For economies to grow and prosper requires the decentralized efforts of entrepreneurs, in the pursuit of profit, experimenting with new combinations of productive resources including raw materials, labour and perhaps most importantly ingenuity. This process of trial and error, with the profit and loss system providing feedback on the quality of the entrepreneurial ideas, is the engine leading to a brighter and wealthier future.
There are three keys to fostering entrepreneurship and the prosperity that accompanies it. First, societies must value and view entrepreneurs for their enormous positive contributions—quit villainizing wealth, successful entrepreneurs and business people. Aspiring to be a successful entrepreneur should be as worthwhile a dream for a child as being a doctor, engineer or a political leader.
Second, ensure markets are contestable, meaning they are open to competition from new and existing firms. This means avoiding or removing government-erected barriers that protect incumbent firms from the entry of new competitors. Third, let the profit and loss system work—don’t subsidize failing firms or play favourites with certain industries.