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The Role of the State in Economic Change$
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Ha-Joon Chang and Robert Rowthorn

Print publication date: 1995

Print ISBN-13: 9780198289845

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780198289845.001.0001

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(p.1) 1 Introduction
The Role of the State in Economic Change

Ha-Joon Chang

Robert Rowthorn

Oxford University Press

This chapter explains the pros and cons of both the traditional and neo-liberal view on the role of the government in economics. The traditional function of the state in economics is that the government is there to effectively allocate the resources of the state among the citizenry. On the other hand, the neo-liberal approach is that the markets should operate free from the government intervention. The principle espoused by the neo-liberals is also known as the Laissez-Faire approach. However, according to the book, a market fully free from government intervention is still impossible to operate. A third way is still more effective than the Laissez-Faire system, and this third kind is present in East-Asian countries. On the other hand, socialism, which requires the planning of all the economic activity within the state by the government is not effective as evidenced by the attempted conversion by Czechoslovakia to a free market economy and the subsequent fall of the communist states and Soviet Union.

Keywords:   government, economics, state, citizenry, Laissez-Faire, neo-liberal, socialism, free market economy

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