NCPA - National Center for Policy Analysis

Does Entrepreneurship Need A Boost?

October 1, 2002

Entrepreneurship is alive and well in the United States. But some Capitol Hill lawmakers and others think special legislation is needed to further encourage it. If 100 new corporations are good for the economy, they seem to be saying, wouldn't 200 be twice as good?

Two Senators, John Kerry (D-Mass.) and Christopher Bond (R-Mo.), along with a group known as the National Commission on Entrepreneurship, plan to recommend a package of tax breaks, and regulatory and other measures designed to "expand and extend the entrepreneurial economy."

But many economists are skeptical of such plans.

  • Northwestern University economist Robert J. Gordon argues that the U.S. banking system "is awash in capital" available to would-be entrepreneurs and that they "don't need any help."
  • Wooing men and women out of jobs and into entrepreneurial activity carries with it substantial risk, experts warn -- since half of small businesses fail after four years, and 66 percent bite the dust within six years.
  • The economy as a whole can also suffer when entrepreneurship becomes overheated -- as the failures of the dot-com and telecom industries recently proved.
  • Successful entrepreneurs are those excited by a new idea and motivated by burning ambitions -- not those lured by the goal of a tax break.

While the removal of regulatory impediments to success would be welcome, economists argue, luring the less motivated into business start-ups will probably only increase the failure rate of small companies and waste resources.

Source: Jeff Bailey, "Entrepreneurship, Too, Has Its Economic Limits," Wall Street Journal, October 1, 2002.

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