Wednesday, August 8, 2007

Celebrating Entrepreneurship

Thomas McKraw, author of Prophet of Innovation: Joseph Schumpeter and Creative Destruction, has a good essay on Joseph Schumpeter and entrepreneurship:

In his classic book of 1911, The Theory of Economic Development, Schumpeter broke with traditional thinking about business, enthroning the entrepreneur as the source of all economic progress. The book made him famous in academic circles at age 28, although his ideas didn't fully catch on until recently, when the vital importance of entrepreneurship became obvious to everybody.

One of the hallmarks of Schumpeter's 1911 book is that he ventured into territory where no economist had gone before--namely, the psychology of entrepreneurs. Entrepreneurs, he insisted, are not propelled solely by a wish to grow rich or by any "motivation of the hedonist kind." Instead, they feel "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…There is the joy of creating, of getting things done, or simply of exercising one's energy and ingenuity."

Celebrating entrepreneurship was a radical idea in 1911, a time of turbulent economic change that nobody seemed to understand. In Europe, socialism was rapidly on the rise. In the United States, business success was often viewed warily, with muckraking journalists accusing robber barons of taking over the economy. Schumpeter's insistence that entrepreneurial capitalism was the only system that could create a better life for the masses went directly against the prevailing tide.

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