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PUBLIC POLICY, ENTREPRENEURSHIP, AND ECONOMIC FREEDOM Steven F. Kreft and Russell S. Sobel The “entrepreneurial spirit” is something that has long been asso- ciated with the driving force behind economic progress and growth. Joseph Schumpeter (1942) stated that the key to the success of mar- kets lies in the spirits of entrepreneurs who persist in developing new products and technologies, through a process he termed as “creative destruction.” Kaiser (1990) modeled the entrepreneur on the basis of many historical characterizations, including the Schumpeterian inno- vator, and concluded that the major characteristics of the entrepre- neur—innovator, risk taker, and resource allocator—are complemen- tary and inseparable facets of entrepreneurship. Kirzner (1997) ar- gues that the entrepreneurial discovery process is vital to the effectiveness of markets, where discovery entails entrepreneurs dis- covering profit opportunities by trial and error. In this same respect, Jenner (1998) models the Schumpeterian entrepreneurial process as a dynamic process in which entrepreneurs search for new combina- tions of products and production techniques that will lead to in- creased productivity and economic growth. Knight (1921) views the entrepreneur as the bearer of the uninsurable uncertainty present in the marketplace, with the profit earned being the compensation for bearing this uncertainty. Recently, the conceptual link between entrepreneurship and eco- nomic growth has received renewed interest by economists. As ar- gued by Minniti (1999), entrepreneurs are the catalysts for economic growth because they create a networking externality that promotes the creation of new ideas and new market formations. The finding Cato Journal, Vol. 25, No. 3 (Fall 2005). Copyright © Cato Institute. All rights reserved. Steven F. Kreft is