Starting with Menger, Böhm-Bawerk, and Wieser, Austrians have always emphasized the importance of the entrepreneur in economics. The role of entrepreneurship also featured prominently in the works of earlier economists such as the French liberals, and Chris Brown and Mark Thornton have even argued that the notion of the entrepreneur was a key to the founding of modern economics. At the same time though, Austrians (along with other scholars such as William Baumol) have also lamented the serious neglect of the entrepreneur in contemporary economics, which has led, among other things, to an underestimation of the welfare-enhancing power of markets, and an undue faith in the power of governments and regulators to tinker with the market process.
It should come as welcome news then that entrepreneurship studies is one of the fastest-growing fields among the business disciplines (along with related fields such as strategic management and strategic entrepreneurship). But sadly, these fields have sparked less attention than they probably should. One possible reason is that there is often a gap between the economic theory of the entrepreneur and the business practice of entrepreneurship. One way to think about it is that business research tends to focus on the practical aspects of new venture creation, whereas economists are usually interested in the economic function of entrepreneurship—the underlying (or perhaps overarching) economic and social significance of entrepreneurs. (Peter Klein makes this point by distinguishing between “occupational entrepreneurship” and “functional entrepreneurship.” Business scholars and practitioners focus mainly on the former, economists on the latter.)
A problem then is to bridge this gap and to bring economic insight to the field of practical business. This is especially important in teaching courses in entrepreneurship, which often focus so much on the business trees that they miss the economic forest. It’s true that entrepreneurship textbooks usually include something about Schumpeterian “creative destruction,” and repeat some well-worn facts about the importance of small business in the economy. But beyond these brief nods to economic ideas, many entrepreneurship courses don’t have much to say about the bigger picture of entrepreneurial behavior. The unfortunate result is that a lot of the richness of the economic point of view gets lost amongst (nevertheless important) details of new venture creation.
However, Austrians enjoy an advantage in that the Austrian tradition excels in explaining the market economy from the ground up, incorporating the entrepreneur at every opportunity. What emerges is a theory of economic and social development that puts the entrepreneur front and center. This approach allows us to show students and potential entrepreneurs the economic and social importance of their own successes (and failures!), however small, and hopefully, to inspire them to think more about the role they play in increasing human welfare. Ideas such as consumer sovereignty, the pervasive problems of uncertainty, the importance of capital heterogeneity, and the social function of bankruptcy are at the same time vital for economic understanding and relevant to occupational entrepreneurship, and fit nicely with the more traditional topics in entrepreneurship courses. I am currently incorporating some of these ideas into my own teaching, and thus far, students seem to respond positively; my intuition is that the gap between theory and practice is much smaller that it seems.
There is of course a lot more to be done in developing Austrian pedagogy in entrepreneurship, but I believe Austrians have a lot more to contribute in this field than they might realize. For anyone with a further interest in this topic, I’ll be speaking about it more at the 2014 meeting of the Association of Private Enterprise Education.