Politicians and bureaucrats undermine entrepreneurship and private investment when they create uncertainty about the security of property rights, contract law, and other rules of the game. The risk of regime uncertainty would be significantly smaller under a contractual, polycentric legal order shaped by market entrepreneurs.
According to economic historian Robert Higgs (1997), an important reason why the Great Depression lasted as long as it did was the prevalence of what he terms regime uncertaintythat is, the kind of uncertainty that businesspeople, investors, and entrepreneurs feel in a political and legal environment that threatens to tax and regulate their wealth-generating activities to the extent that they can in many cases no longer expect these activities to be profitable. In other words, the problem is not the uncertainty produced by unpredictable consumer behavior or natural phenomena, but the uncertainty that politicians and bureaucrats create....
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