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Government and the Economy

Government and the Economy. David Lee Public Policy Analysis 12 March 2008. Question. What is the proper role of the Government in the economy? What policy should it pursue?. Position.

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Government and the Economy

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  1. Government and the Economy David Lee Public Policy Analysis 12 March 2008

  2. Question • What is the proper role of the Government in the economy? • What policy should it pursue?

  3. Position • The economic interests of a nation are best served when the government limits itself to the protection of: • Property • Entrepreneurial integrity and freedom • The focus of this paper

  4. Support – Theoretical • Perfect Competition • Inefficiency of Government Intervention • Crowding Out

  5. Support – Empirical • Entrepreneurship and Growth • Higher entrepreneurship levels lead to increasing economic growth rates (Clark, Lee, and Sobel 2007). • Economic freedom • Positively correlated to growth (Campbell and Rogers 2007)

  6. Support - Empirical • Government Limitation • Countries with less government involvement have greater productive entrepreneurial activity. (Clark, Lee, and Sobel 2007) • Small governments that: limit income redistribution, protect property rights and create an open entrepreneurial environment, do more to promoteprosperity than conventional development models (Campbell and Rogers 2007) • Inefficiency of Special Interests

  7. Arguments for Intervention • Optimal Tariff • Effects on the terms of trade • Promote Domestic Entrepreneurship

  8. Counter Assertions • Resource Combination Limitations • Politicization of the Economy • Strategic Ramifications

  9. Arguments for Intervention • Success of US industrial policy • Special Interest Influence

  10. Counter Arguments • Entrepreneurial Potential • Studies show countries that give into demands of current new businesses have lower levels of entrepreneurship (Clark, Lee, and Sobel 2007). • Inefficiency of Politicization of the Economy

  11. Arguments for Intervention • Entrepreneurship is Disruptive • Established business • Socioeconomically

  12. Counter Arguments • Prosperity • Higher Consumption • Higher Growth

  13. Arguments for Intervention • Economic Freedom is Not Beneficial • Negative relationship between new business formation and commercial lending (Campbell and Rogers 2007).

  14. Counter Arguments • Related Outside Studies • Size of the effect • Economic Freedom Findings

  15. Policy Suggestions • Protection of property • Protection of Entrepreneurial Freedom • Limit Special interests influence • Business Failure

  16. Works Cited • Campbell, Noel D. and Tammy M. Rogers. “Economic Freedom and Net Business Formation.” Cato Journal 27, No. 1 (2007): 23-36. EBSCOHost. Oregon State University Lib., Corvallis OR <http://www.cato.org/pubs/journal/index.html>. • Clark, J. R., Dwight R. Lee and Russell S. Sobel. “Freedom, barriers to entry, entrepreneurship, and economic progress.” Review of Austrian Economics 20 (2007): 221-36. EconLit. Oregon State University Lib., Corvallis OR. 25 August 2007. <http://www.springer.com>. • Ketels, Christian H. M. “Industrial Policy in the United States.” Journal of Industry, Competition and Trade.7 (2007): 147-167. EconLit. Oregon State University Lib., Corvallis OR. 20 January 2007. <http://www.springer.com>.

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