four-isnthere - Tumblr blog

four-isnthere · 3 years ago

Text

Theories on Entrepreneurship

An Austrian-American economist and social theorist Joseph Schumpeter was born in Triesch, Moravia (that is now known the Czech Republic), and studied at Vienna University. In 1907, he began practicing law. After winning the recognition as an economic theorist, he taught economics for various periods at the universities of Vienna, Gernowitz (that is now Chernivtsi, Ukraine), Graz, and Bonn after 1909. After visiting the United States as an exchange professor at Columbia University in 1913 and at Harvard University in 1927 to 1931, he received a permanent faculty appointment at Harvard in 1932. Schumpeter achieved recognition for his theories about the vital importance of the entrepreneur in business, highlighting the entrepreneur’s role in stimulating investment and innovation, thereby causing “creative destruction.” When innovation makes old ideas and technologies obsolete, this is where Creative Destruction occurs. His known books are The Theory of Economic Development (in 1911), Business Cycles (in 1939), Capitalism, Socialism, and Democracy (in 1942), and The History of Economic Analysis (in 1954).

vimeo

https://vimeo.com/75421736

To begin with, it has mentioned that Schumpeter started with a reasonably representation of the Dynamic Model. It is an abstract simplified model of an economy as being in a circular flow. And if an economy is in an equilibrium in a circular flow, all of these flows are in a steady state. For him, the fundamental phenomenon that underlies economic growth is the disruption of the circular flow, and that occurs through innovation. He describes this phenomenon as a source of new combinations of existing resources. He explained the categories: the production of new goods and services; the creation of new methods of production; new production techniques; discovery/exploitations of new markets; finding new sources of raw materials; and the new industrial methods of organizations. This interruption that Schumpeter described results in an economic growth. Hence, this is done through the activities of the entrepreneurs. He defined the that entrepreneurs plays a crucial role in this process. They are the “disruptive innovator”. It was said that he also agreed to the argument of Karl Marx, a German economist, about the importance of the dynamics of innovation; the importance of the history and the culture in influencing diversity; how development happens; and the economic consequences of change.

youtube

https://youtu.be/ZT2kICLatT8

Innovation results in economic change. We all know in this new era, a lot of innovation and changes has already been done but in this theory, the less successful you are in innovation you may go out of business because its somehow the driving force. In this era of changes, in economic development, it’s a perfectly competitive economy just pure competitions, as what he defines innovation. First is New production method is to make new products and to introduce new products and gain much sales. Second is New market is to look for other alternative to get out of the cycle of competitions. Third is the New supplier it has the new approach for sourcing and people supplying raw materials and negotiating discounts. Lastly, the New industry structure it wants a new product and structure that can be different from others and it will cause abnormal profits than the usually normal. In conclusion, this video completely shows what Joseph Schumpeter means about innovation this video support every factor and development an entrepreneur must know it deals this clearly state the main idea and goal of the theory and how it can affect the social skill and mindset of an entrepreneur.

For more information, you can just visit: https://www.economicsdiscussion.net/economic-development/schumpeters-theory-economic-development/schumpeters-theory-of-economic-development-economics/30174

John Maynard Keynes is a famous and one of the most renowned British economist because of his published works but he his best known for his Keynesian theories. The main objective of his theories is to aid for government increased expenses and lower demand of taxes and ascend the global economy out from the great depression. As Keynes famous line “ in the long run we are all dead” and it was misinterpreted as a YOLO quotes about seizing the moment but he was referring to the inflation and the quantity theory of money, in a different view of classical economics to Keynesian economics, Keynesian believe that consumers demand is the primary driving force in an economy in his academic perspective demand creates supply and that supply creates demand. Though there is a debate of wether it worth spending to stimulate the economy and how much do they spend but the main goal here about Keynesian policies like every policies have a trade of that being said that the Keynesian policies of increase in government during financial crisis remarkably reduce the depth and length of the Great Depression.

youtube

https://youtu.be/hPkh8kOldU4

The great depression change everything all of a sudden its 25% unemployment that one in four losing a job.

What really drives a capitalist economy?

People have money and that people is spending that money in the economy people spend money in services and grow that’s what allow business to grow to the economy.

