September 8, 2008

Entrepreneurship, Institutions, and Economic Growth

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This paper provides a brief view of growth and social change taken from the perspective of the entrepreneurial process and Austrian economics in order to establish the following chain of argument:

• Economic performance (i.e. growth) depends on capital accumulation.

•  Capital accumulation is the result of entrepreneurial profit discoveries.

•  Entrepreneurship is a function of the institutional makeup of a society.

•  Institutions (or rules) will foster entrepreneurship if their effects on (a) the noticeability and (b) the exploitability of profit opportunities are limited over time.

In order to limit the effects on the noticeability and exploitability of profit opportunities, institutions must constrain the government in its possibility to renege on its commitments.

Read the paper here.