On the Search for Well-Being

CHAPTER 6 Entrepreneurship

CHAPTER 6 Entrepreneurship There is, necessarily, ubiquitous ignorance, and, if there is knowledge that there is ubiquitous ignorance, searching and learning is set in motion. The searching and learning in tum produce the change that, under specified conditions , leads to enhanced well-being for the population. In the effort to understand how the search for improved preferences enters the story, the household plays a crucial role. On the production side, as has been frequently noted in the preceding pages, the entrepreneur is the crucial agent. In this section I examine this notion as it bears on the story. It is frequently noted in the textbook theory of the firm that there is no role for the entrepreneur. This is the case largely because of the assumptions of "perfect knowledge" and a "given technology." Once these assumptions are abandoned then the entrepreneur immediately becomes a strategic agent of change. In such a milieu-that is, one in which there is ignorance and awareness of the ignorance-the entrepreneur must playa variety of roles. There are, I think, three that may be identified. I list them and then discuss each in tum. 1. The entrepreneur is one source, perhaps the major source on the production side of the "heroic ethic." The entrepreneur is the person who rises above the "nicely calculated less or more," and sees that "things" must and can be better.l More briefly, the entrepreneur is a principal source of the Idea of Progress. 2. The entrepreneur perceives the specific profit opportunity, and is the author of the initial investment decision. 3. The entrepreneur is one-not the only-production worker engaged in searching and learning, and she/he is the author of the decisions to change that emerge from the searching and learning process. l. Kenneth Boulding (1969) uses the term heroic ethic in the same fashion as it is used here. In the same article Boulding quotes the sonnet of Wordsworth on a wall in King's College chapel, Cambridge University. The lines of this sonnet most relevant in the present context are: Give all thou canst: high Heaven rejects the lore Of nicely-calculated less or more: III 112 On the Search for Well-Being The order is from the very general to the increasingly specific, from the institutionally, socially, culturally affected to the activities that can be directly influenced by specific policies. One also expects that the relative supply of category 1 is smallest and that of 3 the largest. All three categories must be present. The Entrepreneur as the Source of the Idea of Progress The basic notion is perhaps best communicated by referring to statements and expressions that appear in the literature of development and of ideas in general . Kenneth Boulding (1969, 10) elaborates on his ideas by arguing that "economic man is a clod, heroic man is a fool, but somewhere between the clod and the fool, human man ... steers his tottering way." Heroism here means, I think, to rise above the mundane calculations of benefit-cost ratios, of internal rates of return, and so on, and to act from some Olympian view that life need not be dull, routinized, and uninspired. Schumpeter (1934, 93) writes of his notion of the entrepreneur in an especially eloquent way: First of all, there is the dream and the will to found a private kingdom, usually, though not necessarily, also a dynasty. The modem world really does not know any such positions, but what may be attained by industrial or commercial success is still the nearest approach to medieval lordship possible to modem man . . . Closer analysis would lead to discovering an endless variety ... of motives, from spiritual ambition down to mere snobbery. Then there is the will to conquer: the impulse to fight, to prove oneself superior to others, to succeed for the sake, not of the fruits of success, but of success itself. From this aspect, economic action becomes akin to sport ... The financial result is a secondary consideration, or, at all events, mainly valued as a symptom of victory, the displaying of which very often is more important as a motive of large expenditure than the wish for the consumers' goods themselves ... And again we are faced with a motivation characteristically different from that of "satisfaction of wants" ... Schumpeter's entrepreneur is not going to be limited by mere low internal rates of return, mere foreign exchange constraints, mere limitations on the supply of skilled labor, and so on. Somehow she/he rises...