- For economies to grow and prosper requires the decentralized effort of multitudes of individual entrepreneurs, in the pursuit of profit and prestige, experimenting with new combinations of productive resources. It’s this process of trial and error, with the profit and loss system providing quick feedback on the quality of these innovations, that is the engine leading to a brighter, more prosperous and wealthier future. There’s no one size fits all policy, no “right” answer to the questions or issues, rather the best route to a bright future relies on the process of decentralized experimentation driven by the incentive structure created by the intersection of consumer preferences and the opportunity costs of necessary productive resources.
- There’s no crystal ball in this process. No wise man or central planner who can know which ideas are good in advance, which ways forward are best, or which resources are best suited to satisfy which needs. Uncertainty, knowledge limitations and constantly changing market conditions make this impossible. Instead it’s the profit and loss system that informs and guides this process of discovery.
- The three keys to fostering entrepreneurship, innovation and the prosperity that accompanies them are simple. First, work to make sure society views individual entrepreneurs as the heroes they really are—quit villainizing wealth, successful entrepreneurs and business people. Second, ensure markets are contestable—avoid or remove government-erected barriers that protect incumbent firms from the entry of new competitors (licensing, certificate of need laws, etc.). Third, let the profit and loss system work—don’t subsidize failing firms and don’t play favorites or subsidize industries with political pull.