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April 13, 2015

The Key to Reviving the U.S. Economy: New Book Explains the Importance of Economic Freedom and Entrepreneurship for U.S. Economic Growth

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Why did the U.S. economy recover so slowly from the 2008 recession?  What lessons have economists learned that can encourage economic growth in the future? 

A new book jointly published today by the Fraser Institute of Canada in conjunction with the Mercatus Center at George Mason University offers the answers.

“The United States was once considered the land of opportunity, where entrepreneurs such as Henry Ford, Ray Kroc and Steve Jobs improved standards of living by providing new products and services at prices people were willing and able to pay,” said Donald J. Boudreaux, senior fellow at both the Fraser Institute and the Mercatus Center, and editor of What America’s Decline in Economic Freedom Means for Entrepreneurship and Prosperity.

Read the U.S. News & World Report column

Comprised of five essays by U.S. economists, the book connects the dots between entrepreneurship, economic freedom, and economic growth, detailing their interrelated roles in America’s sluggish economic recovery:

Liya Palagashvili of New York University and George Mason University begins by detailing how entrepreneurship is central for both economic growth and long-term prosperity.

Russell Sobel of The Citadel builds on Palagashvili’s chapter, providing further details on the relationship between entrepreneurship, high levels of economic freedom, and growth. As Sobel explains: “More economic freedom results in higher prosperity precisely because it results in higher levels of entrepreneurial activity.”

Robert Lawson of Southern Methodist University examines the current situation in the United States.  According to the Fraser Institute’s annual Economic Freedom of the World Index (co-written by Lawson), economic freedom in the U.S. has dramatically fallen from its global rank of second in 2000 to 14th today.

Lawson writes: “To a large degree, the United States has experienced a significant move away from rule of law and toward a highly regulated, politicized, and heavily policed state.”

Robert Meiners of the University of Texas at Arlington and Andrew P. Morris, Dean of Texas A&M University School of Law examine the role of the U.S. legal system and how special interests corrupt the legal and economic framework.  They also explain the impact of regulation and the economy.

Clyde Wayne Crews, Jr. of the Competitive Enterprise Institute captures the extent to which U.S. regulation has reached prodigious levels, writing: “Such examples scale down to the Consumer Product Safety Commission’s proposed window blinds regulation to FDA’s regulation of a serving size of breath mints.”

Donald Boudreaux of the Fraser Institute and Mercatus Center at George Mason University concludes by noting that although American entrepreneurship is in decline, it is possible to reverse the trend:

“For generations, American entrepreneurs and small business owners have played a vital role in our economy. But today that role is being diminished. The results can be seen in the lagging economic recovery since 2008.

“The warning signs are all about us but it’s not too late to reverse course. Start with a simpler, understandable tax code, fewer regulations, greater enforceability of contracts – in short, put an end to government stifling of entrepreneurs and small businesses.”

The Fraser Institute is an independent Canadian public policy research and educational organization. The Mercatus Center at George Mason University is the world’s leading university source for market-oriented ideas– bridging the gap between academic ideas and real-world problems.