1. Jobs and Business Policy BY EDWARD J. EGAN, PH.D. BAKER INSTITUTE FELLOW DIRECTOR OF THE MCNAIR CENTER FOR ENTREPRENEURSHIP & INNOVATION

2. The U.S. is a Free Market Economy  In a free market economy, firms control the means of the production. This means that by-and-large government can not change the nation’s economic direction.  Government can do things that are more or less optimal to support a free market economy as it evolves.  Free markets fail to achieve efficiency for well-known economic reasons. Government should address market failures.  Efficiency isn’t the goal — maximizing social welfare is — so governments should also redistribute wealth in free market economies. All of the candidates, even Senator Sanders, believe in free markets!

3. “The economy, stupid.” ● US GDP estimated at $18.1 trillion for Q4 2015 ● Current growth rate is around 2.2% ● There is no consensus among projections — anything in the 2% to 3% range over the next presidential term is likely ● GDP growth is declining relative to the 80’s and the 90’s. We are now back at pre-recession levels, but with a gradual downward trend.

4. Jobs and Small Business “Don’t believe these phony numbers when you hear 4.9 and 5 percent unemployment. The number’s probably 28, 29, as high as 35. In fact, I even heard recently 42 percent.” -- Donald Trump “Instead of small businesses going out of business in record numbers, imagine small businesses growing and prospering.” -- Ted Cruz

5. How the Candidates Will Help Small Business “Pull back the job-crushing regulations that are killing small businesses” -- Ted Cruz “Make sure that small businesses have access to low-interest loans” -- Bernie Sanders “Removing such burdensome regulations would boost small businesses” -- Ben Carson “Regulatory cost and the tax cost - that's why small businesses are closing” -- Jeb Bush “We're going to get rid of the regulations” -- Donald Trump “High taxes... punish a small business owner” -- John Kasich “Expand access to capital, provide tax relief, cut red tape, and help small businesses...” -- Hillary Clinton “Small businesses are the engines of the American economy... [they] need to be free from overbearing government policy” -- Marco Rubio

6. Regulations/Subsidies that Affect Small Business

7. Candidate / Regulation Social Welfare ClintonSandersBushCarsonCruzKasichRubioTrump Environment Healthcare Minimum Wage OSHA Taxes? Access to Capital Decrease regulation/activity Leave regulation/activity unchanged Increase regulation/activity No statement available / unknown Small Business Policy

8. It’s Entrepreneurship, not Small Business, that matters It is very hard to correctly quantify the portion of the economy that is in high- technology, let alone the amount attributable to entrepreneurship. Estimates vary wildly and there is no consensus. Suggestive facts include:  Patent applications went from around 100,000/yr in 1960s-1980s to around 600,000/yr today.  The venture capital industry has grown 107% in the last decade.  The asset value of the top 100 biotech firms has increased by around 400% since 2005. Venture Capital Patents

9. How the Candidates will Help Entrepreneurship “We must promote growth in the technological sector...” -- Ted Cruz “Outdated labor regulations, new taxes, and other bad policies can prevent new, innovative businesses and technologies from ever being able to get off the ground.” -- Marco Rubio “Entrepreneurship and innovation... drive our economy. To continue this... Bernie has supported increasing access to education and training, and opposing intellectual property regimes” -- Bernie Sanders “We need... highly-skilled immigrants. Such a system would help create startups and increase innovation.” -- Jeb Bush

10. Issues that affect Entrepreneurship High-skilled labor (positive externalities) New markets (gains from trade) Commercializable science (positive externalities) High-skilled labor (positive externalities) New markets (positive externalities)

11. Candidate / Regulation Social Welfare ClintonSandersBushCarsonCruzKasichRubioTrump Avail. of Capital Education Free Trade Healthcare H/S Immigration Research funds Decrease public provision Leave public provision unchanged Increase public provision No statement available / unknown Entrepreneurship Policy

12. Thank you QUESTIONS OR COMMENTS TO ED.EGAN@RICE.EDU