The 4% Solution: How to Unleash the Economic Boom America Needs in the Twenty-First Century, Brendan Miniter, ed., Crown Business), Forthcoming
Posted: 20 Sep 2012
Date Written: December 1, 2011
Policymakers talk about entrepreneurship as a way of improving economic conditions in developing countries the way they used to talk about roads, dams, bridges, and other infrastructure projects. But what exactly is entrepreneurship? Is it simply self-employment or new-venture formation — a set of outcomes that can be measured, analyzed, and perhaps stimulated using the usual sorts of economic policy instruments — or a way of thinking or acting? This paper describes entrepreneurship not as a phenomenon, but as a behavior, that of judgmental decision-making under uncertainty, and examines the institutional environment for effective entrepreneurial judgment. It suggests that the best policy to encourage entrepreneurship is to allow an environment that encourages entrepreneurship to flourish — stable money, the rule of law, and free and open competition. It argues that government policy should not 1) create and exacerbate business cycles, 2) bail out failing enterprises, 3) focus on misleading aggregates, and 3) plan clusters of entrepreneurship and innovation.
Keywords: entrepreneurship, growth, political economy, institutional environment, Knightian uncertainty
JEL Classification: M13, O20
Suggested Citation: Suggested Citation
Klein, Peter G., Entrepreneurship and the Political Economy of Growth (December 1, 2011). The 4% Solution: How to Unleash the Economic Boom America Needs in the Twenty-First Century, Brendan Miniter, ed., Crown Business), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2149204