The threat of the entrepreneurial state

The idea that governments should act entrepreneurially has gained a following among academics and policymakers. An examination of what it means to be entrepreneurial reveals that the institutional structure of governments prevents them from acting entrepreneurially. Attempts to make the state more entrepreneurial would exacerbate pathologies in government decision-making that have been identified in the public choice literature. The entrepreneurial state would enhance the power of budget-maximizing government agencies and would create rents to encourage rent-seeking. The idea that governments should be more entrepreneurial sounds enticing, but government is not designed to be entrepreneurial, and trying to make it more entrepreneurial will lead to cronyism and inefficiency. Entrepreneurship is a profit-seeking activity, and the policy goals advocated by proponents of an entrepreneurial state are not marketable commodities and have no measure of profit or loss. They are designed to put more resources under government control. Attempts to make the state more entrepreneurial will expand the scope of government and create opportunities for interest groups to access government resources. The concept sounds enticing and its advocates have had some influence over public policy. The paper offers a realistic assessment of the consequences of trying to make the state more entrepreneurial to counter the unrealistic claims of the concept’s advocates.