Introduction To Economics And Business Economics (ECB1IEBE)
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Theme 5: Social Entrepeneurship articles & reading questions - Introduction To Economics And Business Economics (ECB1IEBE)
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Course
Introduction To Economics And Business Economics (ECB1IEBE)
Institution
Universiteit Utrecht (UU)
This document contains the necessary material for Theme 5 of the course Introduction to Economics and Business Economics. The document contains the articles (Baumol 1990: Entrepreneurship — Productive, unproductive, and destructive) and addresses the corresponding theme questions.
Introduction To Economics And Business Economics (ECB1IEBE)
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Theme 5: Social Entrepreneurship – Article + Reading Questions
Baumol 1990: Entrepreneurship – Productive, unproductive, and destructive
Basic hypothesis:
The total supply of entrepreneurs varies among societies there is even more variety in productive
contribution to the society’s entrepreneurial activities, because of their allocation between
productive activities (such as innovation) and unproductive activities (such as rent seeking or
organized crime).
Allocation (verdeling): is heavily influenced by the relative payoffs society offers to such activities.
Policy can influence the allocation of entrepreneurship more effectively than it can influence its
supply.
Entrepreneurship is a big part of the economy need for achievement and innovation
Slow economic growth decline in entrepreneurship is blamed
Central hypothesis Baumol 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 entrepreneurial resources 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
The Schumpeterian analysis
Innovations “the carrying out of new combinations”
1) Good/new quality of good
2) Method or production
3) Market
4) Source of supply
5)Organization
The Schumpeter list only consists of productive contributions, it should have unproductive
contributions added to it
Definitions Entrepreneurship:
Baumol 1990: Entrepreneurs are defined to be persons who are ingenious and creative in
finding ways that add to their own wealth, power, and prestige.
Entrepreneurship can be unproductive or even destructive this depends on the rewards/payoffs –
the rules of the game 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)
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