1.1 + UE 1: The Entrepreneur in the Economic Literature Flashcards
According to the “Theory of the firm” how is entrepreneurship considered (what’s their aim/function)?
The enterprise is considered to be aiming at efficient factor input and maximization of profit based on certain forms of production and demand curves.
In principle, the entrepreneur’s function could be considered an additional production factor.
How is an entrepreneur included in the “Theory of the firm,” and how does that relate to equilibria?
There is a “fake” entrepreneurship included in the Theory of the Firm: the assumption that enterprises make decisions to maximize profits enlarges the misunderstanding that entrepreneurship is in the middle of the theory of the firm. In equilibrium, there is no place for an entrepreneur (Kirzner 1978, S. 21).
How did Frank Knight define entrepreneurship, and how does this effect their profit/income?
Entrepreneurs have to be allowed to make profit, because they take on uncertainty.
Entrepreneur income is a residual.
This type of profit cannot be maximized in advance.
There is a difference between managers and entrepreneurs because only entrepreneurs carry full responsibility.
How did Schumpeter define entrepreneurship (behavior, contribution, what they create, etc)?
Entrepreneurs may behave as if they have no money themselves, as the ones taking the risks are the investors (capitalists).
They don’t contribute the production factor, but they contribute the decision factor.
The entrepreneur breaks the economic cycle (with innovations), he creates a disequilibrium (destroys equilibria) out of an equilibrium, and thereby initiates economic development.
Entrepreneurs create temporary monopolies, and therefore make profit.
How did Kirzner define entrepreneurship?
What entrepreneurs bring to the table is more important than some market equilibrium.
The “pure” entrepreneur acts because of his cleverness to detect and exploit situations of agency, to detect a profit opportunity means to detect something that is “free” (contrary to Knight).
What is the definition of an entrepreneur for this course, and how are they different from a manager (CMA)?
Entrepreneurs are people who exercise an entrepreneurial function predominantly.
Managers are not entrepreneurs since they are not owners of the enterprise, and the consequences of their decisions do not carry this in its entirety.
Control, monitoring and the assumption of risks are the crucial entrepreneurial features, with the assumption of risks differentiating the entrepreneur from the manager.
What is Mark Casson’s definition of entrepreneurship (what do they coordinate)?
-An entrepreneur is someone who specializes in taking judgmental decisions about the coordination of scarce resources.
What comprises an entrepreneurs “Judgment” for Mark Casson, and how does this relate to uncertainty/managers?
- Judgment is based on information, knowledge, and experience.
- The entrepreneur faces uncertainty and a good judgmental decision is necessary.
- Managers can be entrepreneurs (contrary to Knight).
What does Mark Casson mean by “Coordination of resources,” i.e. what is the entrepreneurs role?
The entrepreneur mediates between two owners of resources if the distribution of them is not optimal, the entrepreneur acts as a broker.
What are the types of coordination according to Mark Casson?
- Social coordination: All three involved have a benefit of this trade.
- Private coordination: The mediator has a benefit of the trade.
