The basic argument concerning the role of government economic policy taken in this chapter is based on the oriental philosophy of Taolsm and the Hayekian philosophy: that there exists a natural market order in the economy that arises endogenously and spontaneously, independent of any outside intervention. Competition in the market is a natural process of discovering the op imal outcome, which cannot be determined in advance
According to this view, the economic role of government should be confined to preserving the spontaneity and endogeneity of the market order - it should refrain from intervening through direct regulation. To this end, the government should establish a regime of fair competition in the economic and social system so that the discovery function of the market order can be utilized to-the highest degree. Within this frame- work, the role of the government should be limited to defining the economic and social environments; that is to say, to determine the exogenous variables for the market order, while the determination of the endogenous variables should be left to the market. If the government wants to influence the endogenous variables, it must participate in the market order in the same manner as private economic agents, or change the environment or incentive structure for the market order in such a way as to Influence the endogenous variables in the desired direction.