Entrepreneurship – Page 181 – artdiamondblog.com

Frazer Institute Seeks Better Measures of Policy Variables

George Gilder emphasizes that the importance of entrepreneurship to economic growth has been missed by many economists, in part because of the difficulty of measuring both the inputs of entrepreneurship (e.g., courage, persistence, creativity, etc.) and the outputs of entrepreneurship (e.g., happiness from more challenging work, greater variety of products, etc.).
Unfortunately this is not just an academic problem, because economists’ policy advice is based on their models, and their models focus on what they can measure. If they can’t measure entrepreneurship, then policies to encourage entrepreneurship are neglected.
Now the Frazer Institute, is seeking proposals to improve the measurement of important poorly measured policy-relevant variables. This initiative is in the spirit of the good work that the Frazer Institute has done in correlating measures of economic freedom with measures of economic growth.
I have been asked to publicize this initiative, and am pleased to do so:

Dear Art Diamond,

The Fraser Institute is launching a new contest to identify economic and public policy issues which still require proper measurement in order to facilitate meaningful analysis and public discourse. We hope you can help promote this contest by posting it on your weblog, artdiamondblog.
The Essay Contest for Excellence in the Pursuit of Measurement is an opportunity for the public to comment on an economic or public policy issue that they feel is important and deserves to be properly measured.
A top prize of $1,000 and other cash prizes can be won by identifying a vital issue that is either not being measured, or is being measured inappropriately. Acceptable entry formats include a short 500-600 word essay, or a short one-minute video essay.
Complete details and a promotional flyer are available at: http://www.fraserinstitute.org/programsandinitiatives/measurement_center.htm.
Entry deadline is Friday, May 15th, 2009.
Sponsored by the R.J. Addington Center for the Study of Measurement.

Enquiries may be directed to:
Courtenay Vermeulen
Education Programs Assistant
The Fraser Institute
Direct: 604.714.4533
courtenay.vermeulen@fraserinstitute.org

The Fraser Institute is an independent international research and educational organization with offices in Canada and the United States and active research ties with similar independent organizations in more than 70 countries around the world. Our vision is a free and prosperous world where individuals benefit from greater choice, competitive markets, and personal responsibility. Our mission is to measure, study, and communicate the impact of competitive markets and government interventions on the welfare of individuals.

An important source of Gilder’s views, obliquely referred to in my comments above, is:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

The Most Fertile Margins of the Economy Are Always in People’s Minds

(p. 151) The most fertile margins of the economy are always in people’s minds: thoughts and plans and projects yet unborn to business. The future emerges centrifugally and at first invisibly, on the fringes of existing companies and industries. The fastest-growing new firms often arise through defections of restive managers and engineers from large corporations or through the initiatives of (p. 152) immigrants and outcasts beyond the established circles of commerce. All programs that favor established companies, certified borrowers, immobile forms of pay, pensions, and perquisites, institutionally managed savings and wealth, against mobile capital, personal earnings, disposable savings, and small business borrowing, tend to thwart the turbulent, creative, and unpredictable processes of innovation and growth.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

The Policy Agenda to Euthanize the Entrepreneur

(p. 151) The agenda is simple: the stealthy and unannounced euthanasia of the entrepreneur. It can be accomplished easily by following two seductive themes of policy: lowering tax and interest costs for large corporations and a few other favored institutions, while shifting the burden increasingly to individuals and families. By reducing corporate taxes, subsidizing corporate loans, sponsoring a wide range of favored borrowers, institutionalizing personal savings, and discreetly allowing taxes to rise on personal income, government can painlessly extinguish the disposable wealth of entrepreneurs.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

Schramm Sees the Donor as the Only Real Stakeholder of a Foundation

Carl Schramm. Source of image: online version of the WSJ interview article quoted and cited below.

