April 18, 2011
Immediately following the 2008 global financial crisis, many economists and market observers hastened to declare that the era of free markets was now over. America and the world as a whole, they said, were trending toward greater reliance on government controls. Contrary to those widespread predictions, the changing nature of economic growth means that prosperity is actually more, not less, reliant on free, competitive markets, according to "Frontier Economics: Why Entrepreneurial Capitalism is Needed Now More than Ever," a report by the Ewing Marion Kauffman Foundation.
According to Brink Lindsey, the study's author and the vice president of research at the Cato Institute:
- Over the past generation, world economic policy has been dominated by greater reliance on market competition.
- Notwithstanding the recent financial crisis, there are good reasons to believe this trend will continue well into the future.
Lindsey's analysis focuses on the evolving requirements of economic growth as countries grow richer.
- Imitative growth, which comes from applying existing knowledge, becomes less important; innovative growth, which comes from new ideas, becomes more important.
- The world economy has entered an era of "frontier economics," as growth is increasingly something that takes place at the technological frontier.
The richer nations get, the more they "rely on innovation to keep growth going -- and, therefore, the more we need free market policies that foster the creation of new businesses and the implementation of new ideas," Lindsey says. "If we are to rise out of the current slump and launch a new, 21st century boom, it is in the direction of freer, more competitive markets that our policies must turn."
Source: Brink Lindsey, "Economic Growth Hinges on 'Frontier Economics' of Entrepreneurial Upstarts and Reduced Government Intervention," Kauffman Foundation, April 13, 2011.
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