Entrepreneurship and Capitalism

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  • #1
Astronuc
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I am all for capitalism, but it's got to be good capitalism as opposed to bad.

Good Capitalism, Bad Capitalism, and the the Economics of Growth and Prosperity
http://www.kauffman.org/capitalism/ [Broken]

Ewing Marion Kauffman Foundation
http://www.kauffman.org/

and The Foundation for Entrepreneurship


See also - National Dialogue on Entrepreneurship
http://www.publicforuminstitute.org/nde/entre/index.htm [Broken]

See also the discussion here -
Capitalism, the Good Society
https://www.physicsforums.com/showthread.php?t=47317
 
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  • #2
What exactly is good capitalism and bad capitalism anyway?
 
  • #3
Astronuc
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What exactly is good capitalism and bad capitalism anyway?
May I recommend reading the book?

http://www.yalepresswiki.org/w/index.php?title=Good_Capitalism%2C_Bad_Capitalism [Broken]

or download pdf
http://www.yalepresswiki.org/gcbc/GCBC_Entire.pdf [Broken]

The authors present four forms of capitalism: enterpreneurial, big-firm (corporate), state-directed, and oligarchic.


The authors mention that “entrepreneurial capitalism” has powered the U.S. economy toward a higher growth rate since the 1990s and seems to be taking hold in other parts of the world, such as Ireland,
Israel, the United Kingdom, India, and China, to name just a few. It would seem that this form of capitalism is the only good form of capitalism. However Baumol has elaborated over a decade ago, it takes a mix of innovative firms as well as established larger enterprises to make an economy really tick. He argues that a small set of entrepreneurs may come up with the “next big things,” but few if any of them would be brought to market unless the new products, services, or methods of production were refined to the point where they could be sold in the marketplace at prices such that large numbers of people or firms could buy them. In other words, small entrepreneurs often need the support of the traditional big-firms.

The authors conclude that the best form of “good capitalism” is a blend of “entrepreneurial” and “big-firm” capitalism, although the precise mix will vary from country to country, depending on a combination of cultural and historical characteristics that they hope will be clarified in the years to come.


The authors also recognize and acknowledge the support of the Kauffman Foundation, which is considered by some the world’s leading foundation in increasing understanding of and encouraging entrepreneurship.

Consider the following from Chapter 1:
Instead, economists generally focus on two main sources of growth: (1) the addition of more inputs (capital and labor), and (2) innovation, technological change, or, in technical economic terms, “total factor productivity” (the increase in productivity of both capital and labor, considered together). For simplicity, one could call these two different strategies growth by “brute force” and “smart growth.” Robert Solow of MIT won his Nobel Prize in economics for showing in the late 1950s that in the United States and a few other industrialized countries, innovation or “smart growth” was more important than brute force (more inputs) in generating additions to output over time (Solow, 1956, 1957). A number of scholars have since confirmed this basic insight and extended it to many countries around the world (see Denison, 1962, 1967; and Easterly and Levine, 2001).

But what is innovation, beyond something new? As we (and others) use the term, it is the marriage of new knowledge, embodied in an invention, with the successful introduction of that invention into the marketplace. Even the best inventions are useless unless they have been designed, marketed, and modified in ways that make them commercially viable. This requires someone who realizes the commercial opportunity presented by the innovation (or even a seemingly small element of the breakthrough), which sometimes is not the purpose the inventor had in mind, and then takes all the steps necessary to turn that opportunity into something many consumers will want to buy. These tasks are inherently entrepreneurial, . . . .

So what determines innovation? In Solow’s model, innovation is like manna from heaven, something that policy makers largely cannot control. Although they may modestly influence it by way of government-funded research or incentives for research and development, the pace of innovation is essentially taken as a given. A growing number of economists have been uncomfortable with that assumption, and over the past two decades they have put much effort into a better explanation of innovation’s role in economic growth. These researchers, using increasingly sophisticated statistical methods, have posited a range of other variables that influence innovation, some of which governments can control (like openness to goods and investment from abroad, spending on research and development, and training of more scientists and engineers), and others of which governments cannot control (like geographic location).

We do not take the position that these factors are unimportant, because many or most of them are. Instead, we suggest that it is more useful to pare down (economize, if you will) the list of suggestions that societies should implement by thinking of economies as potential “growth machines,” which need fuel to operate but which also must have some essential primary parts or components that work in harmony if they are to promote entrepreneurship, innovation (and its dissemination), and growth most effectively. The “fuel” for an economy is the right set of macroeconomic policies: essentially, prudent fiscal and monetary policies to keep inflation low and relatively stable and to prevent economic downturns (or even worse, financial crises) from derailing progress toward growth in the long run. We realize that maintaining macroeconomic stability is far from easy. Indeed, it is the focus of much, if not most, of the attention political leaders give to economic policy. But by definition, economic growth is a longrun phenomenon, and so the much greater challenge is to design and implement policies that foster growth in the long run.
The book is an excellent resource, even if one disagrees with the thesis.
 
