notes on reading # 3

notes on reading # 3 - Entrepreneurship Productive...

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Entrepreneurship: Productive, Unproductive, and Destructive William J. Baumol Hypothesis 1: The total supply of entrepreneurs varies among societies. The productive contribution of the society's entrepreneurial activities varies much more because of their allocation between productive activities such as innovation and largely unproductive activities such as rent seeking or organized crime. Simple: In each society you can find different numbers of entrepreneurs. Their ability to become productive depends not only in innovation but on the conditions the country offers them. Hypothesis 2 : It is the set of rules and not the supply of entrepreneurs or the nature of their objectives that undergoes significant changes from one period to another and helps to dictate the ultimate effect on the economy via the allocation of entrepreneurial resources. Simple: The number of entrepreneurs does not matter, what matters is how the rules help them achieve their objective and create a change in the economy. Purpose: The allocation of the changing class of entrepreneurs rather than its magnitude and makeup. I. On the Historical Character of the Evidence o Ancient Rome o Medieval China o Dark Age Europe o The Later Middle Age II. The Schumpeterian Model Extended: Allocation of Entrepreneurship Schumpeter tells us that innovations take various forms besides mere improvements in technology; this concept covers the following five cases: 1. The introduction of a new good that is one with which consumers are not yet familiar or of a new quality of a good. Example: iPod, touchscreen computer. 2. The introduction of a new method of production, that is one not yet tested by experience in the branch of manufacture concerned, which need by no means be founded upon a discovery scientifically new, and can also exist in a new way of handling a commodity commercially. Example: Ford method, harvesting technic. 3. The opening of a new market that is a market into which the particular branch of manufacture of the country in question has not previously entered, whether or not this market has existed before. Example: Colombia in exporting telecommunications, smartphones.
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4. The conquest of a new source of supply of raw materials or half-manufactured goods, again irrespective of whether this source already exists or whether it has first to be created. Example: coltan, petroleum. 5. The carrying out of the new organization of any industry, like the creation of a monopoly position (for example through trustification) or the breaking up of a monopoly position. Example: Microsoft Any analysis of the allocation of entrepreneurial resources among the five items in the preceding list does not promise to yield any profound conclusions. There is no obvious reason to make much of a shift of entrepreneurial activity away
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notes on reading # 3 - Entrepreneurship Productive...

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