Thread by @Nightingale_P

Lots of UK twitter talk on encouraging entrepreneurship.

Couple of points:

1. We spend more on supporting small firms than we do no the police or universities, with little evidence it makes much difference. It substantially distorts the market.

2. There is already a massive amount of market entry in UK and good case can be made that it is excessive. Most common outcome is failure. Half of firms gone in 4-5 years.

3. The returns for most are zero or negative, raising moral questions about encouraging people to do it.

4. Most market entry simply generates economic churn. This is mostly wasted effort.

5. "The typical entrepreneur in the UK is not Bill Gates. Its someone who opens a fish and chip shop in a town which already has two, and a market that can only support one. If they survive it is only because they have pushed another firm out of the market"

6. There is a tiny subset of firms that have a huge impact. They are in a few sectors and typically supported by large, global, very professional equity investors. They are *very* different from the typical firm. We need more of them.

7. The policy issue isn't incentives, but quality.

8. When a small firm seeks funding and is refused, and exits the market as a result. This is *not* an example of market failure. It is v probably the market working well. It doesn't mean they need a subsidy.

9. Entrepreneurs tax relief is a very badly designed policy. It is very costly, and that money could be put to much better use elsewhere. It doesn't do what it is intended to do.

10. Its very, very hard to do good work on the economic impact of entrepreneurship and SMEs.

11. Storey's Law of SME policy evaluation: the larger the sample and the better the methodology, the more likely you are to find zero or negative findings.

12. I did a paper with @AlexCoad on why naive thinking in this area is naive. Its designed to be a fun read and should be seen in the context of a well-intentioned academic disagreement.

watermark.silverchair.com/dtt057.pdf?tok…

@AlexCoad There is an excellent @TheIFS analysis of entrepreneurs relief, by the amazing @HelenMiller_IFS and Kate Smith (twitter???)

ifs.org.uk/publications/1…

@AlexCoad @TheIFS @HelenMiller_IFS Sorry, the link for the paper on the difficulties and biases involved in SME research seems to not work for some people.

Try this link and click on the "[pdf] OUP.com" in the top left.

scholar.google.com/scholar?hl=en&…