Entrepreneurship: Productive, Unproductive, and Destructive

Posted: 11 Nov 2009

See all articles by William J. Baumol

William J. Baumol

New York University - Stern School of Business, Berkley Center for Entrepreneurial Studies; Leonard N. Stern School of Business - Department of Economics

Date Written: 1990

Abstract

Examines the roles that entrepreneurs can play within a society and the allocation of their entrepreneurial activities. The role that is played by an entrepreneur is dictated by the economy's set of rules. As a result, the contributions made by entrepreneurs can vary based on the activities on which these entrepreneurs choose to focus. These contributions can be productive, unproductive, and even destructive. Unproductive activities today include tax evasion and rent seeking such as litigation and takeovers. Building on the Schumpeterian model, this analysis utilizes historical evidence from ancient Rome, medieval China, Dark Age Europe, and Renaissance Europe to support the proposition that dramatic differences in entrepreneurial activity can be found between one time and place and another based on the rules of that time and place. Further, the allocation of productive and unproductive entrepreneurial activities in an economy impacts its innovativeness and the dissemination of technological advances. Consequently, a society should encourage entrepreneurs to reallocate their activities toward productive activities. This shift is more likely to be achieved by modifying the rules in the economy that determine relative rewards for entrepreneurs than by attempting to change the goals of the entrepreneurs themselves. (SRD)

Keywords: Productivity, Rent seeking, Allocation models, Public policies, Economic policies, Legal systems, Roles, Resource model, Individual goals, Entrepreneurial environment

Suggested Citation

Baumol, William J., Entrepreneurship: Productive, Unproductive, and Destructive (1990). Journal of Political Economy, Vol. 98, Issue 5, p. 893-921 1990. Available at SSRN: https://ssrn.com/abstract=1503897

William J. Baumol (Contact Author)

New York University - Stern School of Business, Berkley Center for Entrepreneurial Studies ( email )

New York, NY
United States
212-998-8943 (Phone)
212-995-3932 (Fax)

Leonard N. Stern School of Business - Department of Economics

269 Mercer Street
New York, NY 10003
United States

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