THE TRIUMPH OF ECONOMIC RATIONALISM: THE TREASURY AND THE MARKET ECONOMY

The 1980s have seen the triumph of economic rationalism. Greater efficiency has become a sacred goal. Increased competition and the unlocking of market forces, we are told, are the key means to obtain it. Proponents of economic rationalism insist that the public sector is riddled with inefficiencies. The private sector, by contrast, is self-evidently superior. To the extent that the private sector often operates less than optimally, a major reason is the plethora of perverse governmental regulations which hamper its efficiency. Despite the problems, the public sector needs to model itself wherever possible on the private. And where public sector activities can be or are being done in the private sector, then the public sector should surrender such activities. The inevitable result will be an increase in net economic welfare: the economy will become more dynamic and scarce resources will be allocated more efficiently. Such is the rhetoric of the economic rationalists.     

The growth effects of fiscal policy in Greece 1960–2000

This empirical paper uses annual data for Greece 1960–2000 to study the link between fiscal policy and economic growth. Our regression analysis implies that, although a smaller public sector can be good for growth, it is necessary to look beyond size; the composition and quality/efficiency of the public sector are equally important. The policy lesson is that a smaller government share in GDP, a reallocation of funds away from the wage bill to public investment, and an improvement in government quality/efficiency can become engines of long-term growth.     

Share the Wealth: Redistribution Can Increase Economic Efficiency

People frequently face uncertain income and the threat of loss can inhibit economic investments. Government redistribution can insure citizens against economic losses, but its effect on people’s investment decisions depends on how they react to redistributive rules. We apply methods from experimental economics to study how a redistributive institution affects people’s investment decisions. Experiment 1 tests whether redistribution can increase economic efficiency when people face risk problems—investment opportunities that are profitable on average but could result in a loss. In a between-subject design, participants decide whether to make a risky investment either individually or under an institution that redistributes earnings equally among four group members. We find greater investment and profits when participants are required to share their earnings. In Experiment 2, we examine free-riding by comparing an institution that allows non-investors to exploit investors to an assortment institution that matches investors with investors. We find that vulnerability to free-riding suppresses investment, whereas an assortment mechanism increases investment by preventing free-riding and thereby facilitating risk pooling.     

A study on loan approval and non‐performing asset—Segment identification

Nonperforming assets (NPAs) are a huge challenge infront of the Indian economy. Accumulating NPA is forming a burden and obstacle for economic growth. Financial institutions are struggling with nonperforming loans, and their efficiency is getting tremendously impacted. The aims of this study are to find out the critical factors for granting mortgage loan and to develop a formula that can help financial institutions in identifying and differentiating a possible loan defaulter from a non‐defaulter. The formula developed and the identification of defaulters could help in reducing NPA of financial institutions. Managers and loan approvers can use this model to grant loans to verified borrowers and can also keep an eye on their existing customers.     

The efficiency of provincial governments in China from 2001 to 2010: measurement and analysis

Measurement and analysis of local government efficiency is important; however, it is also difficult. To measure government efficiency, this paper employs the relative measurement method described in the research literature. It develops and applies an index to measure and rank the government efficiency of 31 provincial governments in China (including autonomous regions and municipalities) from 2001 to 2010. This permits a comparative analysis of provincial government efficiency and of the factors that influence it, among China's eastern, central, and western regions. The findings suggest a high association between the degree of economic development and local government efficiency, and in this respect, a large disparity has been observed between central and western regions on the one hand and the eastern region on the other. It is argued that provincial governments in the central and western regions should focus on improving residents' welfare, the quality of regional economic growth, and the level of social development by constantly enhancing government efficiency, optimizing the supply of public services, controlling the size of government, and thus improving residents' disposable income. Copyright © 2014 John Wiley & Sons, Ltd.     

Blind spots in policy analysis: What economics doesn't say about energy use

This article describes the difficulties of reducing analysis of energy use to an application of economic theory. It shows how economic concepts of behavior direct attention selectively to some important determinants of consumer behavior and away from others; how available economic accounts of short-term change in energy use, investment in energy efficiency, and the dynamics of investment limit understanding and narrow analysts' vision; how promising policy options are overlooked as a result; and how concepts and knowledge from the noneconomic behavioral sciences can compensate. Two strategies are discussed for improving analysis. Using economic theory to guide the improvement of existing models can help, conceptual blind spots will remain. A problem-oriented approach drawing on concepts and methods from across the behavioral sciences can avoid the blind spots, but cannot be systematic. Analysis can be improved by using both approaches in concert; some implications of a combined strategy are sketched.     

