Innovation, Information, and the Poverty of Nations
Sustained growth occurs in developing nations through improvements in markets and organizations. Entrepreneurial innovation resembles biological mutation that is unpredictable before it occurs and understandable afterwards. It is unpredictable because it begins with an innovator who acquires private information and earns extraordinary profits. It is understandable because its ends with the public figuring out the innovation and all investors earning ordinary profits. These characteristics of innovation have important consequences for law and policy to foster economic growth. Government officials who rely on public information cannot predict which firms or industries will experience rapid growth. Consequently, industrial policies that promote growth are unlikely to succeed. Proponents of industrial policy today make the same mistake as the mercantilists whose interventions Adam Smith attacked as a cause of national poverty. In contrast, secure property and contract rights, and effective business law (especially the laws regulating financial markets), create conditions under which competition naturally produces entrepreneurial innovation and nations become rich. The main obstacle to sustained economic growth in poor countries today is ineffective civil and business law.
|Date of creation:||22 Apr 2005|
|Date of revision:|
|Contact details of provider:|| Postal: Boalt Hall, Berkeley, CA 94720|
Fax: (510) 642-3767
Web page: http://www.escholarship.org/repec/blewp/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Buscaglia, Edgardo & Ulen, Thomas, 1997. "A quantitative assessment of the efficiency of the judicial sector in Latin America," International Review of Law and Economics, Elsevier, vol. 17(2), pages 275-291, June.
- Buchanan, James M, 1988. "Contractarian Political Economy and Constitutional Interpretation," American Economic Review, American Economic Association, vol. 78(2), pages 135-39, May.
- Lau, Lawrence J. & Qian, Yingyi & Roland, Gerard, 1997.
"Pareto-improving economic reforms through dual-track liberalization,"
Elsevier, vol. 55(2), pages 285-292, August.
- Lawrence J. Lau & Yingyi Qian & Gerard Roland, . "Pareto-Improving Economic Reforms through Dual-Track Liberalization," Working Papers 97007, Stanford University, Department of Economics.
- Lau, Lawrence J & Qian, Yingyi & Roland, Gérard, 1997. "Pareto-Improving Economic Reforms through Dual-Track Liberalization," CEPR Discussion Papers 1595, C.E.P.R. Discussion Papers.
- Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 1998.
"Corporate Ownership Around the World,"
NBER Working Papers
6625, National Bureau of Economic Research, Inc.
- Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 1998. "Corporate Ownership Around the World," Harvard Institute of Economic Research Working Papers 1840, Harvard - Institute of Economic Research.
- Buchanan, James M., 1986.
"The Constitution of Economic Policy,"
Nobel Prize in Economics documents
1986-1, Nobel Prize Committee.
- Robert J. Barro, 1998.
"Determinants of Economic Growth: A Cross-Country Empirical Study,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262522543, March.
- Robert J. Barro, 1996. "Determinants of Economic Growth: A Cross-Country Empirical Study," NBER Working Papers 5698, National Bureau of Economic Research, Inc.
- North,Douglass C. & Thomas,Robert Paul, 1976. "The Rise of the Western World," Cambridge Books, Cambridge University Press, number 9780521290999, Junio.
- Adelman, Irma & Morris, Cynthia Taft, 1997. "Editorial: Development history and its implications for development theory," World Development, Elsevier, vol. 25(6), pages 831-840, June.
- Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989.
"Industrialization and the Big Push,"
3606235, Harvard University Department of Economics.
- Buscaglia, Edgardo, 2001. "An analysis of judicial corruption and its causes: An objective governing-based approach," International Review of Law and Economics, Elsevier, vol. 21(2), pages 233-249, June.
- Douglass C. North, 1990.
"A Transaction Cost Theory of Politics,"
Journal of Theoretical Politics,
SAGE Publishing, vol. 2(4), pages 355-367, October.
- Torstensson, Johan, 1994. "Property Rights and Economic Growth: An Empirical Study," Kyklos, Wiley Blackwell, vol. 47(2), pages 231-47.
- Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1992. "The Transition to a Market Economy: Pitfalls of Partial Reform," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 889-906.
- Avinash Dixit, 2003. "Some Lessons from Transaction-Cost Politics for Less-Developed Countries," Economics and Politics, Wiley Blackwell, vol. 15(2), pages 107-133, 07.
- Douglass C. North, 1993. "The Paradox of the West," Economic History 9309005, EconWPA.
- Waterbury, John, 1999. "The Long Gestation and Brief Triumph of Import-Substituting Industrialization," World Development, Elsevier, vol. 27(2), pages 323-341, February.
- Prebisch, Raúl, 1950. "The economic development of Latin America and its principal problems," Sede de la CEPAL en Santiago (Estudios e Investigaciones) 29973, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
- repec:cup:cbooks:9780521659123 is not listed on IDEAS
- repec:cup:cbooks:9780521632935 is not listed on IDEAS
When requesting a correction, please mention this item's handle: RePEc:cdl:oplwec:qt9sz547bd. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Schiff)
If references are entirely missing, you can add them using this form.