Michael Strong has written an excellent book on how Entrepreneurship and Conscious Capitalism can solve all the world’s problems. This is a extravagant claim because the only one who can solve the world’s problems is Jesus Christ. However, it doesn’t mean we shouldn’t do our best to come up with creative solutions to very serious problems. Therefore, I think Strong is on to something.
If you have been reading my blog for a while you know I believe in a free market, with a caveat. When the market behaves in a manner that is unfair, monopoly, then government needs to oversee and correct the market. I also believe that if the market does not regulate itself, like in the area of pollution, then the government must step in. When we have melting polar icecaps larger than the United States, something must be done. But I am getting off topic.
A free market, private property, and rewards for those who take on entrepreneurial risk will create growth. In my economics class I talk about two growth drivers for the economy. Capital deepening and technological progress. Capital deepening involves the purchasing of larger amounts of equipment. The equipment allows for the hiring of more people thus leading to higher levels of output. Technological progress involves creativity and innovation. It could be the creation of new, and more efficient equipment, or a new and more efficient way of doing something. In either case it involves innovation. This is where entrepreneurship comes in.
Michael Strong, CEO and Chief Visionary Officer of FLOW, writes about an Entrepreneurial Toolkit. This toolkit includes: Secure and well-defined property rights; freedom of contract; timely, fair, and reliable enforcement of contracts. When these foundational elements are in place, the structure then allows for entrepreneurs to do what they do. They “transform undervalued assets into valuable goods and services, and thereby move societies from poverty to wealth.”
The toolbox is under attack today, but this attack is nothing new. The free market perspective for much of the 20th century has been challenged by Marxists and Neoclassical economists alike, the Marxist denounces the importance of private property, while the neoclassical economist minimizes the value of the entrepreneur. However, we are now seeing the value of the entrepreneur, and her ability to create something new out of something old. To continue this the policy makers in this country must maintain a supporting structure for the entrepreneurial endeavor.
Israel Kirzner and Frederic Sautet are quoted in Strong’s Be the Solution, “In order to foster socially-beneficial entrepreneurial activity, policy makers must pay attention to the quality of institutions – especially as they impact profits. Institutions that enable individuals to exercise their creativity to the fullest extent possible, by allowing them to discover opportunities and to reap the gains they have discovered, will foster an entrepreneurial society. It is only in the context of well-defined and enforced property rights that society can benefit from the fullness of entrepreneurial activity. Institutions should also include the freedom to contract over property rights and limited interference from government with markets – especially regarding regulation and taxation.”
I hope our Politicians, who are dealing with our impending doom, keep this in mind. Senator Patty Murray from Washington State has stated that she hopes we go over the Fiscal Cliff. With an attitude like that how willing is she to negotiate an innovative and creative deal? Have a good day comrade.
And that is my thought for the day!