edwin Cannan (ed.), An Inquiry into the Nature and Causes of the Wealth Of Nations, Book V, Chapter II, London, UK: Methuen & Co. Ltd, 341–440 4. Frédéric Bastiat (1850 [2007]), The Law, Auburn, AL: Ludwig von Mises Institute, 1–55 5. Jean-Baptiste Say (2001 [1880]), ‘Of the Effect of Government Regulations Intended to Influence Production’, in A Treatise on Political Economy, Book I, Chapter XVII, Ontario, Canada: Batoche Books, [translated by C.R. Prinsep], 60–83 6. Simon Newcomb (1870), ‘The Let-Alone Principle’, North American Review, CCXXVI (226), January, 1–33 7. Herbert Spencer (1981 [1843]), ‘The Proper Sphere of Government’, in The Man Versus the State: With Six Essays on Government, Society, and Freedom, Indianapolis, IN, USA: Liberty Fund, Inc., 181–263 PART IICRITICS OF LAISSEZ FAIRE 8. John Stuart Mill (1909 [1848]), ‘Of the Grounds and Limits of the Laisser-faire or Non-interference Principle’, in Principals of Political Economy with Some of Their Applications to Social Philosophy, Book IV, Chapter XI, London, UK: Longmans, Green and Co., 304–46 9. John Maynard Keynes (2012 [1926]), ‘The End of Laissez-Faire’, in Elizabeth Johnson and Donald Moggridge (eds), The Collected Writings of John Maynard Keynes. Volume IX: Essays in Persuasion, Cambridge, UK and New York, NY, USA: Cambridge University Press, 272–94 10. R.G. Tugwell (1932), ‘The Principle of Planning and the Institution of Laissez Faire’, American Economic Review, 22 (1), March, 75–92 11. J.E. Meade (1954), ‘External Economies and Diseconomies in a Competitive Situation’, Economic Journal, 62 (245), March, 54–67 12. Paul A. Samuelson (1954), ‘The Pure Theory of Public Expenditure’, Review of Economics and Statistics, 36 (4), November, 387–9 13. Francis M. Bator (1958), ‘The Anatomy of Market Failure’, Quarterly Journal of Economics, 72 (3), August, 351–79 14. George J. Stigler and Paul A. Samuelson (1963), ‘A Dialogue on the Proper Economic Role of the State’, Selected Papers No. 7, Graduate School of Business, University of Chicago, 3–39 PART IIITHE RESTATEMENT OF LAISSEZ FAIRE 15. Ludwig von Mises (2005), ‘Liberal Economic Policy’, Liberalism: The Classical Tradition, Chapter 2, Indianapolis, IN, USA: Liberty Fund, Inc., 37–75 16. Friedrich A. Hayek (1980), ‘Individualism: True and False’, in Individualism and Economic Order, Chapter I, Chicago, IL, USA and London, UK: University of Chicago Press, 1–32 17. R.H. Coase (1959), ‘The Federal Communications Commission’, Journal of Law and Economics, II, October, 1–40 18. R.H. Coase (1960), ‘The Problem of Social Cost’, Journal of Law and Economics, III, October, 1–44 19. Murray N. Rothbard (1974), ‘The Anatomy of the State’, in Egalitarianism as a Revolt Against Nature and Other Essays, Washington, DC, USA: Libertarian Review Press, 34–53 20. James M. Buchanan (1976), ‘The Justice of Natural Liberty’, Journal of Legal Studies, 5 (1), January, 1–16 21. Gordon Tullock (1967), ‘The Welfare Costs of Tariffs, Monopolies, and Theft’, Western Economic Journal, 5 (3), June, 224–32 22. Armen A. Alchian (2006), ‘Some Economics of Property Rights’, in The Collected Works of Armen A. Alchian, Volume 2: Property Rights and Economic Behavior, Part 1, Indianapolis, IN, USA: Liberty Fund, Inc., 52–67 23. Mancur Olson (1993), ‘Dictatorship, Democracy, and Development’, American Political Science Review, 87 (3), September, 567–76 PART IVMODERN POLITICAL ECONOMY OF LAISSEZ FAIRE 24. David Friedman (1989), ‘What is Anarchy? What is Government?’, in The Machinery of Freedom: Guide to a Radical Capitalism, Chapter 28, New Rochelle, NY, USA: Arlington Publishers, 151–4 25. Jack Hirshleifer (1995), ‘Anarchy and its Breakdown’, Journal of Political Economy, 103 (1), February, 26–52 26. Avinash K. Dixit (2004), ‘Economics With and Without the Law’, in Lawlessness and Economics: Alternative Modes of Governance, Chapter 1, Princeton, NJ, USA and Oxford, UK: Princeton University Press, 1–23, references 27. James E. Rauch (2005), ‘Getting the Properties Right to Secure Property Rights: Dixit’s Lawlessness and Economics’, Journal of Economic Literature, XLIII (2), June, 480–7 28. Timothy Frye and Andrei Shleifer (1997), ‘The Invisible Hand and the Grabbing Hand’, American Economic Review, 87 (2), May, 354–8 29. Andrei Shleifer (2009), ‘The Age of Milton Friedman’, Journal of Economic Literature, XLVII (1), March, 123–35 30. Daron Acemoglu and Simon Johnson (2005), ‘Unbundling Institutions’, Journal of Political Economy, 113 (5), October, 949–95 31. Barry R. Weingast (1995), ‘The Economic Role of Political Institutions: Market-Preserving Federalism and Economic Development’, Journal of Law and Economic Organization, 11 (1), April, 1–31.

