The Elusive Underpinnings of U.S. Venturesomeness (If Not Prosperity)*

Abstract

This article explores the question of how the U.S. economy has managed to maintain (or even increase) its lead over other nations in per capita income and the average productivity of its workforce. The answer provided in the author's recent book is that such productivity depends on the greater willingness and effectiveness of U.S. consumers and businesses in making use of innovations in products and business processes.But this begs the question: What accounts for the increase in the innovative capabilities or effectiveness of U.S. consumers and businesses, both over time and relative to that of their global counterparts? After starting with the conventional “supply‐side” focus on low taxes, limited regulatory barriers, and strong property rights, the author goes on to shift the main emphasis to the following six “institutional” contributors to U.S. prosperity: Breadth of participation: the modern U.S. economy draws, to a greater extent than either its global competitors or the U.S. of a century ago, on the contributions of far more individuals both as developers and as users of new products. Organizational diversity and specialization: the evolution of new forms of organization in the U.S., from small venture capital‐backed firms to huge public corporations with dispersed ownership, has enabled the system to use the contributions of many individuals more effectively. Changes in common beliefs and attitudes: greater receptiveness to technological change has accelerated the adoption of new products in all countries, but especially in the U.S. Increased pressure for growth: the “grow or die” imperative faced by U.S. businesses has encouraged them to look for help from new technologies. The professionalization of management and sales functions—a distinctively U.S. phenomenon whose beginnings can be traced to IBM in the 1920s—has improved the capacity of modern U.S. organizations to develop markets and use new products. The expansion of higher education, to a far greater extent in the U.S. than elsewhere, has increased the supply of individuals with habits and attitudes that improve their ability to develop and use innovations.