Public Entrepreneurship

Just recently the Champaign County Libertarian Party had the opportunity to have a discussion with Joseph T. Mahoney on his collaborative paper (written with Peter Klein, Anita McGahan, Christos Pitelis) about “The Economic Organization of Public Entreprenership”.

I created a podcast of the discussion in AAC format that is available here (6.2 megs, one and a half hours), as well as a google video version which is viewable below:

Among topics discussed were Arrow's Impossibility Theorem, Coase's Theorem, and how the government's role can be to enhance the wealth of nations as opposed to destroying it through the harnessing of entrepreneurship in the public sphere. Some specific examples are thrown in, as well as how the topic related to local politics in Champaign-Urbana.

Some of the arguments were new to me, some of them being more from a utilitarian-libertarian point of view than a deontological-libertarian view. Also, the paper is based upon a minarchist view of the world--that is to say, it assumes that a government will exist. It is a pragmatist idea of how to improve government that could appeal to both conservatives and liberals I think.

For instance, the typical small-government view is that government inaction is better than government action. However, imagine the following hypothetical. A community is under imminent danger from an objectively demonstrable threat (a natural disaster, the collapse of a bridge, etc.). The private parties that make up this community cannot all agree on a plan to remedy the situation. In this case, the government stepping in doing something would be preferable to doing nothing, as a haphazard solution would be better than total disaster. If the government solution is unpleasant enough, or would take too long to implement, this would stimulate entrepreneurs to come together with a plan for the public good. More often then not this plan is more effective, faster, and more efficient than the government plan, and more appreciated by the public as it doesn't involve increased taxes or regulation.

There are surprisingly many instances of this happening, in light of the bungling done with the bridge collapse in Minnesota and Hurricane Katrina at the hands of the government. Just recently I was forwarded an email on how citizens and businesses built a bridge in Hawaii because the government was unable or unwilling to do it. Not only did it get done faster, but much cheaper than the projected cost. Not only that, the cost did not result in increased taxes or government debt--it was absorbed by the businesses who would benefit from the repaired bridge. The "free rider problem" in this case was averted. There are other examples of course, such as citizens volunteering to sandbag an overflowing river. Their efforts not only save their own property, but help save the property of their neighbors as well.

The only downside I can think of, is that while public entrepreneurship is better than a government solution due to government's use of force, is that it sometimes requires the threat of force. In other words, action is only taken because the government bureaucracy's solution is more feared. This of course is tied into legitimacy of the government's force (see: Arrow's Impossibility Theorem), which may be called into question if the democratic process is absent or easy to manipulate--the paper discusses this issue in some detail.

Overall it was a fascinating topic that I think will gain more traction as people realize that the government isn't very good at creating value or solving things--and we may have to rely on ourselves and our neighbors.