entrepreneurship in a developing country consists of discovering the underlying cost structure--what can and cannot be produced profitably. Initial investors in a new line of economic activity face a great amount of uncertainty, since foreign technology always needs some local adaptation. Plus, their cost discovery soon becomes public knowledge--everyone can observe whether their projects are successful or not--so the social value they generate exceeds their private costs. If they succeed, much of the gains are socialized through entry and emulation, whereas if they fail, they bear the full costs.
He includes a great example of "free markets theory" being ignored for the better...
Some of the what I have been seeing in Ethiopia is a picture perfect illustration of this process at work. Most notable in this respect is the flower industry, which was started by some courageous entrepreneurs who had observed the success of the industry in nearby Kenya and wondered if it could be made to work in Ethiopia as well. Even though much of the technology is standard, local soil conditions make a lot of difference to the economics of growing flowers, and a whole range of other services--from daily cargo flights to high-quality cardboard packaging--has to be in place before the operation can succeed. To its credit, the Ethiopian government understood the need to subsidize these pioneer firms, through cheap land and tax holidays, and the industry took off. Exports have reached $100 million from zero in just a few years. There are now around 90 flower farms in the country, with latecomers the beneficiary of the tinkering that early investors have undertaken.
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