Economic Calculation and the Productivity of Investment

Benjamin Powell, Gonzalo Macera

Research output: Contribution to journalArticle

Abstract

This paper explains why institutional quality impacts the productivity of investment. The existing empirical literature finds that a given level of investment creates more economic growth in more economically free countries. We draw on insights from Austrian economics, particularly the economic calculation debate and associated knowledge problems, to provide a theoretical explanation for why entrepreneurs are able to better value investment opportunities in more economically free countries which, in turn, leads to higher economic growth.

Original languageEnglish
Article number20160016
JournalJournal of Business Valuation and Economic Loss Analysis
Volume12
Issue numbers1
DOIs
StatePublished - 2017

Keywords

  • Economic calculation
  • Economic freedom
  • Growth
  • Investment

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