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In this chapter we argue that the ability of people to freely trade, enter into contracts, and start businesses in a system of private property, and the rule of law are crucial for productive entrepreneurship. One measure of how freely individuals can engage in economic activity is the Economic Freedom of the World (EFW) index. After examining the economic policies that harm economic freedom and possibly entrepreneurship, we highlight the correspondence between economic freedom and a number of measures of entrepreneurship. We conclude with some thoughts regarding future research involving economic freedom and entrepreneurship. Keywords: Institutions, entrepreneurship, economic freedom

Morality and economic actions may converge, but for this to be so over the long run, economic institutions, policies, and their desired outcomes cannot violate human nature—not simply because it is unjust, but because it is unnatural. Economists have grappled with incorporating human nature or behavior into their models, and economists are good at identifying incentives; but sometimes behavioral tendencies and incentives at play in everyday life do not make it into the models. We present a two-nation, two time-period model in which individual agents strive for happiness and prosperity under conditions of uncertainty regarding the behavior of unfamiliar domestic and foreign agents. We allow certain institutions to evolve over time and others individuals create through direct intention, both affecting behavior and the average level of wealth and happiness in society. We show how, in an open society with narrow institutional powers, seemingly conflicting ideals do not dominate moral and economic outcomes. The general premise of our model extends to policymaking and intended outcomes. Keywords: Morality, entrepreneurship, human nature

Researchers have embraced the topics of entrepreneurship and institutions since the 1990s, but a great deal of work remains in addressing the role of informal institutions in determining entrepreneurial outcomes and the use of public policy to encourage productive entrepreneurship. This chapter highlights the importance of understanding informal institutions to best encourage entrepreneurship and foster economic growth. In order to assist researchers, an overview of the available measures of informal institutions is provided and the potential benefits of case-study approaches are addressed. The chapter identifies the implications of research regarding informal institutions for policymaking, and provides suggestions for research going forward. Keywords: Informal institutions, entrepreneurship, public policy

The 2008–09 recession in the U.S. left many states struggling with an eroding tax base and declining overall economic activity, resulting in difficult choices for their annual budget. The two choices every state faced was to either cut their spending on programs or raise revenue from existing sources (through higher tax rates). There was one possible alternative to those tough choices, which was to search out and recruit businesses to relocate to their state—thus increasing the tax base, employment, income, and economic development. States have been competing with one another, at least anecdotally, in their attempts to recruit relocating businesses. This competition leads to a “race to the bottom,” or states basically giving away many incentives that benefit only a few at the cost of the many taxpayers who already live there. How do these decisions by states affect entrepreneurs and the incentives they now face? This race to the bottom by states opens the door for an increase in unproductive entrepreneurship. Keywords: Entrepreneurship, state economic policy

This chapter explores the relationship between politics and entrepreneurship. While the aim of the U.S. House Select Committee on Small Business is presumably to increase entrepreneurial activity, state measures of entrepreneurship show the opposite effect as states with representatives on the committee have lower levels of entrepreneurship. This relationship between state committee representation and state-level entrepreneurship is examined by evaluating congressional dominance. The findings in this chapter suggest that politicians cannot spur entrepreneurship, and may even deter productive entrepreneurship. Keywords: Politics, entrepreneurship, congressional committees