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Summer 2018
ISSN 0890-913X
Volume 33, Number 2

Entrepreneurial Errors in a Kaleidic Democracy

Simon Bilo, Allegheny College
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TheJournalofPrivateEnterprise33(2),2018,5366EntrepreneurialErrorsinaKaleidicDemocracySimonBilo*AlleghenyCollege______________________________________________________AbstractEconomicactivityisastreamofinterconnectedexperiments,wheresomeareboundtofail.Suchfailuresarecostlyandpolicymakersmightaspiretomitigatethem,particularlyduringeconomiccrises.Themitigationcanhappenintwoways:throughfurtherentrepreneurialexperimentationinthemarketprocessorthroughthepoliticalprocess.Whenthegoalistominimizeuncertaintyduringeconomiccrises,profit-seekingentrepreneurshipshoulddominatepoliticalaction.Thisisbecausewhilepeopleeasilyunderstandthatthegoalmotivatingentrepreneursistostayinbusinessandtokeeprevenuesabovecosts,thegoalsdrivingbureaucratsandpoliticiansarelesspredictable.______________________________________________________JELCodes:H11,H12Keywords:clustersoferrors,democracy,kaleidics,misallocations,uncertaintyI.IntroductionUncertainty,subjectivity,andpurposefulbehaviorarethreefeaturesofhumaninteractionthatconstrainpotentialmarketoutcomesbutalsopoliticianswhowanttoregulatetheseoutcomes.Thefeatures,however,playoutdifferentlyinthemarketarenawhencomparedtothepoliticalarena,andtheyleadtotwoseparateresponsepatternstothesametypeofevent,particularlytoaclusterofentrepreneurialerrors.Whereaspoliticalresponsesseemarbitrarytooutsideobserversandinjectintotheeconomyadditionaluncertainty,themarketgivespeopletheincentivesandtheknowledgetorespondtoerrorsinamoreconstrainedandthereforemorepredictablepatternofcreativity.Aslongastheoverarchingpolicygoalistominimizeeconomicuncertainty,usingthetermuncertaintyhere*IthankRichardWagnerforvaluableconversationthatledtothispaper,andHarryDavidandparticipantsofthe2015annualmeetingoftheSouthernEconomicAssociationforvaluablecommentsandsuggestionsontheearlierdrafts.Iamresponsibleforallerrors.
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