Economic Growth and Social Capital

Recent interdisciplinary theoretical work has suggested that social capital, or the interpersonal trust of citizens, plays an important role in explaining both the efficiency of political institutions, and in the economic performance of contemporary societies. This paper examines the relationship between social capital and economic growth in a sample of thirty-four countries over the period 1970 to 1992, within the framework of a modified neo-classical model of economic growth. The findings suggest that social capital has an impact on growth which is at least as strong as that of human capital or education, which has been the focus of much of the recent work on endogenous growth theory. It appears to have about the same impact on growth as catch-up or the ability of poorer nations to adopt technological innovations pioneered by their richer counterparts.     

The "Efficient" Public Administrator: Pareto and a Well-Rounded Approach to Public Administration

The New Public Management movement was only the latest demand that public organizations promote efficiency by adopting business methods. There again followed reactions from those arguing that other values, such as equity, citizen participation, and democracy, are as important as efficiency. This article suggests that an economic rather than business perspective on efficiency may usefully contribute to the scholarly conversation. It also suggests that it is "efficient" to identify the public values in play within any given situation.     

区域经济发展中城市体系分维研究——以陕西省关中地区为例

借助分形理论考察了陕西省关中地区城市规模分布自20世纪80年代以来的变化趋势.根据统计资料,对关中城市群不同等级城市的经济效益进行实证分析,得出关中城市群的城市规模分布已经影响了关中地区的区域经济发展,需要充分重视中等城市在区域经济发展中的重要作用,要将追求区域整体经济效益最大化作为城市化建设的重要目标的研究结论.     

ADMINISTRATIVE REFORM AND ECONOMIC DEVELOPMENT: CONCEPTS, ISSUES, AND THE NATIONAL EXPERIENCE

This symposium examines issues related to the links between administrative reform policy and economic development policy. The symposium introduction paper consists of two parts. First, it offers an overview of the background of theoretical and conceptual issues that are important to the connection between administrative reform and economic development. The issues reviewed include the role of government in economic development, the importance of public policy and management to economic development, the contribution of development administration, and the need of administrative reform to remove bureaucratic problems and promote efficiency. Next, the introduction paper provides a brief summary of the research arguments and findings addressed in the following six articles. They include an evaluation of administrative reform in Arab world economic growth, an examination of administrative reform and economic development in Latin America and the Caribbean, a political economy analysis of policy reform in Korea, a study of the implementation of privatization strategies in India's public sector reform, a discussion of the concerns between efficiency and ethics in China's economic development, and the study of administrative and economic development in Mongolia. The implications of the research findings and the need for further study of the linkage between administrative reform and economic development are emphasized in the conclusion.     

Not equitable,not efficient: U.S. policy on low-level radioactive waste disposal

Elected officials and policy analysts alike often treat equity and efficiency as distinct concerns. In this case study, focusing on U.S. policy for disposing of low-level radioactive waste, we consider an instance where the distinction between equity and efficiency is difficult to sustain. The “equity, then efficiency” approach embodied in the compact system of regional agreements is largely to blame for the current crisis facing generators, regulatory officials, and citizens. We find that nearly three times more waste disposal facilities are being contemplated than are financially viable. More generally, it is claimed that the approach for achieving an equitable solution must be very carefully designed, and that the concept of economic efficiency must be considered (at least in this case study) as part of the definition of equity. This case study is unusual, because we are able to make a recommendation that improves both efficiency and equity.     

Does public sector efficiency matter? Revisiting the relation between fiscal size and economic growth in a world sample

This paper revisits the relationship between fiscal size and economic growth. Our work differs from the empirical growth literature because this relationship depends explicitly on the efficiency of the public sector. We use a sample of 64 countries, both developed and developing, in four five-year time periods between 1980 and 2000. Building on the work of Afonso et al. (Public Choice 123:321–347, 2005), we construct a measure of public sector efficiency in each country and each time period by calculating an output-to-input ratio. In addition, we get an estimate of technical efficiency of public spending for 52 countries from 1995 to 2000 by employing a stochastic frontier analysis. Using these two measures, we find evidence of a non-monotonic relation between fiscal size and economic growth that depends critically on the size-efficiency mix.     

Why Smaller Councils Make Sense

This article presents a case for smaller local governments based on notions of economic efficiency and community identity service responsiveness and political accountability. The arguments of sceptics (or those favouring greater council amalgamations) are challenged and refuted. Further elaboration of the case can be found in my recent book Secession: A Manifesto for an Independent Balmain Local Council (2001).     

