As DanielBMarkham said in the top post, the problem is that governmental offices need to look like they are productively creating value. Getting out of the way doesn't get a bureaucrat a career advance. The government way would be to use tax money to create a startup development program, so that the administrators can point to successful outcomes from it and take credit. Never mind if we'd have more successful startups without a program at all thanks to lower tax overhead. Government cannot create such an outcome because government is composed of individual administrators all with their own self-interest. Government cannot remain idle even when remaining idle is the best solution, because each civil servant needs to be seen as Doing Something.
My state, New Jersey, has as part of its income tax return a moderately complicated form that amounts to a $50 rebate credit against property tax. Wouldn't it have been infinitely simpler to just lower property tax by $50 in the first place? Of course. But the extra paperwork creates visibility that They Are Doing Something About Our Taxes, which perception is far more important to the politicians than actually doing something about taxes.
I'm vaguely reminded of Internet Explorer's "enhanced security" stuff. IE looks more secure by emitting "we protected you!" notices all over the place, than if it had never been designed with such inherently risky OS integration in the first place.
Yes, but the whole premise of the venture-capital scene is that the price system is inefficient. =] That is, there are places where you can put in $10m and get $100m out, because you find an area of potential production that just needed a catalyst.
I see cities as more or less trying to do the same thing; they want to find a way to provide a catalyst to local businesses that will pay for itself 10x over the next N years. May or may not work, but nothing in the market precludes it from being possible (the main reason for it not to work is just that city bureaucrats are bad at it, partly due to the political situation they operate in).
PS on taxes, we've got the lowest tax rates in the post-war era right now, and record corporate profits, but new jobs still aren't appearing. Why? There's no business reason for them. Taxes are only one of many variables. Contrast with the 50s and 60s when taxes were much higher as was growth and employment. That's not to say that higher taxes cause economic growth, obviously. Other variables in play.
I really hope that methodology and philosophy never becomes the penultimate choice for those that want to start their own business or innovate something.
The government could potentially destroy that balance though, I agree.
Where there is a need, there will be an innovation of some kind. The best ideas come partially from necessity.
If "let's work out of a garage for a while" is the second-to-last choice, what is the last choice, and is it better or worse?
I'm not sure a society needs more startups and I have no way to know so I wouldn't think to make a policy to help create startups. It seems to me that the presumption that society cannot produce the things it values is very arrogant. The whole point of the price system is to allow society to communicate to entrepreneurs what is valued and what isn't. Let others in society (not in government) communicate to the entrepreneurs what they should be building.