Abstract:

In transformational eras, the agency capability of public sectors is challenged/under stress due to a combination of two specific developmental factors: (a) more or less demanding new coordination problems and social dilemmas requiring changing (sometimes expanding) degrees of centralization in collective agency in a world of polycentric Governance and (b) shifting and contested rent potentials. While rents inevitably accompany innovation in capitalist market economies, rent appropriation is not only politically disruptive due to distributive effects creating groups of losers (as stressed by Schumpeter 1912: 449-52): perspectives of shifting rent potentials moreover may hamper and sometimes preempt public agency capabilities in multifarious ways, multiplying the situations where private agents have the means and the incentives to invest in rent-enhancing and distortive political influence. Concomitant stress may lead to state failure intertwined with a specific kind of systemic failure of the market. As a result of those failures, the core function of the public sector in a market society is in jeopardy: stabilizing and developing inclusive institutions/open access societies under transformational challenges.