Do Entrepreneurs Make Predictable Mistakes? Evidence from Corporate Divestitures

Abstract

Mises (1990) famously showed that economic calculation is not possible without private property in all markets, especially markets for factors of production. The Austrian business-cycle literature (Mises 1934; Hayek 1935; Garrison 2001) suggests that entrepreneurial errors are more likely under government sponsored credit expansion. This article makes a related argument: Entrepreneurial decisions to make acquisitions that will later be regretted, and divested, are more likely in the wake of government intervention in particular industries.