Pundita’s Macro-Economics of Micro-Entrepreneurship

My fellow blogger Pundita — mostly on hiatus but returning to a weekly format in April — very kindly responded to my query about fellow blogger Eric Raymond’s enthusiasm for micro-infrastructure:

Kamen is taking the next logical step: downsizing and decentralizing the power and water infrastructure. And look at the way he plans to do it; not by enlisting governments, but by tapping local entrepreneurialism.

I asked:

Do you think it is possible for technology + entrepreneurship to (eventually) do an “end-run” around traditional development organizations (e.g., the World Bank), and demonstrate the viability of a truly grass-roots approach to social uplift

Pundit replied in her usual fact-filled, foot-noted analysis, but the key points are:

As the Kamen article notes, those nifty energy generator/water purifier machines have to be mass produced in order to put their price within the reach of village entrepreneurs. As soon as you talk about mass production, you’re talking about factories and distribution, and labor unions, and financing. When talking about financing you’re talking about banks, which leads to banking regulations, and — pretty soon you are entangled in the very red tape that Kamen wants to circumvent.


So that’s where we are now. Microenterprise is coming into its own in development circles. The catch is that microenterprise, with its emphasis on small-scale entrepreneurs, requires microfinancing and thus, laws that don’t mire small business and creative microfinancing in red tape.

In short, Pundita captures the point that Libertarians always prefer to ignore: you need a healthy system in order to enable individual freedom, and you need good, strong governance to prevent one group’s short-sighted self-interest from ruining the system.