3 Private, public and semi-public institutions
3.1 Introduction As a matter of fact, neither Keynes nor Friedman is directly interested in institutions as such but only to the extent that there is a problem to be solved, namely how to ensure full employment together with stable prices in a decentralised market economy. Our hypothesis in this chapter is that beyond their respective appraisal of a laissez-faire regime within a purely competitive system one can investigate their views on intermediate institutions situated halfway between an individualistic body and centralised authorities, such as the big company. This perspective should provide us with some clues regarding their respective understanding about the State as a collective body that might (or not) be able to help individuals to coordinate themselves. In other words, behind their specific pleas for the necessary implementation of new institutions, such as a Public Capital Budget for Keynes or a strictly passive monetary authority for Friedman, there are their specific diagnoses regarding the ability of the institutional arrangements they respectively face to stabilise a decentralised market economy around full employment. Our basic purpose here is to provide theoretical rationales to these diagnoses. Likewise, behind a critical look at State prerogatives there are questions such as: Is a ‘modern’ economy, characterised in particular by the separation of ownership and management, still able to function according to the ‘invisible hand’ principle? And are non-purely competitive firms such as semi- public bodies or a ‘big’ company necessarily detrimental for collective welfare? The study of Keynes’ and Friedman’s hardly reconcilable answers to these questions should allow us to better understand why the former calls for a ‘new liberalism’ while the latter advocates the return to the old principles of laissez-faire, i.e. the ‘classical liberalism’. We know well that their respective answers take place at years of distance and in a completely different institutional set-up: Keynes experiences the emergence of the welfare state without which market economies might not have escaped the worst depression ever known until then whereas Friedman faces the excesses of ‘big government’. Hence the risk for our comparison to be anachronistic. Yet, our basic goal here is conceptual. It is not so much the relevance of their views on laissez-faire regarding the historical set-up they respectively face
