The place of entrepreneurship in “The Economics that Might Have Been”

Abstract

It is a familiar observation that entrepreneurship is not easily accommodated within the framework of neoclassical economic theory. Drawing inspiration from an ancient critique of neoclassicism by Veblen (Q J Econ 12(4):373–397, 1898), this paper attributes the difficulty to the tension between normative accounts of decision making (as in mainstream theory) and ideas of causation that are standard in the sciences. Normative theories naturally privilege the conjectured future over the experienced past in the quest for explanatory factors. Evolutionary theories elucidate instead the mechanisms of “cumulative causation” (Veblen) that perpetually produce the present from the past. Entrepreneurship of the innovative (Schumpeterian) kind seizes opportunities that emerge in complex, evolving contexts of technological and institutional change. A theory that gives due weight to cumulative causation sheds greater light on these processes than prevailing mainstream theory can, and that is a key advantage of an evolutionary theory.