Academic journal article Proceedings of the American Philosophical Society

Entrepreneurship and Global Prosperity: Implications for Poverty and Peace1

Academic journal article Proceedings of the American Philosophical Society

Entrepreneurship and Global Prosperity: Implications for Poverty and Peace1

Article excerpt

MODERN SCHOLARS seem strangely incurious about eco- nomic growth. Were it not for our knowledge of the medi- eval period, many would believe that economic expansion was a roughly linear phenomenon reaching back to Greece and Rome. Growth just happens. In truth, we know little about humanity's path through markets. We know the Roman state made economic policy, and its rulers and scholars were highly conscious of the scale returns to em- pire. This story of growth occupied rulers in historic periods in China and India, as well.

For us, the idea of growth is intrinsically part of the Enlightenment. Adam Smith's treatise, The Wealth of Nations, appeared in 1776. By the time Franklin and Hamilton helped to write the American Consti- tution eleven years later, Smith's ideas were of such consequence that our founding document was as much the outline of an economic ex- periment as it was a political one. Faith in the ingenuity that would allow America's free citizens to prosper might be seen as the DNA of our constitutional government. Indeed, the recorded debates tell us of the quarrel between the idea of a political utopia based on freehold farms and that of a commercial republic eager to show the world that economic progress would confirm the rightness of the American Rev- olution. The new nation really did take on the exceptional task of example-making as it started out on its political/economic experiment.

How odd it is, then, that it took such a long time for the impor- tance of the ensuing growth to be understood by economics, the dis- cipline that holds itself responsible for understanding how welfare expands. William Baumol arguably is responsible for leading us to see the promise that modern entrepreneurial capitalism holds for scale growth and its potential to improve human welfare in all parts of the globe.2 Baumol's work builds on that of Joseph Schumpeter, who first analyzed economic history and saw the importance of new market en- trants that disrupt the status quo.3

We are indebted to Schumpeter for his insight relating to creative destruction. But it is Baumol who quantified the gains in terms of the historic expansion of economic welfare and enumerated the universal conditions necessary for growth to succeed.4 We need only recall Bau- mol's reflection on the different outcomes for human welfare of one- percent and three-percent growth rates over the course of a century to appreciate why economic growth is preferable to its alternative. And it is Baumol who recognized the legal predicates laid down in the Consti- tution as vital to America's potential to exemplify the entrepreneurial order for the future.

This case for growth as the basis for expanding human welfare was made irrefutably by Henry Sigerist, a professor of the history of medi- cine at Johns Hopkins University and a contemporary of Schumpeter's. In Civilization and Disease,5 Sigerist showed that increasing personal disposable income helped to improve human health over the course of history more than any other factor, including increasing ratios of physi- cians to patients. Sigerist suggests that when incomes rise, households are more likely to obtain better food, shelter, and clothing; acquire a higher standard of hygiene; seek better public goods-such as pure water and sewers; and, most important, acquire education.

Subsequent work in human capital economics extended these find- ings when describing correlations between rising family incomes and smaller family sizes.6 Similarly, findings showing that, with increased incomes, people trade work for leisure amplified the importance of growth in producing welfare gains. As I will argue in this paper, more recent work in conflict studies suggests that expanding economic activ- ity has still more profound implications for human welfare.

Yet, the concept of economic growth seems to trouble us. Perhaps it is human nature to yearn for the future to be better, even as we resist the loss of old ways of living and working. …

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