Posted by: ericgrimsrud | December 18, 2014

The Government’s Role in Promoting Entrepreneurialism

In the descriptions I previously provided on this blog of the Carbon Fee and 100% Dividend Energy Plan, I might have implied or even mistakenly said that the only role the government would have to play in this scheme would be to set the magnitude of the annually increasing fee on fossil fuel use. In case I did leave that impression, I will correct it here. On the contrary, our government must also continue to perform the essential function it has served so very well in the USA during my lifetime that I have to admit that I have come to mistakenly take that service for granted.

That all important function of government is to create an environment in which private entrepreneurs can step up to the plate and have a reasonable expectation of getting to first base – especially when competing in an arena of high technical difficulty and high risk. Without that environment, private businesses would not generally have the talent, knowledge, and infrastructure required to be competitive in many important areas. Perhaps the most important element of this government provided assistance is our vast array of schools, colleges, and universities that turn out people with the skills necessary to work on intellectually demanding projects. Another is the financial support of new ideas – even those that do not have any financial outcomes envisioned at the onset. The new knowledge such support has generated has resulted in countless payoffs later when the applications of it became more apparent.

The funding for basic research of this type and the education of participants that comes with it seldom comes from the private sector – which generally requires more obvious and more immediate returns in order to attract investors. Only a progressive and far-sighted central government is likely to provide support for such effects – as it has in the USA via organizations such as the National Science Foundation and the National Institutes of Health. Our foundations for entrepreneurism have also been assisted by the public’s support of our military and space exploration programs.

This essential role of government in promoting entrepreneurship has been elegantly described recently by Mariano Massucato in her book entitled “The Entrepreneurial State: Debunking Public vs. Private Sector Myths”. In it, she does, indeed, debunk that myth – so often considered to be truth within the business world – of a lumbering, bureaucratic state in conflict with a dynamic, innovative private sector. With use of many specific examples, Mazzucato argues that the opposite is actually closer to the truth. The private sector finds the courage to invest in technically challenging projects only after a progressive government has made the initial long-term investments in the required people and background knowledge. Examples of this abound spanning from the green revolution to biotech and from pharmaceuticals to Silicon Valley.

In addition, Ms. Massucato correctly argues that whenever we fail to adequately acknowledge this assistance provided by government, we are likely to make the grave error of socializing only the risks of new undertakings while privatizing the rewards. That is, the general public should reap some of the benefits of those successes. Thus, it is imperative that the private sector honors its obligations to the public by way of the taxes they are assessed for their profits and does not outsource the production and sales components of their successful products to other countries that offer cheap labor and lower taxes but played no part in creating the entrepreneurial environment that made it all possible.

Ms Mazzucato, who is a Brit, says that the most successful entrepreneurial state can be found in the most unlikely place: the United States. Americans, she says, have traditionally been divided between Jeffersonians (who think that we govern best when we govern least) and Hamiltonians (who favor active government). The secret of the USA’s success lies, she suggests, in talking like Jeffersonians but acting like Hamiltonians. Whatever the rhetoric, it is a fact that the USA has invested heavily in public education and scientific advancement since the beginning of the 20th Century and the fruits of those investments have made the USA the financial center of the world. Going forward, it would be a mistake to deny either our Jeffersonian or Hamiltonian instincts. The combination of State and private forces in the USA have resulted in a level of success that would not have been possible without the participation of both.

So under Carbon Fee and 100% Dividend Plan, yes, the government does have a far greater role to play than simply adjusting the magnitude of the Fee to be applied each year. As in the past, it is the government’s responsibility to create an environment in which our entrepreneurs have the basic tools required for participation and success in all aspects of American life including, of course, the means by which it derives and uses its energy.

Acknowledgement: for prompting the thoughts laid out in this post, I have “Paul Ann” to thank for their comment placed on “Why we don’t have the NFPTFCPFM energy plan yet”.


Responses

  1. The idea that government control of education is an advantage in the USA is beyond absurd. We have a “Top Down” approach to K-12 education that imposes “Common Core” on over 40 states.

    “Top Down” control allows a handful of activists to disenfranchise students, teachers and parents. The only hope for improving public education in the USA is to close the federal Depertment of Education and the corresponding state level organizations.


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