CEGHS in a nutshell Flashcards
(134 cards)
<p>Why is Schumpeter's text on "the creative response in Economic Theory" especially important?</p>
<p>Important text as Schumpeter is the first to focus on entrepreneurs in society and their importance for development.</p>
<p>Explain creative response and name the three essential characteristics of creative response</p>
<p>Creative response:
When the economy does something else instead of adapting. It cannot be predicted. The creative response is a long-lasting solution. It is not a temporary nor a quick fix. It creates a completely new situation.
Three essential characteristics:
1) Can always be understood ex post (after), but never ex ante (before)
2) Changes economic situations for good
3) Frequency to occur has something to do with:
- Quality of personnel in society
- The relative quality field of personnel in a specific field
- Individual decisions, actions, and patterns of behavior
“Examples will illustrate this. Sometimes an increase in population actually has no other effect than that predicted by classical theory (adaptive response) - a fall in per capita real income; but, at other times, it may have an energizing effect that induces new developments with the result that per capita real income rises (creative response)” p.149/4</p>
<p>What is the definition of creative response?</p>
<p>The defining characteristic is simply the doing of new things or the doing of things that are already being done in a new way.</p>
<p>Name the 5 different ways of making a "creative response"</p>
<p>5 ways to make a creative response:
a) The introduction of a new product (e.g. steam engine)
b) The introduction of a new method of production (e.g. the assembly line)
c) The opening up of a new market
d) The conquest of a new source of raw materials
e) The carrying out of a new organisation of any industry (e.g. the creation of monopoly)
</p>
<p>What is creative destruction and who is the loser?</p>
<p>Creative destruction is just to understand that when there is a creative response, a game-changer, there has to be a loser/an actor whose work is replaced by the new solution.</p>
<p>What are the engines of capitalism and innovation in general?</p>
<p>New consumer goods, new production methods and new technology</p>
<p>According to Schumpeter what is an entrepreneur?</p>
<p>The ones who get things done. The entrepreneur is often not the one who comes up with the innovation BUT the entrepreneur takes the innovation to the market</p>
<p>According to Schumpeter what is an inventor?</p>
<p>A producer of ideas</p>
<p>According to Schumpeter, manager and entrepreneuers differ but why?</p>
<p>Managers: is administering an existing company
Entrepreneurs: are for Schumpeter not managers since entrepreneurs start NEW businesses.</p>
<p>Discussion: Does the importance of the entrepreneurial function decline as time goes on?</p>
<p>“Mere imitators” become more important in today’s society.
Specialists have overtaken the innovation and the entrepreneur is not fast enough with his intuition as the specialists have already fixed it.
The result is that it gets harder to stimulate your quality of life as the old entrepreneur will be less likely to succeed today than from the previous century.</p>
<p>How does Nathan Rosenberg disagree with Schumpeter and where do they agree?</p>
<p>Rosenberg agrees that the entrepreneurs are really important but he stresses the fact that further innovation of the first introduced innovation is just as important.
He argues for the importance of "imitators" where Schumpeter only values "innovators".
"In fact, they have commonly been the essential carriers of an improvement process that decisively shapes the eventual contribution of new technologies to productivity improvement"</p>
<p>What are some examples where "imitators"/continued innovation has been really important?</p>
<p>- The computer/PC: in 1945 when it became available it had very limited uses. Just look at the imitators amazing work on computers the last 10-15 years - it really did rise productivity.
- Telecommunication from cables to small radio radars to satellitties
- The laser: keeps finding new areas to be used (in military, printing, checkout counters in supermarkets, medical research and surgery, removal of tattoos etc.)
</p>
<p>Who is entrepreneurs according to Rosenberg?</p>
<p>According to Schumpeter: Only the one who takes a new product into market
According to Rosenberg: also the "imitators" improving the existing products with new uses, better functionality and so on.</p>
<p>Does new radical innovations always change society?</p>
<p>Technologies do not automatically change society!
Impact of new technologies is uncertain:
- Technological uncertainties
- Societal response: how will people use the technology
You have to show the public how to use the product and often make a "robust design" to do so</p>
<p>Why is it often hard to measure productivity growth for new technologies?</p>
<p>- Present measurement conventions capture improvements in productivity that take the form om simple cost reductions much better than they capture improvements in performance or quality
- Statistic-firms don't collect data from a technology's first day. Therefore it is hard to say how much fx. the computer actually has changed
- It is relatively easy to measure productivity growth for technologies used in the manufacturing or agricultural industries but today the service sector is huge and here it is really hard to measure
- You can't measure the productivity growth when it lies within the lifes of the population ==> Consumer surplus
- Its simply harder to measure qualitative than quantitative productivity growth</p>
<p>What is the primary factor to why we see more organized crime/criminal entrepreneurship in some societies than in others?</p>
<p>If the profit considering cost/benefit is too low as a productive entrepreneur people will look towards organized crime.
