Socialism and entrepreneurship : a rational choice approach to an issue of compatibility

A theoretical study of the feasibility of socialism. Politically, socialism is characterised by equality, democracy and liberty. Economically, it is assumed (i) that the feasibility of socialism depends upon its ability to generate growth, and (ii) that growth is secured through entrepreneurial activity. Economic theory is used to delineate the concept of entrepreneurship and to explore the nature and limitations of capitalist entrepreneurship and political theory is used to identify possible incompatibilities between socialism and entrepreneurship. Underlying many of these arguments is a claim for the existence of a trade-off between efficiency and equality. The capacity of market socialism to either transcend or minimise this trade-off is considered. Three forms of market socialism are examined. The first is drawn from Joseph Carens' work on moral incentives, the second from theories of the labour-managed firm and the third from new public management. The socialist credentials and capacity of each to generate entrepreneurial activity are appraised. Examples drawn upon include Israeli Kibbutzim, the Spanish Mondragon cooperative, British nationalised industries and the Japanese computer industry. Economic new institutionalism, welfare economics and Austrian economic theory are all on occasions used but the principle methodology is rational choice. Specifically, theory principle agent analysis and William Niskanen's of the budget - using bureaucracy shown capable, illuminating discussion. Given even the assumption of egoism it is argued that through careful institutional and organisational design, tensions between socialism and entrepreneurship can be alleviated.