October 26, 2015

Interview in Die Volkswirtschaft

Die Volkswirtschaft, a Swiss economics journal, interviewed me on the relationship between state and startups. The interview titled The State Shouldn't Stay in the Way was published in German as well as in French on 2015-10-26.

I emphasize the importance of a low level of bureacracy for startups to flourish. It is argued that the state should not invest in startups, neither directly nor indirectly through pension funds, as some politicians recently proposed. For startups, having smart money from investors that care and can help is essential. Taxing these investors, and then letting a hired expert without skin in the game decide where to invest the collected taxes again turns smart money into dumb money, thereby destroying value. Instead of trying to help with funding, the state should rather focus on its core responsibility, namely effectively providing a reliable infrastructure, entrepreneurial freedom, and legal certainty.

“In using systems of adaptive agents to create a ’guess’, we are counting on the tendencies of these systems of adaptive agents, as plodding as they are, eventually to find their ways to equilibria that we economists (who, after all, made up the model!) have difficulty finding.”
Thomas Sargent in 'Bounded Rationality in Macroeconomics'