Setting Policy that Ignites the Entrepreneurial Fire

Mark Kuyper sent along a column from Fortune by Glenn Hutchins that makes the following observation about setting the policy agenda to ensure the entrepreneurship leads us out of this recession as it did out of the recession of the 1970s:

The public policy agenda, when it pivots from the immediate crisis to fundamental questions of how to foster growth, must focus like a laser on promoting capital formation and innovation. We should recognize that being for good jobs but being against wealth creation is akin to being for families but against procreation. One flows naturally from the other. Policies that increase the after-tax cost of capital or discourage the best and the brightest from working in the investment industries would be every bit as disastrous as letting Lehman fail. Portraying business leaders as culprits - while letting consumers, homeowners and public officials off scot free - risks moving us from a culture of aspiration to one of blame. Buttressed by policies that reflect an understanding of both shared responsibility and opportunity, investors and entrepreneurs can create the future.

I had the distinct honor and pleasure of teaching an MBA seminar this semester that explored these issues in great depth.  We explored all of the policy issues that shape entrepreneurial economies. We even took this further and examined how entrepreneurial economic development also helps to strengthen our society and shape our culture.

The final assignment was the following:

You have just been named "Entrepreneurship Czar."  Your charge is to develop a plan to help foster entrepreneurial economic growth.  While this paper should draw upon materials covered in the class do not just repeat points we have made throughout the term.  Be bold.  Be creative.  Be visionary.

1. What would be the key pillars of your plan?  Why have you chosen each of these pillars? 
2. What would be the steps that you would recommend be taken to implement your plan?  Be specific and clear. 
3. What are the anticipated outcomes from your plan?  Be specific and clear. 

They presented their plans the last night of class this past Tuesday.

There was unanimous agreement that a fundamental change in tax policy and the tax code was needed.  However, their recommendations were quite varied.

• Several wanted to replace income tax with a national consumption/sales tax
• Others wanted to keep the income tax, but throw away the current code and make it a very simple income tax with no deductions allowed -- some wanted a flat tax, but other favored two brackets (slightly higher for higher incomes).  Several were concerned that a sales tax would inhibit consumption, which tends to drive our economy.
• One student wanted to base income tax rates on entrepreneurs based on their years in business -- no tax for first year and slowing increasing rates with each year.

There was also consensus that education needs to be addressed.  Here were some of their proposals: 

• Add economics education to the "Three R's" -- reading, writing, arithmatic, and economics for students of all ages.
• Make education more competitive, with elite Magnet Schools and Internships that expose high achieving students to innovation and entrepreneurship
• Create a youth entrepreneurship incubator system to offer experiential learning

Property rights was the other most common theme.  Many in the class had no knowledge of the Kelo Decision that expanded the eminent domain powers of government when we first began looking into this topic.  I had them read both the decision and Justice O'Conner's dissent.  All in the class seemed very concerned about how Kelo -- and several more recent actions by the Federal government -- erode property rights.  After all, property rights are the foundation of entrepreneurship in any economy.

Other proposals from my students touched on immigration policies that encourage entrepreneurs to come to America, forcing balanced budgets at the Federal level, global free trade, tort reform, voting rights reform (this was a controversial proposal from one student that tied voting rights to property), simplifying the patent laws to empower small businesses to innovate, and creating universal access to high speed Internet across the US.

Thanks to all of my students in this class who made this one of the best experiences I have had as a college professor!