Economic Calculation and the Productivity of Investment

Powell Benjamin () and Macera Gonzalo ()
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Powell Benjamin: Rawls College of Business, Texas Tech University, Lubbock, TX 79409, USA
Macera Gonzalo: Department of Agricultural & Applied Economics, Texas Tech University, Lubbock, TX 79409, USA

Journal of Business Valuation and Economic Loss Analysis, 2017, vol. 12, issue s1, 6

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.

Keywords: economic freedom; investment; growth; economic calculation (search for similar items in EconPapers)
JEL-codes: G14 O12 O43 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/jbvela-2016-0016

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