Cost/benefit on two factors: Primarily PROFIT and also risk of criminal entrepreneurship
"It is often assumed that an economy of private enterprise has an automatic bias towards innovation, but this is not so. It has a bias only towards profit" (Hobsbawm, 1969)</p>
<p>What is productive entrepreneurship?</p>
<p>Productive entrepreneurship is the kind a society needs. New products, new production methods etc.)</p>
<p>What is unproductive entrepreneurship?</p>
<p>Unproductive: Is also entrepreneurship in the sense that it is doing something in a new way, but it doesn’t necessarily add anything to society (organized crime)
Unproductive entrepreneurship is, according to Baumol, when it doesn’t create value to society (p. 250)</p>
<p>What is destructive entrepreneurship?</p>
<p>Destructive: Entrepreneurial activity that is destructive to society. An example is sueing your nearest competitor to gain an advantage in the market. This can lead to higher production costs for both companies since they have to spend more on legal costs. In the end this leads to higher prices for the consumer. Hence the innovative action takes us a step back. (Rent Seeking)’</p>
<p>What is rent-seeking?</p>
<p>An attempt to gain a payoff/”rent” at the expense of others instead of creating own value. Today, it takes form of “litigation and takeovers, and tax evasion and avoidance efforts”(p. 268).
Early rent-seeking: the quest for grants of land and patents in the upper strata while the other classes used the legal system for rent-seeking purposes (for instance by suing the competitor) p. 260
</p>
<p>According to Schumpeter entrepreneurship is always positive and cannot be controlled. How does Baumol look at this?</p>
<p>Baumol makes an addition to Schumpeter’s theory. According to Schumpeter, we cannot control entrepreneurship. It is a creative response which we cannot predict.
According to Baumol, we can set the right circumstances to create an environment that stimulates entrepreneurship and innovation.
In addition, the allocation of the entrepreneurship determines (more or less) if the entrepreneurship is productive or unproductive - even destructive. Entrepreneurship is therefore not always positive.</p>
<p>Which factors are important to the "Rules of the game" when it comes to creating an environment that stimulates productive entrepreneurship and innovation? </p>
<p>- The level of property rights
- The major “events” during the period (for instance war)
- Profit and taxation: The right to gain rewards/payoff for the entrepreneurial activity in history (unpredicted taxes etc.).
- Criminal risk: how dangerous it is to do organized crime
- How institutions help entrepreneurs</p>
<p>History lesson of "the rules of the game"</p>
<p>Historic examples:
During the times of the Roman Empire and Medieval China inventions of steam engines, water wheels, gunpowder and printing were seen, but these didn’t lead to a flowering industry.
During Medieval China it was more prestigious to be a part of the state bureaucracy instead of individual enterprise (no freedom, security or legal foundation for individual enterprise) (page 911-212). In addition, there was no incentive to innovate (why should you when the emperor is allowed to take whenever he wants to).
The earlier middle ages entrepreneurship/innovation was inspired by warfare. You could gain a payoff in improving war-technology (bows, gunpowder, castle-architecture).
The later middle ages was inspired by creating luxury in the service of their kings. The monks also played a big role as they ran the water-driven mills and kept improving them and the economies of scale to retain their monopoly.</p>
<p>According to Hall and Soskice will all capitalistic systems move towards the classical neo-liberalism?</p>
<p>The theory of Varieties of Capitalism destroyed the idea that all capitalistic systems would move towards the same neo-liberal system. Instead capitalistic system can be different with the two main varieties being Liberal market economies and Coordinated market economies</p>
What is neo-liberalism?
An approach to economics and social studies in which control of economic factors is shifted from the public sector to the private sector. Drawing upon principles of neoclassical economics, neoliberalism suggests that governments reduce deficit spending, limit subsidies, reform tax law to broaden the tax base, remove fixed exchange rates, open up markets to trade by limiting protectionism, privatize state-run businesses, allow private property and back deregulation.
What are typical LME countries?
UK, USA, Australia, Canada and Ireland
What are typical CME countries?
Industry-based CME's: Germany, Scandinavia, Austria, Netherlands etc. Group-based CME's: South Korea, Japan
