Entrepreneurial economics

Summary

Entrepreneurial economics is the study of the entrepreneur and entrepreneurship within the economy. The accumulation of factors of production per se does not explain economic development. They are necessary factors of production, but they are not sufficient for economic growth. William Baumol wrote in American Economic Review that "The theoretical firm is entrepreneurless – the Prince of Denmark has been expunged from the discussion of Hamlet". The article was a prod to the economics profession to attend to this neglected factor. Entrepreneurship is difficult to analyse using the traditional tools of economics, e.g. calculus and general equilibrium models. Current textbooks have only a passing reference to the concept of entrepreneurship and the entrepreneur. Equilibrium models are central to mainstream economics, and exclude entrepreneurship. Coase believed that economics has become a "theory-driven" subject that has moved into a paradigm in which conclusions take precedence over problems. "If you look at a page of a scientific journal like Nature," he said, "every few weeks you have statements such as, 'We’ll have to think it out again. These results aren't going the way we thought they would.' Well, in economics, the results always go the way we thought they would because we approach the problems in the same way, only asking certain questions. Entrepreneurial Economics challenges fundamental principles, using insights from models and theories in the natural sciences." Studies about entrepreneurs in economics, psychology and sociology largely relate to four major currents of thought. Early thinkers such as Max Weber emphasized its occurrence in the context of a religious belief system, thereby suggesting that some belief systems do not encourage entrepreneurship. This contention has, however, been challenged by many sociologists. Karl Marx considered the economic system and mode of production as its sole determinants. Weber suggested a direct relationship between the ethics and economic system as both interacted intensively.