Baumol, 2007 [William, former junior economist for the U.S. Department of Agriculture, Freedom and capitalism in early modern Europe: mercantilism and the making of the modern economic mind, The Care and Maintenance of Entrepreneurial Capitalism, 228-89, HHW]
For roughly a century, the United States has been the leading economic power in the world. Part of the reason for its success is that the United States has been the quintessential exemplar of a mixture of entrepreneurial and big-firm capitalism.But can Americans, and others in the world who are now emulating the U.S. model, safely assume that the American economy will continue to be as successful as it has been in the past? Or is the United States—like other once-great civilizations (ancient Rome and Greece come to mind)—doomed in the foreseeable future to fall or at least stagnate? We make no claim to be prophets, but we believe that while there is much to be optimistic about, there also are dangers ahead. In this chapter, we will celebrate the former and call attention to the latter in the hope that current and future policy makers will take steps to help us avoid the fate to which the dangers could condemn us. Put in a nutshell, we will suggest in this chapter that one of the most immediate perils facing the U.S. economy is the possibility of transforming into a much less entrepreneurial big-firm regime, one characterized by ossification, limited incentives, and a paucity of breakthrough inventions. There is no simple formula for preventing such an outcome, but the analysis of this book suggests the importance of two key principles: provide incentives for productive entrepreneurship and discourage diversion of entrepreneurial talent into unproductive or destructive sources of wealth. In this closing chapter, we will provide a number of suggestions about how best tomaintain the critical balance of big-firm and entrepreneurial capitalism, in part by simply bringing together the observations of the two pre- ceding chapters.
