Making and Unmaking Economic Orders

22 October 2009 at 12:41 pm 1 comment

| Dick Langlois |

The new issue of the online journal Capitalism and Society has a number of articles that should interest readers of this blog. Each is probably deserving of its own post. (Ah, but time prohibits.)

Jon Elster has a piece called “Excessive Ambitions” that criticizes not only mainstream rational-choice models (as we would expect from Elster) but also modeling in general. Roman Frydman and Michael Goldberg have a piece that applies something like Leijonhufvud’s “corridor” to risk regulation: when swings of asset values are small, government should stay out, since such swings are actually beneficial; but when asset prices get too far from “underlying values,” government regulation is called for.

My favorite paper is by Thorbjørn Knudsen and Richard Swedberg. Here’s the abstract:

This is a theoretical paper in which we attempt to present an economic and sociological theory of entrepreneurship. We start from Schumpeter’s idea in Theory of Economic Development that the economy can be conceptualized as a combination and innovations as new combinations. Schumpeter also spoke of resistance to entrepreneurship. By linking the ideas of combination and resistance, we are in a position to suggest a theory of capitalist entrepreneurship. An existing combination, we propose, can be understood as a social formation with its own cohesion and resistance — what may be called an economic order. Actors know how to act; and profit is low and even in these orders. Entrepreneurship, in contrast, breaks them up by creating new ways of doing things and, in doing so, produces entrepreneurial profit. This profit inspires imitators until a new order for how to do things has been established; and profit has become low and even once more. Entrepreneurship is defined as the act of creating a new combination that ends one economic order and clears the way for a new one. The implications of this approach for a number of topics related to entrepreneurship are also discussed.

This has some affinities to arguments I have made in the past. I am thanked in the acknowledgements, presumably for conversations that Richard and I had at a Schumpeter conference at Harvard last year; but I’m not cited. (Assume sad-faced emoticon here.)

I will talk about the fourth paper in the issue soon in a separate post.

Entry filed under: - Langlois -, Entrepreneurship, Evolutionary Economics, Financial Markets, Methods/Methodology/Theory of Science.

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1 Comment Add your own

  • 1. Nick Gall  |  21 January 2010 at 4:46 pm

    The paper by Knudsen and Swedberg is excellent. The discussion of a cycle between the old order and new order is remarkably similar to the ecosystem concept of the “adaptive cycle” by Buzz Holling. See . In fact, in their book Panarchy, Gunderson and Holling even refer to their release phase as the “creative destruction” phase following Schumpeter.

    I find it intriguing to think that one reason economic evolution is so much more rapid that biological evolution is that the former has an agent, the entrepreneur, whose goal is to recombine factors in disruptive ways, while the latter is driven by seemingly random disruptions.

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