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: |
Fax: (510) 642-3767
Web page: http://www.escholarship.org/repec/blewp/
More information through EDIRC
References listed on IDEAS
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.:
- repec:tpr:qjecon:v:107:y:1992:i:3:p:889-906 is not listed on IDEAS
- Douglass C. North, 1993. "The Paradox of the West," Economic History 9309005, EconWPA.
- Torstensson, Johan, 1994. "Property Rights and Economic Growth: An Empirical Study," Kyklos, Wiley Blackwell, vol. 47(2), pages 231-47.
- Lawrence J. Lau & Yingyi Qian & Gerard Roland, .
"Pareto-Improving Economic Reforms through Dual-Track Liberalization,"
97007, Stanford University, Department of Economics.
- Lau, Lawrence J. & Qian, Yingyi & Roland, Gerard, 1997. "Pareto-improving economic reforms through dual-track liberalization," Economics Letters, Elsevier, vol. 55(2), pages 285-292, August.
- 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.
- Robert J. Barro, 1996.
"Determinants of Economic Growth: A Cross-Country Empirical Study,"
NBER Working Papers
5698, National Bureau of Economic Research, Inc.
- 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, June.
- 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.
- Buchanan, James M, 1987.
"The Constitution of Economic Policy,"
American Economic Review,
American Economic Association, vol. 77(3), pages 243-50, June.
- Douglass C. North, 1990.
"A Transaction Cost Theory of Politics,"
Journal of Theoretical Politics,
, vol. 2(4), pages 355-367, October.
- Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1989.
"Industrialization and the Big Push,"
Journal of Political Economy,
University of Chicago Press, vol. 97(5), pages 1003-26, October.
- Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers 2708, National Bureau of Economic Research, Inc.
- Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
- Rose-Ackerman,Susan, 1999. "Corruption and Government," Cambridge Books, Cambridge University Press, number 9780521632935.
- 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.
- Waterbury, John, 1999. "The Long Gestation and Brief Triumph of Import-Substituting Industrialization," World Development, Elsevier, vol. 27(2), pages 323-341, February.
- North,Douglass C. & Thomas,Robert Paul, 1976. "The Rise of the Western World," Cambridge Books, Cambridge University Press, number 9780521290999.
- 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.
- Buchanan, James M, 1988. "Contractarian Political Economy and Constitutional Interpretation," American Economic Review, American Economic Association, vol. 78(2), pages 135-39, May.
- 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.
- Rose-Ackerman,Susan, 1999. "Corruption and Government," Cambridge Books, Cambridge University Press, number 9780521659123.
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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.