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Government and the Economy. David Lee Public Policy Analysis 12 March 2008. Question. What is the proper role of the Government in the economy? What policy should it pursue?. Position.

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government and the economy

Government and the Economy

David Lee

Public Policy Analysis

12 March 2008

  • What is the proper role of the Government in the economy?
  • What policy should it pursue?
  • The economic interests of a nation are best served when the government limits itself to the protection of:
    • Property
    • Entrepreneurial integrity and freedom
      • The focus of this paper
support theoretical
Support – Theoretical
  • Perfect Competition
    • Inefficiency of Government Intervention
  • Crowding Out
support empirical
Support – Empirical
  • Entrepreneurship and Growth
    • Higher entrepreneurship levels lead to increasing economic growth rates

(Clark, Lee, and Sobel 2007).

  • Economic freedom
    • Positively correlated to growth

(Campbell and Rogers 2007)

support empirical1
Support - Empirical
  • Government Limitation
    • Countries with less government involvement have greater productive entrepreneurial activity. (Clark, Lee, and Sobel 2007)
    • Small governments that: limit income redistribution, protect property rights and create an open entrepreneurial environment, do more to promoteprosperity than conventional development models (Campbell and Rogers 2007)
  • Inefficiency of Special Interests
arguments for intervention
Arguments for Intervention
  • Optimal Tariff
    • Effects on the terms of trade
    • Promote Domestic Entrepreneurship
counter assertions
Counter Assertions
  • Resource Combination Limitations
  • Politicization of the Economy
  • Strategic Ramifications
arguments for intervention1
Arguments for Intervention
  • Success of US industrial policy
    • Special Interest Influence
counter arguments
Counter Arguments
  • Entrepreneurial Potential
    • Studies show countries that give into demands of current new businesses have lower levels of entrepreneurship (Clark, Lee, and Sobel 2007).
  • Inefficiency of Politicization of the Economy
arguments for intervention2
Arguments for Intervention
  • Entrepreneurship is Disruptive
    • Established business
    • Socioeconomically
counter arguments1
Counter Arguments
  • Prosperity
    • Higher Consumption
    • Higher Growth
arguments for intervention3
Arguments for Intervention
  • Economic Freedom is Not Beneficial
    • Negative relationship between new business formation and commercial lending (Campbell and Rogers 2007).
counter arguments2
Counter Arguments
  • Related Outside Studies
  • Size of the effect
  • Economic Freedom Findings
policy suggestions
Policy Suggestions
  • Protection of property
  • Protection of Entrepreneurial Freedom
    • Limit Special interests influence
    • Business Failure
works cited
Works Cited
  • Campbell, Noel D. and Tammy M. Rogers. “Economic Freedom and Net Business Formation.” Cato Journal 27, No. 1 (2007): 23-36. EBSCOHost. Oregon State University Lib., Corvallis OR <>.
  • Clark, J. R., Dwight R. Lee and Russell S. Sobel. “Freedom, barriers to entry, entrepreneurship, and economic progress.” Review of Austrian Economics 20 (2007): 221-36. EconLit. Oregon State University Lib., Corvallis OR. 25 August 2007. <>.
  • Ketels, Christian H. M. “Industrial Policy in the United States.” Journal of Industry, Competition and Trade.7 (2007): 147-167. EconLit. Oregon State University Lib., Corvallis OR. 20 January 2007. <>.