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The Review of Austrian Economics

, Volume 20, Issue 4, pp 221–236 | Cite as

Freedom, barriers to entry, entrepreneurship, and economic progress

  • Russell S. Sobel
  • J. R. Clark
  • Dwight R. Lee
Article

Abstract

While entrepreneurs benefit from unrestricted free entry into markets, they have a time-inconsistent incentive to lobby for government entry restrictions once they become successful. Bad political institutions yield to these demands, and growing barriers are placed on domestic and international competition. Good institutions do not, and this effort is instead channeled toward further wealth creation. We find that productive entrepreneurship depends on both the freedom to succeed and discipline of failure that free markets provide. Trade barriers result in fewer combinations of goods and inputs attempted, and less productive entrepreneurial resource use. We also provide evidence on the value of business failure.

Keywords

Entrepreneurship Creative destruction Economic freedom Barriers to entry 

JEL codes

H11 L26 F13 

Notes

Acknowledgements

The authors would like to thank Leslie Morris for providing the research assistance on this project. We would also like to thank Randy Holcombe, Chris Coyne, Peter Leeson, anonymous referees, and participants at the Association of Private Enterprise Education and Southern Economic Association meetings for the helpful comments and suggestions.

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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  • Russell S. Sobel
    • 1
  • J. R. Clark
    • 2
  • Dwight R. Lee
    • 3
  1. 1.James Clark Coffman Distinguished Chair, Department of EconomicsWest Virginia UniversityWVUSA
  2. 2.Scott L. Probasco Jr. Chair of Free EnterpriseThe University of TennesseeChattanoogaUSA
  3. 3.Ramsey Chair of Private EnterpriseThe University of GeorgiaAtlantaUSA

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