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Economic Calculation and the Productivity of Investment

Author

Listed:
  • Powell Benjamin

    (Rawls College of Business, Texas Tech University, Lubbock, TX 79409, USA)

  • Macera Gonzalo

    (Department of Agricultural & Applied Economics, Texas Tech University, Lubbock, TX 79409, USA)

Abstract

This paper explains why institutional quality impacts the productivity of investment. The existing empirical literature finds that a given level of investment creates more economic growth in more economically free countries. We draw on insights from Austrian economics, particularly the economic calculation debate and associated knowledge problems, to provide a theoretical explanation for why entrepreneurs are able to better value investment opportunities in more economically free countries which, in turn, leads to higher economic growth.

Suggested Citation

  • Powell Benjamin & Macera Gonzalo, 2017. "Economic Calculation and the Productivity of Investment," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 12(s1), pages 1-6, July.
    • Handle: RePEc:bpj:jbvela:v:12:y:2017:i:s1:p:6:n:4
    DOI: 10.1515/jbvela-2016-0016
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    References listed on IDEAS

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    1. Jakob De Haan & Susanna Lundström & Jan‐Egbert Sturm, 2006. "Market‐oriented institutions and policies and economic growth: A critical survey," Journal of Economic Surveys, Wiley Blackwell, vol. 20(2), pages 157-191, April.
    2. James D. Gwartney & Randall G. Holcombe & Robert A. Lawson, 2006. "Institutions and the Impact of Investment on Growth," Kyklos, Wiley Blackwell, vol. 59(2), pages 255-273, May.
    3. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    4. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
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    More about this item

    Keywords

    economic freedom; investment; growth; economic calculation;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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