Document Type
Working Paper
Publication Date
4-10-2011
SSRN Discipline
PSN Subject Matter eJournals; ARN Subject Matter eJournals; Political Economy - Comparative eJournals; Experimental & Empirical Studies eJournals; LSN Subject Matter eJournals; ERPN Subject Matter eJournals; Tax Law & Policy eJournals; ERN Subject Matter eJournals; Management Research Network; Economics Research Network; Legal Scholarship Network; Public Choice & Political Economy eJournals; Political Economy - International eJournals; Social Insurance Research Network; Entrepreneurship Research & Policy Network; Law School Research Papers - Legal Studies; Law & Society eJournals; Law & Society: Public Law eJournals; Accounting Research Network; Political Science Network
Abstract
Small business is a sacred cow in America In 1958 Congress created the Small Business Investment Company SBIC a unique publicprivate program that provides longterm capital to small entrepreneurs From its inception however the SBIC has been plagued by inefficiency and failure Yet Congress continues to pour millions of dollars into the SBIC program with no end in sight What explains this failed policy courseThis article argues that the SBIC program exemplifies the pitfalls of legal and political institutional path dependency and should be replaced by private institutional lending systems Pursuant to this account past decisions can influence future legal developments even in the face of material social changePolitical institutions can entrench ineffective paths by sustaining dynamics of increasing returns through processes of positive feedbacks and selfreinforcement Increasing returns occur when the benefits of a choice augment simply because over time more people opt for that choiceOur romantic ideal of small business as an economic and social catalyst has sprouted positive cultural feedbacks Thereafter the establishment of the House and Senate Small Business Committees and the Small Business Administration sustained this culture selfreinforcing the SBIC program inefficient path where we remain invested to this day
Recommended Citation
Mirit Eyal-Cohen,
Why is Small Business the Chief Business of Congress?,
(2011).
Available at:
https://scholarship.law.ua.edu/fac_working_papers/668