Indirectly Productive Entrepreneurship

Journal of Entrepreneurship and Public Policy. Vol. 5. Issue 2, pp: 161-175

27 Pages Posted: 26 Mar 2015 Last revised: 17 Sep 2016

See all articles by Alexandre Padilla

Alexandre Padilla

Metropolitan State University of Denver - Department of Economics

Nicolas Cachanosky

Metropolitan State University of Denver; American Institute for Economic Research

Date Written: March 18, 2016

Abstract

Since Baumol (1990), the economic literature distinguishes between two broad categories of entrepreneurship: productive and unproductive entrepreneurship. This paper attempts to introduce a third category: indirectly (un)productive entrepreneurship. We argue that profit seeking entrepreneurs will decide to allocate their talents to indirectly (un)productive activities to meet individuals' new needs emerging as a result of government intervention. As a result, the resources used to meet these needs will be diverted from other uses. This paper argues that these profit opportunities are not the result of market entrepreneurial errors or successes but rather emerge artificially as a result of inefficiencies or unintended consequences that some government interventions produce. One implication of this paper is that we should observe increasing regulatory capture by businesses that will benefit from these "artificial" profit opportunities. This paper provides examples of indirectly (un)productive entrepreneurial activities that wouldn't have arise if it weren't for government regulation.

Keywords: entrepreneurship, productive entrepreneurship, unproductive entrepreneuurship, indirect entrepreneurship

JEL Classification: D21, M13

Suggested Citation

Padilla, Alexandre and Cachanosky, Nicolas, Indirectly Productive Entrepreneurship (March 18, 2016). Journal of Entrepreneurship and Public Policy. Vol. 5. Issue 2, pp: 161-175. Available at SSRN: https://ssrn.com/abstract=2584741 or http://dx.doi.org/10.2139/ssrn.2584741

Alexandre Padilla (Contact Author)

Metropolitan State University of Denver - Department of Economics ( email )

Economics department, Campus Box 77
PO Box 173362
Denver, CO 80217
United States
303-556-3131 (Phone)
303-556-3966 (Fax)

HOME PAGE: http://www.msudenver.edu/~econ

Nicolas Cachanosky

Metropolitan State University of Denver ( email )

Student Success Building
890 Auraria Pkwy #310
Denver, CO 80217
United States

HOME PAGE: http://www.ncachanosky.edu

American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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