Class notes # 3

Class notes # 3 - Class notes # 3 Objectives: 1. 2. 3. 4....

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Class notes # 3 Objectives: 1. Understand Baumol’s entrepreneurship typology 2. Introduce the concept of rent seeking 3. How incentives shape the allocation of effort in society 4. Provide examples A. Baumol three types of entrepreneurship i. Productive - Familiar concept: creation of a new idea translated into a product that makes society better off - Schumpeter came up with 5 categories of innovation which is for him the carrying out of new combinations. o New or improved good: flat screen television, then make it 3D o New production methods and processes. This is an intangible innovation. For example Henry Ford assembly line. o Opening of a new market. Bringing products to places they did not have before o Conquest of a new source or a new supply of a raw material o New industry organization - Baumol argues that is incomplete in two ways: o Technology transfer is ignored here. Technology being transferred into new countries, or in new industries. The very idea of taking technology and applying it in a new area increases wealth in a society o Introduction of unproductive and destructive entrepreneurship ii. Unproductive - Innovative activities of questionable value to society. This means that activities that are intended to benefit someone don’t really affect the wealth and benefit of a society. You make money for yourself, but it does not benefit society. -
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Class notes # 3 - Class notes # 3 Objectives: 1. 2. 3. 4....

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