1200 PONTIFICIAE ACADEMIAE SCIENTIARVM SCRIPTA VARIA - 28
and services produced or consumed. Among the attempts in
this direction fall numerous sorts of quantity regulations — in
particular, state control of investment in physical capital. In
some cases, this has been combined with nationalization of
existing big enterprises and/or with the establishment of new
state-owned or state-controlled enterprises which are to operate
alongside the still remaining private enterprises. A common
characteristic of all these arrangements has been their opera-
tion under a monetary and financial machinery which, in all
essentials, was to remain of the traditional type, meaning that
we are still confronted with the Samuelson-Solow menu and
facing tremendous administrative problems, including problems
of loyalty and morale. These, I think, are in a nutshell the
characteristics of the mixed economies seen emerging in many
countries today.
The ghost has performed in his typical manner in all these
pursuits. Quantitative regulations of the prescriptive type have
a tendency to kill initiative and make the activity inflexible,
inefficient and stationary. And state administration, because
it takes away both the stick and the carrot which function
under a hard competitive system, has a tendency to eliminate
a large part of the driving force for personal effort.
Finally, the third direction, in search of a better economic
system, is represented by the more spectacular deviation from
‘he traditional market economy which is found in the centrally
steered economies of the East.
This more radical departure from the traditional market
economy has produced signal results in economic development
that cannot be explained away by any amount of ingenuity
and mental effort on the part of conservative economists and
statisticians. But the same ghost has acted in his typical man-
ner also in these more determined attempts to escape the short-
comings of the free market system. There exists, indeed, an
overwhelming amount of evidence from centrally planned eco-
nomies showing that the active and positive participation of
171 Frisch - pag. 4
