Must-Read: Noah Smith: Want More Startups? Build a Better Safety Net

Must-Read: Noah Smith: Want More Startups? Build a Better Safety Net: “What was wrong with the theory?… Acemoglu et al…. [thought] the thing that determines entrepreneurial success is… how hard you try…

…When it comes to entrepreneurship, there’s another factor that’s probably a lot more important than effort. It’s risk. For a prospective entrepreneur, the choice… is between starting a business and working for someone else. The difference in effort between those two career paths probably isn’t that big. But entrepreneurship is much, much riskier…. The risk theory of entrepreneurship says that when people already have a lot of risk, they’re less likely to take on more…. So if the risk theory is right, a stronger safety net should lead to more entrepreneurial activity, not less…. That’s what the evidence seems to indicate…. The data is piling up–at the margin, risk is a lot more important than effort in determining who starts a business…