Entrepreneurs need an educated workforce

Entrepreneurship is the driver of growth and wealth, or at least an important driver. This is why so many initiatives are geared towards making life easier for entrepreneurs. And the champion in the US, with relatively little red tape, low taxes and especially very developed financial markets. One aspect that is much discussed right now is how low these taxes should be, especially as lowering them implies reducing some public benefits such as education. Is there a trade-off?

José María Millán, Emilio Congregado, Concepción Román, Mirjam van Praag and André van Stel use a panel dataset from several European countries to show that education matters for entrepreneurial performance, and it is not only the entrepreneur's own education, but also that of the workforce. An entrepreneur who cannot find appropriate workers or clients who are sophisticated enough for her products is not as successful. While the results are strong, I am a bit wary of using a short annual sample to tease anything out of education measures, but this is worth further investigation.

The unnecessary problems of the Euro

European leaders are currently struggling over a package to save the Euro, pouring large amounts of money into funds that should stabilize the fiscal situation in Greece, Portugal, Ireland and potentially other countries. It seems to me that this is a completely unnecessary problem, and all this grief could have easily been avoided with a simple change in policy.

Just look at what is happening in the United States. Several states are in serious financial difficulties and, as several times in the past, California is considering issuing IOUs, thereby essentially declaring it is insolvent. Is there any expectation that other states or the federal government will rush to California's aid because the dollar is threatened? Of course not, despite the fact that California is the largest state in the Union.

It should be the same for the Euro. None of the member countries can monetize its debt on its own, and the only reason that the Euro is threatened is that markets have an expectation that other countries will rush to help, thereby sending a message that monetary policy could be influenced by what is happening in those small countries. And why is this belief well anchored? Because European indeed rush to help (talk about a nice example of self-fulfilling expectations) and because of this silly concept that all national debt in Europe is fungible (talk about a nice example of the tragedy of the commons). Now of course it is a bit late to rectify those beliefs, but had it been clear no rescue package were in sight, those countries would probably not taken such a risky fiscal path in the first place (talk about a nice example of moral hazard). I guess that those silly policy decisions all boil down to European politics, once more (talk about a nice example where economists' advice has been ignored, and they will get blamed for it anyway).