Economics Dictionary of ArgumentsHome
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| Entrepreneurship: Entrepreneurship is the activity of setting up a business taking on financial risks in the hope of profit. It involves identifying market needs, creating innovative products or services, and organizing resources to exploit opportunities. _____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Entrepreneurship - Dictionary of Arguments
Rothbard III 64 Entrepreneurship/Rothbard: [The] necessity of guessing the course of the relevant conditions and their possible change during the forthcoming action is called the act of entrepreneurship. Thus, to some extent at least, every man is an entrepreneur. Every actor makes his estimate of the uncertainty situation with regard to his forthcoming action. Suppose (…) that an investment has already been made, and capital goods have already been built with a goal in view, when changing conditions reveal that an error has been made. The actor is then faced with the problem of determining what to do with the capital good. The answer depends on the convertibility of the capital good. >Convertibility/Rothbard, >Factors of production/Rothbard, >Capital goods/Rothbard. If the good becomes worthless in the use for which it is intended, the actor, though having made an error in investing in it in the first place, now has it on his hands and has to make the best of it. If there is another use to which the actor can conveniently transfer the capital good, he will do so. Rothbard III 65 Conservativity: It is clear that the accumulated stock of capital goods (…) imposes a conservative force on present-day action. The actor in the present is influenced by his (or someone else’s) actions in the past, (…). Location: The conservatism of the past exercises a similar influence on the question of location, another aspect of the same problem. Rothbard III 66 If he had not invested in any capital goods or durable consumers’ goods, he would immediately shift his location to this more abundant area. This discussion provides the clue to an analysis of how actors will employ the original nature-given factors of production. Capital goods/time/past/future: The existence of a capital good not in use reveals an error made by this or by some previous actor in the past, but indicates that the actor expects to acquire a greater utility from other uses of his labor than he could obtain by continuing the capital good in its originally intended use or by converting it to some other use.(1) >Capital goods/Rothbard. Rothbard III 68 Planning/future/action: It is clear that capital formation and the concomitant lengthening of the period of production prolong the period of provision of the actor. Capital formation lengthens the period in the future for which he is providing for the satisfaction of wants. Action involves the anticipation of wants that will be felt in the future, an estimate of their relative urgency, and the setting about to satisfy them. (…) the period of provision can be prolonged by lengthening the duration of serviceableness of the consumers’ goods being produced. Rothbard III 69 Saving: (…) another method of lengthening the period of production is the simple accumulation of stocks of consumers’ goods to be consumed in the future instead of the present. Goods: the concept of a “good” refers to a thing the units of which the actor believes afford equal serviceability. It does not refer to the physical or chemical characteristics of the good. Rothbard III 297 Entrepreneurship/durable goods/Rothbard: In general, we may sum up the action of entrepreneurs in the field of durable consumers’ goods by saying that they will tend to invest in the outright purchase of (already existing) durable consumers’ goods when they believe that the present capital value of the good on the market is less than the sum of future rentals (discounted by time preference) that they will receive. >Capital value/Rothbard, >Renting/Rothbard, >Durable goods/Rothbard. Capital value/durable goods: They will sell such goods outright when they believe that the present capital value is higher than the discounted sum of future rentals. Better forecasters will earn profits, and poorer ones will suffer losses. In so far as the forecasting is correct, these “arbitrage” opportunities will tend to disappear. >Speculation/Rothbard, >Equilibrium price/Rothbard, >Price/Rothbard, >Allocation/Rothbard. Rothbard III 509 Entrepreneurship/Rothbard: In the evenly rotating economy, there are only two ultimate categories of producers’ prices and incomes: interest (uniform throughout the economy), and “wages” - the prices of the services of various labor factors. In a changing economy, however, wage rates and the interest rate are not the only elements that can change. Another category of both positive and negative income appears: entrepreneurial profit and loss. >Entrepreneurship/Rothbard, >Capitalism/Rothbard, >Gain and Loss/Rothbard. Dynamic world: The difference in the dynamic, real world is this. None of these future values or events is known; all must be estimated, guessed at, by the capitalists. >Speculation/Rothbard. The capitalist-entrepreneur buys factors or factor services in the present; his product must be sold in the future. He is always on the alert, then, for discrepancies, for areas where he can earn more than the going rate of interest. >Rate of interest/Rothbard, >Factor market/Rothbard. What gave rise to this realized profit, this ex post profit fulfilling the producer’s ex ante expectations? The fact that the factors of production in this process were underpriced and undercapitalized - underpriced in so far as their unit services were bought, undercapitalized in so far as the factors were bought as wholes. >Time/Rothbard, >Capitalization/Rothbard. In either case, the general expectations of the market erred by underestimating the future rents (MVPs) of the factors. >Marginal product/Rothbard. Rothbard III 510 What function has the entrepreneur performed? By recognizing the discrepancy and doing something about it, he shifted factors of production (obviously nonspecific factors) from other productive processes to this one. Marginal product: He detected that the factors’ prices did not adequately reflect their potential DMVPs (discounted marginal products); by bidding for, and hiring, these factors, he was able to allocate them from production of lower DMVP to production of higher DMVP. >Discounting/Rothbard. Rate of profit: It is clear that there is no sense whatever in talking of a going rate of profit. There is no such rate beyond the ephemeral and momentary. For any realized profit tends to disappear because of the entrepreneurial actions it generates. 1. On the "unused capacity" bogey, see Benham, Economics, pp. 147-49._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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