Is Neoclassical Economics Still Entrepreneurless?

Abstract

There is systematic empirical evidence thatentrepreneurship is important for economic growth, but it is often shown thatthe element of entrepreneurship receives little attention in mainstreameconomic literature. This absence arises because the entrepreneur andentrepreneurship cannot be easily captured in analytical methods. Recent attempts to include entrepreneurship in mainstream economic models,including growth models, are examined. Entrepreneurship is a large and diversebody of research in the social sciences. The focus can be on motives,organization, financing, environment, coordination, policy, personality,opportunity, and ability. Also analyzed is the restricted assumptions requiredto attain equilibrium. How it may be possible to model entrepreneurship more realistically withinneoclassical or mainstream economics is investigated. Recent attempts to modelentrepreneurs emphasize three crucial attributes: (1) they are more talented,(2) they have greater tolerance for risk taking, and (3) they are innovators(either individually responding to profit opportunities, or as firms doingresearch and development). It is also found that each model is too restrictive to capture theessentials of entrepreneurship at the individual level. The open-ended,complex, real-world entrepreneur who is constantly required to deal withuncertainty cannot be analytically modeled in neoclassical economics. Theelements of risk and uncertainty of outcomes especially cannot be modeled.Conclusions indicate that the introduction of entrepreneurship is particularlydangerous in models that may be used as guides for policy advice.(TNM)

Keywords: Neoclassical economics, Public policies, Uncertainty, Economic models, Economic research, Economic theory, Economics, Growth theory, Individual traits