Private enterprise vs. publicly owned enterprises
In contrast to private enterprises, government-owned corporation or municipality owned enterprises are not always or even usually managed on the basis of the profit motive. A deficit in this latter case does not spell the end of the enterprise or even the beginning of reforms, because it is generally assumed that the reason the enterprise exists is to 'render useful services to the public' (i.e. employ a large part of the local population as its workforce or charge an artificially low price for its products or services), not become a slave of the profit motive. For this reason enterprises that are in the red are allowed to operate for years or decades, with the result being that its losses are eventually passed on to every citizen.
But as von Mises asserts, to disregard the profit motive is not, as is widely believed, to serve the public better. On the contrary, to operate under the restraints of the profit criterion is the best way to serve the public interest:
With private profit-seeking enterprise this problem is solved by the attitudes of the public. The proof of the usefulness of the services rendered is that a sufficient number of citizens is ready to pay the price asked for them. Under [a given] price the production of [a commodity] tends to expand until saturation is reached, that is, until a further expansion would withdraw factors of production from branches of industry for whose products the demand of the consumers is more intense. In taking the profit-motive as a guide, free enterprise adjusts its activities to the desires of the public. The profit motive pushes every entrepreneur to accomplish those services that the consumers deem the most urgent. But if a public enterprise is to be operated without regard to profits, the behaviour of the public no longer provides a criterion of its usefulness [...]
A private enterprise is doomed if its operation brings losses only and no way can be found to remedy this situation. Its unprofitability is the proof of the fact that the customers disallow it. There is, with private enterprise, no means of defying this verdict of the public and of keeping on. The manager of a plant involving a loss may explain and excuse the failure. But such apologies are of no avail; they cannot prevent the final abandonment of the unsuccessful project. It is different with a public enterprise. Here the appearance of the deficit is not considered a proof of failure. The manager is not responsible for it. It is the aim of his boss, the government, to sell at such a low price that a loss becomes unavoidable. (pp. 76–77)
The economic calculation problem is a criticism of using economic planning as a substitute for market-based allocation of the factors of production. It was first proposed by Ludwig von Mises in his 1920 article "Economic Calculation in the Socialist Commonwealth" and later expanded upon by Friedrich Hayek.
A state-owned enterprise (SOE) is a government entity which is established or nationalised by a national or provincial government, by an executive order or an act of legislation, in order to earn profit for the government, control monopoly of the private sector entities, provide products and services to citizens at a lower price, implement government policies, and/or to deliver products & services to the remote locations of the country. The national government or provincial government has majority ownership over these state owned enterprises. These state owned enterprises are also known as public sector undertakings in some countries. Defining characteristics of SOEs are their distinct legal form and possession of financial goals and developmental objectives, SOEs are government entities established to pursue financial objectives and developmental goals.
A bureaucrat is a member of a bureaucracy and can compose the administration of any organization of any size, although the term usually connotes someone within an institution of government.
The public sector, also called the state sector, is the part of the economy composed of both public services and public enterprises. Public sectors include the public goods and governmental services such as the military, law enforcement, infrastructure, public transit, public education, along with health care and those working for the government itself, such as elected officials. The public sector might provide services that a non-payer cannot be excluded from, services which benefit all of society rather than just the individual who uses the service. Public enterprises, or state-owned enterprises, are self-financing commercial enterprises that are under public ownership which provide various private goods and services for sale and usually operate on a commercial basis.
Organizational theory refers to a series of interrelated concepts that involve the sociological study of the structures and operations of formal social organizations. Organizational theory also seeks to explain how interrelated units of organization either connect or do not connect with each other. Organizational theory also concerns understanding how groups of individuals behave, which may differ from the behavior of an individual. The behavior organizational theory often focuses on is goal-directed. Organizational theory covers both intra-organizational and inter-organizational fields of study.
An organizational structure defines how activities such as task allocation, coordination, and supervision are directed toward the achievement of organizational aims.
Artificial scarcity is scarcity of items despite the technology for production or the sufficient capacity for sharing. The most common causes are monopoly pricing structures, such as those enabled by laws that restrict competition or by high fixed costs in a particular marketplace. The inefficiency associated with artificial scarcity is formally known as a deadweight loss.
Technostructure is the group of technicians, analysts within an organisation with considerable influence and control on its economy. The term was coined by the economist John Kenneth Galbraith in The New Industrial State (1967). It usually refers to managerial capitalism where the managers and other company leading administrators, scientists, or lawyers retain more power and influence than the shareholders in the decisional and directional process.
