Entrepreneurial Paradoxes and Simulations

24 November 2011 at 12:15 am Peter Lewin 7 comments

| Peter Lewin |

Back from the SEA meetings in Washington DC, the venue for our annual SDAE conference and membership meeting. At the annual banquet we honored Leonard Liggio for his contribution to the teaching of Austrian economics. Dick Wagner gave the presidential address. Both received a standing ovation.

The panels were well attended and, from what I could tell, the quality very high. I presented my paper on Entrepreneurial Paradoxes (which has been around for a while). Young Bak Choi commented on it and presented an interesting paper on the role of entrepreneurship in economic development and development policy. David Harper and Anthony Endres presented a paper on another variation on the theme of heterogeneous capital and its structure. Perhaps most interesting was a paper by a strategic management Ph.D candidate at York University, Mohammad Keyhani (co-authored with Moren Lévesque), on “The Role of Entrepreneurship in the Market Process: A Simulation Study of The Equilibrating and Disequilibrating Effects of Opportunity Creation and Discovery.” Randy Holcombe commented. Interesting that the issue of equilibration is considered important enough to investigate with simulations. But it raises some important questions. My own current view, having spent a lifetime contemplating the issue, is that we are no nearer an answer than we ever were, and that perhaps the more important distinction is between entrepreneurial actions that add value and those that do not.

Next year’s meetings will be in New Orleans. The president-elect of the SDAE is Larry White. He will be putting together the panels. So if you have an interest in presenting a paper, discussing one, or chairing a panel, let him know (lwhite11@gmu.edu).

Entry filed under: Austrian Economics, Entrepreneurship, Ephemera, Former Guest Bloggers, Papers, Public Policy / Political Economy, Strategic Management.

A Turkey of a Thanksgiving Post Easterly at the Southerns

7 Comments Add your own

1. Peter Klein | 24 November 2011 at 1:34 am

Thanks for the report, Peter. I was sorry to miss the SDAE this year.

Interestingly, I was assigned to discuss the Keyhani and Lévesque at this year’s AOM entrepreneurship doctoral consortium, but Mohammad unfortunately had to back out due to a visa issue.
2. Steve Horwitz | 24 November 2011 at 11:02 am

One correction: we’re in New Orleans next year.
3. Peter Lewin | 24 November 2011 at 12:30 pm

Oops! Not Atlanta, New Orleans, next year. Thanks Steve. I made that correction.
4. Michael E. Marotta | 26 November 2011 at 4:08 pm

Thanks for making the paper available. It is helpful to have a market-friendly authority cite when trying to explain entrepreneurship to Objectivists. I saved the paper in my old school folders for Organizational Behavior and for Complex Organizatons.
5. Mohammad Keyhani | 16 December 2011 at 3:10 pm

Thank you professor Lewin for the mention! In our simulations we are asking, if we mathematically distinguish between actions that add new value and actions that discover existing value, such that they have no overlap, then what can we say about the equilibrating and disequilibrating effects of each. We found some interesting things to say, but our concept of equilibrium is still an objective mathematical one (the “core” in cooperative games) so some can argue (as did Randy Holcombe) that this is still not the “consistency of plans” definition of equilibrium that Hayek proposed…The other paper we missed the chance to discuss with Peter Klein uses the same simulation model to look at the concept of entrepreneurial rents.
6. Peter Lewin | 16 December 2011 at 11:20 pm

Thanks for your comment Mohammad. You raise some interesting questions about adding value and identifying equilibrium. A formal model may be a good place to start – like the ERE in Mises’s work – against which to put a more descriptive story. The challenge, it seems to me, is, as you suggest, how to measure value in a disequilibrium situation. (Mises would suggest you can’t). There disequilibrium there is no consensus about what things are worth (outputs or inputs). Consequently, entrepreneurial action may turn out to be unsuccessful. Does this mean it does not “add (net) value”? Does this mean it is not “equilibrating”? The virtue of a formal model may be that one can start with a situation of unchanging preferences and known technologies which identify a (unique?) equilibrium. One may then be able to classify entrepreneurial action (which is arbitrage) as net-value-adding or not. For example, if government subsidies and taxes exist (or are introduced), this may result in spin-off arbitrage opportunities in many markets. One may crank through and see what this implies about end points compared with the pure no intervention equilibrium – and so on.

But then, when one introduces, the possibility (indeed the ubiquity) of new technologies, new goods, and changing preferences (inputs to household production), what happens to this approach? I don’t know the answer; I have suspicions.
7. Videos for teaching Strategic Management early in the morning! « Mohammad's Blog | 17 December 2011 at 2:19 pm

[…] and the SEA conference in Washington DC (Thanks to Peter Lewin for mentioning my work on the famous organizations and markets blog!). The Fall term was also the first time I taught a class in Canada as the main instructor. It […]