The Liberty of Progress: Increasing Returns, Institutions, and Entrepreneurship

Abstract

This paper argues that liberty and progress arose due to the generalized increasing returns to economic activity. These increasing returns follow from the gradual, cumulative process of institutionalizing liberties. As a society adopts an institutional framework from accumulated liberties, there is greater scope for productive specialization and social cooperation under the division of labor. Greater scope for market exchange also delivers social norms and commercial values that tolerate experimentation and innovation. Taken together, the accumulation of liberties, the institutionalization of liberty, and the generalized increasing returns to economic activity unleash the creative powers of a free civilization to deliver societies from poverty and subjugation.

Keywords: entrepreneurship, institutions, liberty, progress, economic growth

JEL Classification: A12, B52, B53