This ground-breaking new volume focuses on the interaction between political, social, and economic change in Central and Eastern Europe and the New Independent States. It includes a wide selection of analytic papers, thought-provoking essays by leading scholars in diverse fields, and an agenda for future research. It integrates work on the micro and macro levels of the economy and provides a broad overview of the transition process. This volume broadens the current intellectual and policy debate concerning the historic transition now taking place from a narrow concern with purely economic factors to the dynamics of political and social change. It questions the assumption that the post-communist economies are all following the same path and that they will inevitably develop into replicas of economies in the advanced industrial West. It challenges accepted thinking and promotes the utilization of new methods and perspectives.

List of Tables and Figures; List of Acronyms; Acknowledgements; Introduction: Thinking Big Again; Chapter 1: From Crisis Ideology to the Division of Innovative Labour; Chapter 2: Technology, Innovation and Growth; Chapter 3: Risk-Taking State: From 'De-risking' to 'Bring It On!'; Chapter 4: The US Entrepreneurial State; Chapter 5: The State behind the iPhone; Chapter 6: Pushing vs. Nudging the Green Industrial Revolution; Chapter 7: Wind and Solar Power: Government Success Stories and Technology in Crisis; Chapter 8: Risks and Rewards: From Rotten Apples to Symbiotic Ecosystems; Chapter 9: So.

Ha-Joon Chang evaluates the role of the state in economics and development. In this collection of essays, he reviews theories and practices of state intervention as they have developed over two centuries of modern capitalism. He develops an institutionalist approach to the role of the state in economic change, and examines the issues involved in particular settings including industrial policy, trade policy, intellectual property rights, regulation, and strategies towards transnational corporations. He mounts a sophisticated theoretical and historical case for the continuing essential and constructive roles which the state can and must play in economic development.

This research review covers the main theories and justifications for and against state intervention as they have developed over two centuries. It also incorporates an institutional approach to the role of the state in enforcing "the rules of the game" of the economy as well as examining specific issues including market failure, rent-seeking and regulation. Economists and political scientists alike will find this to be the ideal guide to the classic and modern arguments surrounding the state's role in the economy.

Over its lifetime, 'political economy' has had different meanings. This handbook views political economy as a synthesis of the various strands of social science, treating it as the methodology of economics applied to the analysis of political behaviour and institutions.

Should governments be involved in economic affairs? Challenging prevailing wisdom about the benefits of self-regulating markets, this accessible and engaging book advances a uniquely sociological perspective on economy and state connections to emphasize that states can never be divorced from economy.