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  • #4
russ_watters
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Sounds like a good book and I may pick it up. However:
The authors present four forms of capitalism: enterpreneurial, big-firm (corporate), state-directed, and oligarchic.


The authors mention that “entrepreneurial capitalism” has powered the U.S. economy toward a higher growth rate since the 1990s and seems to be taking hold in other parts of the world, such as Ireland,
Israel, the United Kingdom, India, and China, to name just a few. It would seem that this form of capitalism is the only good form of capitalism. However Baumol has elaborated over a decade ago, it takes a mix of innovative firms as well as established larger enterprises to make an economy really tick. He argues that a small set of entrepreneurs may come up with the “next big things,” but few if any of them would be brought to market unless the new products, services, or methods of production were refined to the point where they could be sold in the marketplace at prices such that large numbers of people or firms could buy them. In other words, small entrepreneurs often need the support of the traditional big-firms.

The authors conclude that the best form of “good capitalism” is a blend of “entrepreneurial” and “big-firm” capitalism, although the precise mix will vary from country to country, depending on a combination of cultural and historical characteristics that they hope will be clarified in the years to come.
Doesn't his primary example disprove his thesis? The tech boom of the 80s and 90s was almost exclusively powered by small startups - dozens of companies that with one or two or three employees grew into Fortune 500 companies in scarcely a decade. Granted, MS used IBM in the way you describe, but Dell started in his dorm room and then leased the building across the street as he grew. He created his market completely from scratch, as did Apple, Netscape, and a host of others.

That may be a relatively minor point - in general, I am in agreement that the primary driver of a mature economy is entreprenurial spirit. And that is something that is uniquely fostered by the American system. Developing countries can sustain double-digit growth because they are so far behind. The US is more correctly measured against the mature economies of Europe and we're still kicking their butts on a regular basis because their systems do not encourage innovation the way ours does.
 
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  • #5
Astronuc
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but Dell started in his dorm room and then leased the building across the street as he grew. He created his market completely from scratch, as did Apple, Netscape, and a host of others.
True, but Dell bought off-the-shelf components and when he got big enough, Dell could order per Dell specs. Dell still buys microprocessors from Intel or AMD, and so Dell is supported by big-firms. Also, the OS on DELL is MS, or perhaps LINUX (although I'm not sure).

Nevertheless, I think the book is worth reading.
 
  • #6
On the other hand, we also have the haters of Capitalism at hand. The current leaders of the Democratic party are all Socialists. They will destroy us if they get their way. They got their way in New Orleans, and we know how that worked out.
 
  • #7
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Capital defined

Capital is the ability to do work. For example, fresh vs salt water; education vs less; valuation of underlying asests i.e derivative. Labor, natural resources, financial, and technical are natural divisions.
 
  • #8
Evo
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I am all for capitalism, but it's got to be good capitalism as opposed to bad.

Good Capitalism, Bad Capitalism, and the the Economics of Growth and Prosperity
http://www.kauffman.org/capitalism/ [Broken]

Ewing Marion Kauffman Foundation
http://www.kauffman.org/

and The Foundation for Entrepreneurship
I worked with the Kaufmann Foundation for years assisting in getting them grant money from our company. They do good work.
 
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  • #9
marcus
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I am all for capitalism, but it's got to be good capitalism as opposed to bad.

Good Capitalism, Bad Capitalism, and the the Economics of Growth and Prosperity
http://www.kauffman.org/capitalism/ [Broken]
...
that mix of entrepreneurial and bigfirm capitalism you are talking about (illustrated by some historical and contemporary growth examples) sounds great
and makes me think I should download the PDF version of the book. To respond immediately, without having read it, what concerns me is when corporations assume control of the media, determine the conditions of election campaigning, and become dominant channels of political influence.

well I clicked on your link and it's FREE, no hassle. I got the whole book right away
May I recommend reading the book?

http://www.yalepresswiki.org/w/index.php?title=Good_Capitalism%2C_Bad_Capitalism [Broken]

or download pdf
http://www.yalepresswiki.org/gcbc/GCBC_Entire.pdf [Broken]

The authors present four forms of capitalism: enterpreneurial, big-firm (corporate), state-directed, and oligarchic.
it doesnt seem to have much though about large commercial concentrations of power controlling the media, the way people think and the body politic (in some cases for the corporate interest)

have to say it DOES make good points and have interesting examples of creative capitalism though, I like the anecdotes I happened across
 
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