John Maynard Keynes proposed during the great depression that the government should spend more money in peoples hands, driving up demand. His ideas is now often called demand-side economics and through government action, recessions can be minimized while maintaining steady economic growth. In this video the clear overview and explanation about John Maynard Keynes and his Keynesian theory is shown and well discuss it explains more about how the great recession started and how it ended, the unemployment of the people and the fact of a low economy is being said in the video and it supported the Keynesian theory.

Alfred Marshall a well known and one of the most influential English economist after publishing the principles of economics in 1890. His books contains a scientific explanation of notion such as supply, demand and marginal utility. The principles of economics has four factors of production (land, labor, capital, and organization). Land deals with natural resources, everything has its natural resources but some mad an enhancement and developed it to something better and greater . Labor deals with mental and physical skills it takes physical efforts and services to labor something. Capital deals with the machineries and tools to produce good quality product and lastly is the organization it coordinates all the elements.

youtube

https://youtu.be/oTd0nQeW05U

As we all know The Principles of Economics is equal to fundamentals of truth in which economics is established. It can be categorized under, how people makes opinion as for the fact that some people trades something to get another and its all on what you give to get it. Second is on how people interact, trading can make a better off and lastly, how the economy as a whole, a nation that can produce goods and services demand its wealth and that’s where it meets the peoples marginal utility its all in the consumers satisfaction and most best outcome of it is the inflation and unemployment is in the short run. Therefore this video supports the theory of Alfred Marshall for it discuss on point matter about the improvement of the economy and the clear and precise over view of the principles of economics.

Frank Hyneman Knight (born November 7, 1885, White Oak township, McLean county, Illinois, U.S., died on April 15, 1972, Chicago, Illinois), was an American economist who spent most of his work times at the University of Chicago, an became one of the founders of the Chicago School. Knight made his reputation with the book which was based on his Ph.D. dissertation, Risk, Uncertainty and Profit In it, Knight set out to elaborate why competitions would not necessarily eliminate profits. The book was published in 1921, is one of his most important contributions to economics. In that book, he makes an important difference between uninsurable and insurable risks. According to Knight, profit that is earned by the entrepreneur who makes decisions in an uncertain environment, is the entrepreneur’s reward for bearing uninsurable risk.

youtube

https://youtu.be/3-Rk9OpYyKY

To start the following theories, one should know how to distinguish risk from uncertainty. On this video, the speaker explained how Frank H. Knight establishes the way how risk differentiates from uncertainty. “Risk as the ‘known unknows’, things that exist and can be measured. Uncertainties, however, are the ‘unknown unknowns’, things that do not exist yet and can not be measured.”

Risk Bearing Theory

It suggested that it depends on the risk-taking behavior of the entrepreneur that he/she gather his/her profit. How the entrepreneur efficiently manage the risks is the main determiner of the amount of profit he/she gains, not on the amount of risk borne by him/her.

More information on: https://www.economicsdiscussion.net/theories-of-profit/top-7-theories-of-profit-with-criticisms/21072

https://youtu.be/vAzj_CBgSPk

Uncertainty Theory

The speaker stated that according to Frank Knight, uncertainty is the paid reward to the entrepreneur, not for bearing the risk but for undertaking the uncertainty. He argues that risks are purely physical in nature and therefore, they can be seen in advance and can be protected against. Such risks are taken cover by the insurance. But there are uncertainties in every business that can not be covered by measured insurance. The speaker aforesaid a list 4 examples of risks enlisted by Knight. Starting off with the risk due to the Competitors. Any business worth has the risk expected to the increase in number of competitors. The changes in vital firms, marketing, strategies, improvement in the quality and management, decrease in the cost of production, and many more. Then the risk caused by the Trade Cycle. Most of the business firms suffer the loss due to the decrease in the demand for good and services during the recession and depression. Followed by the risk rooted by the changes in policy of the government. Any firm may suffer loss because of the government may change its policy related to investment, export, taxes, and many more. And lastly, The risk due to the Technological changes. Technology advances with flight of time. If any firm failed to adjust to the change of this aspect, they may suffer deficiency. Thus, the term risk is applied to those dangers which can be seen in advance and which can be insured against. But the term uncertainty is applied to those dangers which is can not be foreseen and can not guarantee accomplishment. It is for the those uncertainties that the entrepreneur is rewarded with profit. Concluding on Profit is the reward for uncertainty bearing.

Keep reading

2 notes · View notes