Entrepreneurship: Ameliorative or Transformative?

31 January 2007 at 8:42 am 2 comments

| Peter Klein |

Amar Bhide and Carl Schramm take the O&M position on microfinance in a Monday WSJ op-ed. Comparing the views of Nobel Laureates Mohammad Yunus and Edmund Phelps, they write:

Mr. Yunus’s ameliorative entrepreneurship however is very different from the transformative entrepreneurship that Mr. Phelps argues has been central to modern capitalism. . . .

Economic development does wonders for peace, but what does microfinanced entrepreneurship really do for economic development? Can turning more beggars into basket weavers make Bangladesh less of a, well, basket case? A few small port cities or petro-states aside, there is no historical precedent for sustained improvements in living standards without broad-based modernization and widespread improvements in productivity brought about by the dynamic entrepreneurship that Mr. Phelps celebrates.

In principle, microfinance does not preclude modern entrepreneurship. But in practice, we wonder if the romantic charm of the former might distract governments in impoverished countries from undertaking reforms needed to foster the latter.

It’s a nice piece — and how often do you see both F. A. Hayek and Frank Knight lauded in a newspaper editorial?

Entry filed under: - Klein -, Entrepreneurship, Institutions, Myths and Realities.

MBA Recruiters’ No. 1 Pet Peeve: Poor Writing and Speaking Skills Do I Need an (Ideological) Affirmation?

2 Comments Add your own

  • 1. Paolo MARITI  |  1 February 2007 at 8:25 am

    One can get a little deeper to clarify the difference between the two types of entrepreneurships and say that ameliorative entrepreneurship does not go any further than teaching how to bake a cake , i.e. how to execute the sequence of operations that are needed for baking. A serious limitation of the approach becomes clear when we are asking not about the ability to execute a given recipe but about the ability to CREATE the recipe.

  • 2. chris macrae  |  22 February 2008 at 5:27 pm

    Sounds as if the authors have not read the new book of Dr Yunus. It explains very clearly how his strategies are rapidly developing Bangladesh

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