(p. A9) . . . who are the real stakeholders in foundations? Mr. Schramm can think of only one: the donor. “At Kauffman I think the trustees and I are very, very clear: We work for Mr. Kauffman,” says Mr. Schramm, acknowledging that his boss passed away in 1993. Kauffman not only left extensive writings but also videotape of himself describing how he wanted the foundation to operate. Mr. Schramm says that one board member told him he was hired because he was the only candidate who had read Kauffman’s book.
. . .
. . . within a year of taking over, Mr. Schramm began a serious overhaul of the foundation. He laid off about half of its 150-person staff and cut off funding to some of its biggest grantees, many in Kansas City. There was a public outcry from local nonprofits and from some former members of the board. One told the New York Times that “Carl doesn’t seem to understand that there isn’t an ‘I’ in team.” It reached the point where Missouri’s then attorney general, Jeremiah Nixon, launched an extensive investigation. He determined that Mr. Schramm had not led the foundation astray. What ultimately saved his job, says Mr. Schramm, were the detailed writings that Kauffman left before his death.
“What happened was not atypical in foundations. Often around 10 years after the death of the donor there’s a moment of truth.” People who were close to the donor will say, “Yes, he said that but he didn’t mean that.” Mr. Schramm concludes: “If there was one piece of advice I’d give to someone who was starting a foundation it is this: Think very, very hard of the long term and write down what you want your foundation to look like in 30 years or 40 years.”
Despite the fact that the foundation’s endowment has fallen by $722 million since the end of 2007, Mr. Schramm sees this as Kauffman’s “moment.” While “no one hopes for a recession,” it’s during economic crises that entrepreneurs “challenge companies that have gotten big and lazy.” The downturn, he says, will even challenge Kauffman to “think about how we can do our work better, like every business.” In fact, Mr. Schramm adds, “The only people immune from thinking hard in moments like this are in government.”

For the full interview, see:

NAOMI SCHAEFER RILEY. “Opinion; THE WEEKEND INTERVIEW with Carl Schramm; Giving Capitalism Its Due.” Wall Street Journal (Sat., APRIL 4, 2009): A9.
(Note: ellipses added.)

Instead of Government Money, Benson “Just Wanted the Opportunity to Compete”

“Jim Benson” Source of caption and photo: online version of the WSJ obituary quoted and cited below.

(p. A10) “A number of people had told me they wanted to start space businesses,” Mr. Huntress says, “but they always wanted government money. Jim said he didn’t want any government money. He just wanted the opportunity to compete. That got my attention.”

Mr. Benson, who died Oct. 10 at age 63 of a brain tumor, put it directly: “If we’re going to space to stay, space has to pay.”

He thought he’d found a business model. “We offer FedEx-like package delivery rides,” he proclaimed in 1999. He imagined getting customers like NASA itself and the armed forces, as well as scientists and industry. Always looking for an angle, he also envisioned a more terrestrial use for his rockets: sending a package from San Jose, Calif., to Taipei in 20 minutes.

With organizational ability he developed at software start-ups in the 1980s, Mr. Benson assembled a team of mostly young engineers plus some NASA veterans and set to work. To avoid high development costs, he used off-the-shelf technologies and designs. He quickly landed several contracts, including one from the University of California at Berkeley for ChipSat, a small satellite built for carrying scientific instruments to study interstellar gas. It cost $7 million to build — peanuts in space bucks — and has continued to function since its 2003 launch.

For the full obituary, see:
STEPHEN MILLER. “REMEMBRANCES; Jim Benson (1945 – 2008); Rocket Man Ran a Proper Business, But Loftiest Plans Were Ill-Starred.” The Wall Street Journal (Sat., OCTOBER 18, 2008): A10.

Entrepreneurs Are the Main Source of Economic Growth

(p. 144) The reason the system of capitalism without capitalists is failing throughout most of Europe is that it misconceives the essential nature of growth. Poring over huge aggregations of economic data, economists see the rise to wealth as a slow upward climb achieved through the marginal productivity gains of millions of workers, through the slow accumulation of plant and machinery, and through the continued improvement of “human capital” by advances in education, training, and health. But, in fact, all these sources of growth are dwarfed by the role of entrepreneurs launching new companies based on new concepts or technologies. These gains generate the wealth that finances the welfare state, that makes possible the long-term investments in human capital that are often seen as the primary source of growth.

Source:
Gilder, George. The Spirit of Enterprise. 1 ed. New York: Simon and Schuster, 1984.

“Capitalism without Capitalists”

(p. 131) . . . suffusing all the most visionary and idealistic prose of leftist economics is the same essential dream of the same static and technocratic destiny: capitalism without capitalists. Wealth without the rich, choice without too many things to choose, political and intellectual freedom without a vulgarian welter of individual money and goods, a social revolution every week or so without all this disruptive enterprise.

Source:
Gilder, George. The Spirit of Enterprise. 1 ed. New York: Simon and Schuster, 1984.
(Note: ellipsis added.)

High Progressive Income Taxes Result in “Demoralization of Entrepreneurs”

(p. 127) High progressive and unnegotiable gouges like those in Sweden and England drive people altogether out of the country into offshore tax havens, out of income-generating activities into perks and leisure pursuits, out of money and savings into collectibles and gold, and, most important, out of small business ventures into the cosseting arms of large established corporations and government bureaucracies. The result is the demoralization of entrepreneurs and the stultification of capital. The experimental knowledge that informs and refines the process of economic growth is stifled, and the metaphysical capital in the system collapses, even while all the indices of capital formation rise.

