A nimble hand: On the transformation of government (Economic Research Series): On the transformation of government

Author: Hu Jiayong
Publisher:
Publish Date: 2002-02-01
Features: Government intervention is often a "visible hand," in contrast to the "invisible hand" of the market mechanism. However, the "visible hand" does not accurately define the government's functions. Under a market economy, the government should be a "nimble hand." As a "nimble hand," the basic function of the government is to correct market failures while avoiding its own failures. Therefore, the resources actually controlled by the government should not be excessive, otherwise, it will squeeze the role of the market mechanism. The scale and structure of the state-owned economy should be adapted to the government's functions. Exceeding this boundary will lead to misalignment and result in difficult-to-escape dilemmas. The government's size should not be too large, otherwise, it will give rise to many ineffective or even harmful intervention behaviors. Even in infrastructure and social security sectors, the government should make full use of the market mechanism and appropriately reduce its own responsibilities. For the thriving non-public sector economy, the government should reverse its basic policy orientation, shifting from restriction and regulation to support, encouragement, and guidance, fully utilizing their positive roles in attracting investment, promoting growth, and increasing employment. In summary, only a government that flexibly applies the market mechanism can be efficient and cost-effective.