The Evolution of Entrepreneurial Skill
| Peter Klein |
Market competition is often characterized as an evolutionary selection process. “[O]ne of the main functions of profits is to shift the control of capital to those who know how to employ it in the best possible way for the satisfaction of the public. The more profits a man earns, the greater his wealth consequently becomes, the more influential does he become in the conduct of business affairs” (Mises, “Profit and Loss,” 1951). Within a given population, then, the market process selects for those individuals with the greatest levels of entrepreneurial skill. But can the emergence of entrepreneurial skill as a human trait itself be explained in terms of natural selection? Here’s one attempt:
Evolution and the Growth Process:
Natural Selection of Entrepreneurial Traits
Oded Galor, Stelios Michalopoulos
NBER Working Paper No. 17075, May 2011
This research suggests that a Darwinian evolution of entrepreneurial spirit played a significant role in the process of economic development and the dynamics of inequality within and across societies. The study argues that entrepreneurial spirit evolved non-monotonically in the course of human history. In early stages of development, risk-tolerant, growth promoting traits generated an evolutionary advantage and their increased representation accelerated the pace of technological progress and the process of economic development. In mature stages of development, however, risk-averse traits gained an evolutionary advantage, diminishing the growth potential of advanced economies and contributing to convergence in economic growth across countries.
This is a (mathematical) theory paper with “entrepreneurship” modeled as tolerance for risk, so some readers will find the execution less interesting than the idea. But it is good to see these kinds of big-picture issues addressed in the mainstream literature.