No, we can't just have more entrepreneurs


We'd all like to have more entrepreneurs in the economy, of course. Those lighting rods of the business world who are able to see new ways of putting together extant resources to produce new, better, even cheaper, products for the rest of us to enjoy.

But it turns out that "encouraging entrepreneurship" is more difficult that it seems. Telling people to go and do something new doesn't inspire all that many to do so.

This doesn't mean that we're stuffed though, just that we have to do something different. William Baumol suggests that, in anything approaching the short term at least, the supply of entrepreneurs, of entrepreneurialism, is pretty fixed in any one society. But what those entrepreneurs do will vary according to the incentives in that society.

Maybe they'll open up a business employing redundant miners to build low carbon energy systems. Or perhaps they'll turn to crime: at worst they might turn to rent seeking, a deeply unproductive use of their talents. So, the task before us is to convert, to redirect, the already extant supply to its most productive use.

Which means dissuading them from crime of course, the easiest way of doing which is to stop making a crime some of the things done. Much inventiveness which could be better used goes into the trading of drugs for example: legalisation would turn such talents to other uses. But more important would be the abolishing of opportunities to seek rents.

For example, reducing the regulation which winds around all too many industries would mean that skill and talent stops being used to deploy such regulations to strangle competitors and is instead turned to creating new ones.

To put it another way: create that level playing field and entrepreneurs won't spend their time trying to game the system, they'll get on with making life better for us all.