December 10, 2023

Entrepreneurship in Economy and Economics

Economics is that part of social science that mainly deals with the problem of allocation of resources. As market mechanism has been the best solution to it, understanding market system is fundamental in Economics. In a market, there are different players who look for their own benefit. But as Adam Smith portrayed, when everyone looks for their benefit then the whole society benefits.

Like Biology and Linguistics, economics isn’t predictable too. To make predictions possible one must have all the knowledge and in that includes tacit knowledge too that makes the case impossible. Therefore, decentralization is seen as better option in economics. One fundamental part of economy that makes it very unpredictable is entrepreneurship.

Entrepreneurs aren’t any ordinary businessmen and they aren’t just inventors or innovators too. A businessman is running business already in the market with his product or service whereas scientists, engineers or other inventors aren’t involved in market as sellers in general cases. This is because no matter the new invention or discovery, what’s important is whether they are needed in the market? This is what entrepreneur does, they find solution to the problem. They bring in new ideas, and have good understanding of the market workings. But, most importantly their idea succeeds only when they understand the problem and needs of consumers. Therefore, market is consumer sovereign otherwise all the inventions would have become a part of market with no need of entrepreneurs. There would be just scientists or scholars introducing us to new goods with their discoveries or invention. This would lead to neglect of efficiency and consumer need.

Entrepreneurship is very important in an Economy, they bring in new ideas, make consumer life easier, raise the quality of life, add more job opportunities, contribute new and efficient technologies to the market. But apart from these, it also gives more hope amongst individuals for self-employment, add more competitive spirit among people and encourage self-reliance.

When talking about Economics in academic sense then it has largely been neglected in mainstream. Importance of equilibrium analysis can’t be denied and how they provide us relationship between different economic variables with the help of algebraic analysis. Without denying the importance of equilibrium analysis, we need to look outside it too. After understanding the relationship between different variable we tend to forget qualitative part of the subject. Economists can obviously not say what the ideas are going to be but can show what their influence can be. In microeconomic supply formula the factors of production are endogenously Capital and Labour whereas for exogenous there is a variable (denoted ‘A’) which is called “technological advancement” is taken constant and can include entrepreneurship like intangible factors too.

Equilibrium is at stage of market which is studied a lot but never happens in reality. Equilibrium is the stage of rest, neither the consumer would be willing to demand more not supplier would be willing to raise the alter the price or supply. All are at equilibrium and all the parties are satisfied too. In this stage of rest, there doesn’t seem to be any need of entrepreneurs. Hence, it is probably right to assume technological advancement to be constant.

Economist Israel Kirzner impressively contributed to entrepreneur study in economics. Understanding the role of consumers, Sir Israel Kirzner make us understand how with the dispersed and imperfect tacit knowledge, the entrepreneurs are able to make decisions and understand consumer needs. With the help of Hayek’s and Wieser’s insights he has vital contributions in entrepreneurship study in economics. But, before Kirzner it was Schumpeter who introduced to the importance of capitalist society in enhancing innovations. Though one must note that the term used is innovation and not just entrepreneurship. Therefore, in Schumpeter’s theory the innovation can be of any type, it can be innovations made by scientists and engineers too and not just entrepreneurs.

Existence of private property is very important in the society for market economy but it isn’t necessary that an entrepreneur can reflect his idea when he/she is the owner of a private land or other kind of property. Entrepreneurship is something one can achieve no matter his background or income class. An entrepreneur can get loans or even can pitch his/her ideas to investors. It is the investor who is property owner prior to implementation. An entrepreneur might not put his property at stake in all cases but they do put there many vital years, their social life and many other things which are highly subjective and can be understood only by the one who made the sacrifices.

Nonetheless, it might not be important whether an entrepreneur is private property owner or not but existence of private property in system is highly necessary. Also, it isn’t possible in every case for one to not own anything before starting something or be owner of everything.

It is generally seen that the solution to lack of entrepreneurship is government or education system. Though they can play their role in making people aware about these options but neither government nor education system has the power to raise the entrepreneur spirit and even it does then it will lead to many mal-investments. To see more entrepreneurship in town, what’s important is the free flow of knowledge in the society for which there is a need of unaltered price system.

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