Competitive Tendering and Contracting in the Australian Public Sector

The Hilmer reforms, and recent reports from the Industry Commission, advocate a significant shift toward competitive tendering for Australian public services. This article discusses the policy debate in the light of recent developments in the economic theory of contracts.
It will be argued that, although more intense competition can, on some occasions, generate apparent efficiency gains, it can also generate efficiency losses. Following Stigler, it will be argued that the general tendency for competition to generate cost reductions may be explained in terms of increased work intensity, and does not therefore involve a net social welfare gain. Such issues will be examined in relation to the Industry Commission (1995b) draft report on Competitive Tendering and Contracting by Public Sector Agencies, with particular attention to the issue of net social welfare benefits of contracting out. It is suggested that the Industry Commission estimates of efficiency gains available through contracting out are based on an incomplete sample, ignore the social transfer implied in reducing costs and are unlikely to hold for many sections of the public sector.     

Nomenklatura,state monopoly,and private enterprise

Using a behavioral model of political decisionmaking, it is argued that an increasing population size and/or an increasing efficiency of production in a private enterprise economy relative to a centrally planned economy may create the conditions for a self-interested nomenklatura in a Soviet-type economy to consider a transition to a market economy. This transition may be thwarted, however, by the threat for prospective private enterpreneurs of exploitation after the change of regime. Some form of political pluralism guaranteeing sufficient political influence to private entrepreneurs appears to be required for a successful transition. The analysis shows that such a combined political and economic reform can be in the interest of the nomenklatura, thereby providing an endogenous behavioral explanation for a change of regime.     

Some alternative scenarios for the role of the state in Vietnam

The Vietnamese economy has by most standards performed very well over the last decade. For instance, economic growth has averaged around 8 per cent per year during the 1990s. The high growth rate has mainly been achieved through large increases in investment, and a large share of the investment has come from foreign sources. However, it is likely that the Asian crisis will lead to a significant reduction in the inflows of foreign capital, which will make it difficult to maintain a growth strategy based on increased capital formation. Continued high growth requires improved economic efficiency. Such efficiency gains have to focus on the state-owned enterprises that account for a large share of the Vietnamese economy, but are known to face serious efficiency and profitability problems. This paper discusses economic consequences of some different choices regarding the role of the state-owned sector. We discuss two scenarios where the state will continue to play a dominant role – centralized or localized state-owned enterprises – and two scenarios with a stronger private sector – supporting the establishment of new private firms and privatizing existing state-owned enterprises.     

Equality and efficiency: The illusory tradeoff

Abstract. Scholars and policy makers have traditionally assumed that nations face a tradeoff between income equality and economic efficiency. Greater equality is believed to reduce investment and dampen work incentives. A heterodox view suggests that a more egalitarian distribution of income may have beneficial efficiency effects by augmenting consumer demand and/or encouraging workers to cooperate in upgrading competitiveness. This paper offers an empirical assessment of the relationship between equality and efficiency, based on cross-sectional data from 17 advanced industrialized economies over the period 1974–90. The comparative evidence indicates no adverse impact of greater equality on investment or work effort, nor on growth of productivity or output, trade balances, inflation, or unemployment. On the contrary, higher levels of equality are associated with stronger productivity growth and trade performance, and possibly with higher investment and lower inflation.     

世界经济区域集团化发展的理论分析及启示

区域集团化的原因在于:经济全球化和各国国内经济发展之间的矛盾运动;追求市场多元化,克服对单一市场的过度依赖;获得政治竞争优势.关税同盟理论表明,区域集团的贸易创造效应可能对世界经济发展有利,贸易转移效应可能对世界经济发展不利;大市场理论表明,区域集团能够促使规模经济形成,加剧竞争,提高管理和刺激技术发展,增进区域内直接投资;奥尔森的理论表明,区域集团会对成员国的各种特殊利益集团形成约束,促进各国经济效率的提高.区域集团化发展给我们的启示是:应以国家长期利益为重,树立均胜观;加强对内开放;加强与周边国家或地区的合作.     

Public capital stock and interstate variations in manufacturing efficiency

This study focuses on the role of public capital stock in contributing to interstate differences in productive efficiency in manufacturing. Our motivation is to assess the role of public capital as a source of persistent regional variations in efficiency, and thus determine if public infrastructure policies might reasonably be expected to alter the competitive environment of a state's manufacturing sector. We use a stochastic frontier production function model, explicitly incorporating infrastructure capital, to examine the relative performance of the aggregate manufacturing sector across states and over time. We calculate an index of productive efficiency and estimate the determinants of statewide variations in it. These results show that variations in per capita infrastructure stocks significantly affect manufacturing efficiency. Considering the behavior of public capital as both a direct and an indirect input furthers our understanding of the role of infrastructure and its implications for regional economic development policies.