In CIPE Mary Shirley writes:
An economy that is performing well at one particular point in time may be outperformed in the long-run by an apparent laggard, if that lagging economy proves better able to take advantage of changing circumstances 1. What determines which economy lags or prospers? The answer, according to Schumpeter, is entrepreneurship: the constant creation of new goods, new markets, new methods of production, and new ways of organizing. And what determines whether entrepreneurship flourishes? The answer, I submit, is institutions: institutions that nourish rather than stifle innovation and change, as we can see in the history of the modern market economy...[continue reading]