Source:
Gilder, George. The Spirit of Enterprise. 1 ed. New York: Simon and Schuster, 1984.

Gilder Explored “The Spirit of Enterprise”

Source of book image:
http://g-ecx.images-amazon.com/images/G/01/ciu/64/17/bc94225b9da0b4326fb8b010.L.jpg

Gilder presents many case studies of entrepreneurs, with plenty of thought-provoking commentary and generalization.
I read the 1984 version because it is the version that is available in audio that can be listened to while walking the dachshund. I also own the 1992 updated version, and can say from a flip-through that this it is a major revision (not just a “revision” that consists of a new introduction, as is often done).
Gilder justly, and eloquently, takes economists to task for generally ignoring the role of the entrepreneur in improving our lives.

For the early edition, see:
Gilder, George. The Spirit of Enterprise. 1 ed. New York: Simon and Schuster, 1984.
For the revised version, see:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

Source of the book image: http://www.icspress.com/images/recapturing.jpg

“Venturesome” Consumers May Help Save the Day

Bhidé makes thought-provoking comments about the role of the entrepreneurial or “venturesome” consumer in the process of innovation. The point is the mirror image on one made by Schumpeter in Capitalism, Socialism and Democracy when he emphasized that consumer resistance to innovation is one of the obstacles that entrepreneurs in earlier periods had to overcome. (The decline of such consumer resistance was one of the reasons that Schumpeter speculated that the entrepreneur might become obsolete.)
I would like to see Bhidé’s evidence on his claim that technology rapidly advanced during the Great Depression. The claim seems at odds with Amity Shlaes’ claim that New Deal policies often discouraged entrepreneurship.

(p. A15) Consumers get no respect — we value thrift and deplore the spending that supposedly undermines the investment necessary for our long-run prosperity. In fact, the venturesomeness of consumers has nourished unimaginable advances in our standard of living and created invaluable human capital that is often ignored.
Economists regard the innovations that sustain long-run prosperity as a gift to consumers. Stanford University and Hoover Institution economist Paul Romer wrote in the “Concise Encyclopedia of Economics” in 2007: “In 1985, I paid a thousand dollars per million transistors for memory in my computer. In 2005, I paid less than ten dollars per million, and yet I did nothing to deserve or help pay for this windfall.”
In fact, Mr. Romer and innumerable consumers of transistor-based products such as personal computers have played a critical, “venturesome” role in generating their windfalls.
. . .
History suggests that Americans don’t shirk from venturesome consumption in hard times. The personal computer took off in the dark days of the early 1980s. I paid more than a fourth of my annual income to buy an IBM XT then — as did millions of others. Similarly, in spite of the Great Depression, the rapid increase in the use of new technologies made the 1930s a period of exceptional productivity growth. Today, sales of Apple’s iPhone continue to expand at double-digit rates. Low-income groups (in the $25,000 to $49,999 income segment) are showing the most rapid growth, with resourceful buyers using the latest models as their primary device for accessing the Internet.
Recessions will come and go, but unless we completely mess things up, we can count on our venturesome consumers to keep prosperity on its long, upward arc.

For the full commentary, see:
Amar Bhidé. “Consumers Can Still Spot Value in a Crisis.” Wall Street Journal (Thurs., MARCH 11, 2009): A15.
(Note: ellipsis added.)

Entrepreneurs Are Key to Ending Economic Crisis

(p. A15) The passage of the $787 billion stimulus bill has so far failed to stimulate anything but greater market pessimism. This suggests to us that the strategy behind the American Reinvestment and Recovery Act is wrong — and worse, that the weapons it is using to fight the recession are obsolete.

Just as generals are notorious for fighting the last war, Congress and the White House seem intent on fixing an economy of hidebound and obsolete companies and industries, while ignoring the innovative ones rising before us and those waiting to be born.

Missing from this legislation is anything more than token support for the long-proven source of most new jobs and new growth in America: entrepreneurs. These are the people who gave us everything — from Wal-Mart to iPhones, from microprocessors to Twitter — that is still strong in our economy. Without entrepreneurs, we will never get out of our current predicament.

For the full commentary, see:
TOM HAYES and MICHAEL S. MALONE. “Entrepreneurs Can Lead Us Out of the Crisis What Are the Odds of a Depression?” Wall Street Journal (Tues., FEBRUARY 24, 2009): A15.
(Note: ellipses added.)