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UU Introduction to Economics and Business Economics - Summary for William Baumol Text 'Entrepreneurship: Productive, Unproductive, and Destructive' (1990)
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Summary – Entrepreneurship – Baumol:Entrepreneurship: Productive, Unproductive, and Destructive (1990). William J. Baumol.
The total supply of entrepreneurs varies among societies there is even more variety in
productive contribution to entrepreneurial activities, because of the allocation between
productive and unproductive activities policy can influence this allocation.
Entrepreneurship is a big part of the economy need for achievement and innovation.
Slow economic growth decline in entrepreneurship is blamed.
Baumol’s Hypothesis entrepreneurs always play a substantial role the set of rules
undergo significant changes from one period to another these rules help to dictate the
effect on the economy via the allocation of resources the rules can be observed, described
and modified and improved the rules and its consequences determine the effect on the
economy the variety of (relative) rewards for entrepreneurial activity have effect on
patterns in entrepreneurial behaviour the changing rewards, in other words the
reallocations, have influence on behaviour and therefore have influence on the growth and
direction of an economy.
Allocability of entrepreneurial effort between productive and unproductive activity helps to
account for the phenomenon of economic changes in prosperity (due to reward changes).
Rules of the game = the system of entrepreneurial rewards (changes / reallocations).
Changing the rules of the game stimulating productive contribution to entrepreneurship.
Schumpeterian Analysis a minor extension in this slightly shortcoming model can explain
the allocation of entrepreneurial input analysis of these inputs does not promise to lead to
conclusions expanding the Schumpeter list will lead to more results the list, now only
consisting of productive contributions, should have unproductive contributions added to it.
Concept 1) new product / new quality of product 2) new method of production 3) new
market 4) new source of supply of raw materials 5) new organisation.
Entrepreneurship can be unproductive or even destructive this depends on the rewards /
payoffs different reward systems: Roman (landholding / usury / political payments),
Medieval Chinese (bias, status), Earlier Middle Ages (military activity / warfare, family),
Later Middle Ages (architect-engineers / religion / technological innovations /
entrepreneurship = monopolies), 14th century (military inventions), Early Rent-Seeking
(unproductive contribution, new ways of gaining wealth).
If entrepreneurship is the imaginative pursuit of position, we can expect changes in the
structure of rewards to modify the nature of the entrepreneur’s activities the rules of the
game can then be a critical influence helping to determine whether entrepreneurship will all
be allocated to productive, unproductive or destructive activities.
Internet:
Entrepreneur = someone who sets up a business, taking on financial risks in the hope of
gaining profit (personal savings as capital or convincing investors to finance the ideas).
Entrepreneurship = one of the resources economists categorise as integral to production, using
a business plan to manufacture goods or provide services it is empirical and theoretical.
Conjecture = a conclusion based on incomplete information.
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