Should a state control the means of production?

The state should not control the means of production due to the innovation and efficiency that arises from private ownership (Shleifer, 1998:135), the necessity for non-regulated prices creating proper indicatators  (Friedman & Friedman, 1980:14) and the dangers of central planning (Hayek, 2007:124).

People are more likely to work hard if they are given proper incentives. Ownership and the prospect of reward provided in a Capitalist system give individuals more incentive to innovate and seek efficient methods of production (Shleifer, 1998:135), while also keeping them responsible as they face the possibility of failure  (Friedman & Friedman, 1980:4).

By contrast, government employees have no incentive to improve as their position is not at risk by lack of improvement (Shleifer, 1998:138). Rather, they seek to maintain political support through patronage and populism, actions which do not necessarily aid society (Shleifer, 1998:141). Private enterprise is bound by an incentive to maintain a good reputation and cannot rely on a military to defer risk  (Shleifer, 1998:139).

Prices act as indicators for society to act accordingly (Friedman & Friedman, 1980:14). Friedman (1980) argued that the “infintismal” processes which go into producing a single product cannot all be managed by a single entity  (Friedman & Friedman, 1980:9). Government cannot know all the information necessary to run an entire economy (Shleifer, 1998:137).

A Central planner will inevitably become authoritarian in order to maintain the level of control that it needs in order to attempt to control the economy (Hayek, 2007:124). Elite Theory argues that organisations will inevitably be dominated by oligarchies (Bill & Hardgrave, 1981:144). The only organisation capable of producing wealth under Socialism are the government and the Elite will come to dominate  (Hayek, 2007:160). Under Capitalism, the means of production are decentralised and cannot be dominated by a single Elite.

The fundamental tenet of Capitalism is voluntary exchange (Friedman & Friedman, 1980:1). It is not only efficient at producing wealth but also allows humans to cooperate for societal good without sacrificing their own self-interest (Friedman & Friedman, 1980:10). The risk and reward nature of Capitalism restrains and incentivises people to improve themselves and others (Hayek, 2007:216).


Bill, J. A. & Hardgrave, R. L. 1981. Chapter V: The Political Elite Approach. In Jr. Comparative Politics: The Quest for Theory. Lanham, MD: University Press of America. 143-173.

Friedman, M. & Friedman, R. 1980. Free to Choose: a personal statement. Harmondsworth: Penguin.

Hayek, F. A. 2007. The Road to Serfdom. Definitive ed. Chicago: University of Chicago Press.

Shleifer, A. 1998. State versus Private Ownership. The Journal of Economic Perspective, 12(4). 133-150.