Criticism of socialism is any critique of socialist economics and socialist models of organization and their feasibility, as well as the political and social implications of adopting such a system. Some critiques are not necessarily directed toward socialism as a system but rather toward the socialist movement, parties, or existing states. Some critics consider socialism to be a purely theoretical concept that should be criticized on theoretical grounds, such as in the economic calculation problem and the socialist calculation debate, while others hold that certain historical examples exist and that they can be criticized on practical grounds. Because there are many types of socialism, most critiques are focused on a specific type of socialism, that of the command economy and the experience of Soviet-type economies that may not apply to all forms of socialism as different models of socialism conflict with each other over questions of property ownership, economic coordination and how socialism is to be achieved. Critics of specific models of socialism might be advocates of a different type of socialism.
The Japanese civil service employs over three million employees, with the Japan Self-Defense Forces, with 247,000 personnel, being the biggest branch. In the post-war period, this figure has been even higher, but the privatization of a large number of public corporations since the 1980s, including NTT, Japanese National Railways, and Japan Post, already reduced the number.
In economics, the profit motive is the motivation of firms that operate so as to maximize their profits. Mainstream microeconomic theory posits that the ultimate goal of a business is "to make money" - not in the sense of increasing the firm's stock of means of payment, but in the sense of "increasing net worth". Stated differently, the reason for a business's existence is to turn a profit. The profit motive is a key tenet of rational choice theory, or the theory that economic agents tend to pursue what is in their own best interests. In accordance with this doctrine, businesses seek to benefit themselves and/or their shareholders by maximizing profits.
Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources between and within organizations contrasted with the market mechanism. As an allocation mechanism for socialism, economic planning replaces factor markets with a procedure for direct allocations of resources within an interconnected group of socially owned organizations which together comprise the productive apparatus of the economy.
In sociology, the iron cage is a concept introduced by Max Weber to describe the increased rationalization inherent in social life, particularly in Western capitalist societies. The "iron cage" thus traps individuals in systems based purely on teleological efficiency, rational calculation and control. Weber also described the bureaucratization of social order as "the polar night of icy darkness".
A private defense agency (PDA) is a theoretical enterprise which would provide personal protection and military defense services to individuals who would pay for its services. PDAs are advocated in anarcho-capitalism as a way of enforcing the system of private property.
Free-market roads is the idea that it is possible and desirable for a society to have entirely private roads.
Bureaucracy is a body of non-elected governing officials or an administrative policy-making group. Historically, a bureaucracy was a government administration managed by departments staffed with non-elected officials. Today, bureaucracy is the administrative system governing any large institution, whether publicly owned or privately owned. The public administration in many jurisdictions and sub-jurisdictions exemplifies bureaucracy, but so does any centralized hierarchical structure of an institution, e.g. hospitals, academic entities, business firms, professional societies, social clubs, etc.
Production for use is a phrase referring to the principle of economic organization and production taken as a defining criterion for a socialist economy. It is held in contrast to production for profit. This criterion is used to distinguish communism from capitalism, and is one of the fundamental defining characteristics of communism.
Market socialism is a type of economic system involving social ownership of the means of production within the framework of a market economy. Various models for such a system exist, usually involving cooperative enterprises and sometimes a mix that includes public or private enterprises. In contrast to the majority of historic socialist economies, which have substituted the market mechanism for some form of economic planning, market socialists wish to retain the use of supply and demand signals to guide the allocation of capital goods and the means of production. Under such a system, depending on whether socially owned firms are state-owned or operated as worker cooperatives, profits may variously be used to directly remunerate employees, accrue to society at large as the source of public finance, or be distributed amongst the population in a social dividend.
Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems. A socialist economic system is characterized by social ownership and operation of the means of production that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use rather than for profit. Socialist systems that utilize markets for allocating capital goods and factors of production among economic units are designated market socialism. When planning is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to value resources and goods.
The socialist calculation debate, sometimes known as the economic calculation debate, was a discourse on the subject of how a socialist economy would perform economic calculation given the absence of the law of value, money, financial prices for capital goods and private ownership of the means of production. More specifically, the debate was centered on the application of economic planning for the allocation of the means of production as a substitute for capital markets and whether or not such an arrangement would be superior to capitalism in terms of efficiency and productivity.
