Abstract
We debate the motivation for and effectiveness of public policies to encourage individuals to become entrepreneurs. Reviewing established evidence we find that most western world policies do not greatly reduce or solve any market failures but instead waste taxpayers’ money, encourage those already intent on becoming entrepreneurs, and mostly generate one-employee businesses with low growth intentions and a lack of interest in innovating. Most policy initiatives that would have the effect of promoting valuable entrepreneurship would not be recognizable as such, because they would primarily address other market failures: a central-payer healthcare would remove health-care related distortions affecting employment choices; greater STEM education would produce more engineers of which some start valuable new firms; and labor market reform to encourage hiring immigrants in jobs they have been educated for would reduce inefficient allocation of talent to entrepreneurship.
Highlights
Entrepreneurs are widely celebrated as job creators and catalysts for economic growth
We argued that there were three prerequisites to any policy intervention: willing and able entrepreneurial talent stranded in wage employment; an economy made worse off as a result; and the ability of policy aimed at stimulating entrepreneurship to fix the problem
This paper is a debate about whether there is a strong motivation for public policies to stimulate more people to enter entrepreneurship and self-employment
Summary
Entrepreneurs are widely celebrated as job creators and catalysts for economic growth. The purpose of this paper is to provide a critical discussion of the motivation for and effectiveness of public policies to encourage individuals to become entrepreneurs. Working from a common perspective regarding the pros and cons of entrepreneurial public policy, and the aim of this paper is to capture that debate. To that end, it follows an unorthodox structure, with each section devoted to the arguments each author provided in the debate. We as a society are worse off because of this; More policies like the ones we have would correct this social problem Table below (from Astebro forthcoming) provides a few examples which focus on general policies of the kind which the four authors find agreement on are especially difficult to provide social welfare
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