Lecture 2 Flashcards
What is an ecosystem?
It takes into account the actors + the external context and structure.
It might facilitate or impede entrepreneurial action
Who are the players in the ecosystem framework?
Resource providers Allies Beneficiaries Opponents Influential bystanders The environment
Who are the environmental conditions in the ecosystems framework?
Politics and administrative structure Economics and Markets Institutions Geography and infrastructure Culture
What is the neoclassical view of markets?
Maximizing profits at the core of all economic activities
Assumes perfect information
Pareto efficiency - prices are equal to average total costs, and as results profits are non-existent
Equilibrium price (balanced supply and demand) - Natural resources are infinite and they have a market value that accurately reflects supply and demand
How does the invisible hand function in reality?
There is bounded rationality, transaction costs, uncertainty and institutional settings, which result in:
Unmet social and environmental needs and neglected problems and “stable but unjust equilibrium”
Definition of market failure
the failure of a more or less idealized system of price-market institutions to sustain ‘desirable’ activities or to stop ‘undesirable’ activities.”
Types of market failures
Negative - usually from over-production.
Contamination of water, excess car usage
Common pool resources
Positive - Value for society is beyond the value created to the recipients
- RnD
- Public goods (non-excludable, non-rival)
Causes of market failures
Imperfect information
Inefficient firms
Inappropriate government intervention
What are institutions?
multifaceted, durable social structures, made of symbolic elements, social activities, and material resources
constitutes the “rules of the game” as they set conditions on and enable action”
The types of institutions
Formal - constraints and incentives arising from government regulation of individual and organizational actions (e.g. contracts, constitutions, laws
Informal -slowly changing, culturally transmitted and socially constructed (e.g. traditions, customs, religious beliefs)
Explicit - taken for granted, consciously perceived by individuals
Implicit - guidelines for individuals’ actions
Cognitive - institutions include the culturally shared understandings closely linked with cultural values (how to interpret others’ behavior)
Normative - social obligations and expectations about appropriate actions modelled on existing dominant practices or norms (how you should behave)
Two perspectives on institutions
Institutional Void - SE motivation increases in resource-scarce environments in which social & environmental problems are abundant.
Less active governments may trigger higher social need, and greater demand for SE
Institutional Support - Countries with more active governments will support and thus enhance SE
What is an institutional void?
When government fails to assume its role to build strong institutions
When the rules of the game and the conditions under which economic actors organize, compete or cooperate, tend to favor some actors over others
Prevent the efficient market functioning, development, and participation
