Entrepreneurship

Volume 17, Values and Responsibility

Stefan Kwiatkowski

• Publisher: Routledge
• Year: 2017
• eBook ISBN: 9781351297783
• Topic: Business
• Subtopic: Entrepreneurship
• Index: Business

Entrepreneurship is the capability to be an entrepreneur. Beyond that idea is an ideology that a person's business actions result in industrial growth or technical advances, making that person a leader in the economic world. The contributors to this latest volume in the Praxiology Series, now available in paperback, are united in claiming that resourcefulness is a characteristic of people who take effective action, and that effectiveness is dependent on good, ethical purposes.

The wide-angle definition of entrepreneurship presented in this volume demands that people and organizations engage in more than simple self-interest, but also display awareness of the prospects for wider growth and advances resulting from their decisions. In a period of financial crisis caused by irresponsible behavior by eminent would-be "entrepreneurs" the significance of this perspective should be evident. The editors claim that growth, not stagnation, advantage, not decline, are irreversible traits of business activity. This is why the very concept of entrepreneurship calls for values and responsibility—even more than in the past.

The contributors develop the idea of entrepreneurship from both theoretical approaches religious and practical, or applied perspectives. This inter- and multidisciplinary approach offers readers a chance to rebuild trust in entrepreneurship.

PART ONE

Perspectives on Entrepreneurship

Entrepreneurship from a Praxiology Point of View¹

Wojciech W. Gasparski
Business Ethics Center of Leon Kozminski University Warsaw, Poland

1 Introduction

Praxiology (action theory), developed in particular by Ludwig von Mises in his book Human Action: A Treatise on Economics, described the concept of “entrepreneur.” This concept as well as other concepts, like “capitalist,” “landlord,” “worker,” “consumer” etc., refers to the actions of persons performing them. Praxiology and economics define the concepts as ideal types of catallactic (exchange theory) categories, i.e. their functions executed in market operations. Therefore the concept of “entrepreneur” denotes “an acting human (actor) considered from the point of view of uncertainty related to an action.” Economic theory considers the “entrepreneur” as an actor causing changes in the market, particularly changes in data mirroring market processes. An entrepreneur makes a profit or incurs a loss, an owner of production factors gains interests, employees earn wages or salaries. These characteristics offer a construct of functional distribution, different from a historical or political explanation.

Entrepreneurs always deal with uncertain conditions as regards the future; their success or loss depends on faultless anticipation of events to come. If they are wrong, they will be finished. The only source of their profit is their ability to predict consumer expectations better than their competitors. The specific function of entrepreneurship lies in the proper definition of production factors worthy of the entrepreneur’s commitment. However, acting in this way they can not ignore market rules; their activity must gain the acknowledgement of clients and consumers.

As far as the ethical aspect of entrepreneurship is concerned, Mises points out that it is not the entrepreneurs’ fault that consumers, i.e. ordinary people, prefer alcohol to the Bible, detective novels to classics, and guns to butter. Entrepreneurs gain higher profits not because they sell “bad” things instead of “good” things. The higher their profit, the better they are able to deliver products consumers want to buy with greater intensiveness. People do not drink poison to make “alcohol capital” happier, they do not fight wars to increase the “death merchants” profits. Military industry is a consequence of people’s war like spirit, not its cause. It is not the entrepreneur’s duty to encourage people to act better onto substitute wrong ideologies with their opposites. That is the duty of philosophers; they should change the ideas and ideals of human beings. An entrepreneur serves consumers such as they are, despite the fact that some of them are sinners and ignoramuses. We may highly appreciate those who forsake out of producing weapons or alcohol, but such praiseworthy behavior would be no more than an empty gesture if consumers were of the same mind; meanwhile, even if all entrepreneurs followed those who forsake such profits, wars and habitual drunkenness would not disappear. As it was done in pre-capitalist times, governments would produce guns in their arsenals, and drinkers would distill alcohol by themselves, says Mises.

It would be as simple as Mises writes if entrepreneurs were busy only with meeting consumer needs. This is not the case today. Today entrepreneurs are busy with innovations, which even Mises noticed. Initiating innovations is closely related not only to producing products but also to creating consumers’ appetite for new needs. That is the nature of contemporary marketing. Creating needs is not axiologically neutral with respect to fulfilling already existing needs. It is a way of making consumers addicted to new products, which calls for an assessment broader than thinking in just economic and praxiological terms. Ethical categories are indispensable. Why? Entrepreneurs are becoming more responsible for goods, which they produce. They know better even than the consumer, the characteristics of the commodity they are offering.

There is probably no great difference between the praxiological (Misesian) understanding of the entrepreneur and the understanding offered by Joseph M. BocheĔski (an eminent philosopher of the Lvov-Warsaw School of Polish Philosophy), who pointed out the wise recommendations suggested by praxiology as a human action theory. According to BocheĔski an entrepreneur is the synthesis factor of an enterprise. Entrepreneurs buy inventions from inventors, employ workers, look for clients, and communicate with local and state governments. In other words, they orchestrate an enterprise out of separate and dispersed elements. This fact is so obvious that it is inconceivable how for so long it was possible to confuse the identity of the entrepreneur with the capitalist. True, initially a capitalist was an entrepreneur, but later, and particularly now, the situation is different. In these different circumstances, writes BocheĔski, an entrepreneur represents an enterprise as a whole, regardless of its legal or organizational form. You may hear an opinion from this that there has never been a “saint Entrepreneur” or “saint Manager.” This assertion is not true. From the very structure of an enterprise there emerges the ideal entrepreneur, a person who serves the enterprise unselfishly, even in opposition to others, if necessary. There are many examples of great entrepreneurs who uphold this ideal, concludes BocheĔski.

Entrepreneurship understood as the essence of an entrepreneur’s activity calls for an explanation not only in terms of the “double E” of praxiological dimensions, i.e., effectiveness and efficiency, but also of the “third E,” i.e. ethicality. This is because each of the “triple E” dimensions is a component of the irremovable axiological context of the other two. This was explained by the contributors of the book Human Action in Business: Praxiological and Ethical Dimensions., Vol. 5 in the Praxiology Transaction series.

The Praxiology “nickname” given by Tadeusz Kotarbinski (Polish philosopher and founder of the Polish school of Praxiology) is “grammar of (human) action.” However, one cannot attain a literary ideal through knowledge of the rules of grammar only. One can write correctly while the content may be filled with dirty words and the content itself can be disgusting. One can use praxiological principles for evil deeds, individual or collective. Malpractice is prevented, or at least limited, by clearly naming and identifying and by showing disapproval for such conduct. This role is fulfilled by business ethics. Business ethics supplies the vocabulary (e.g., in this context Mises criticizes military terminology used in business operations) and the theory enabling one to tell what is noble from what is despicable. Business ethics helps forms the norms (standards) of conduct that ensure corporate integrity. However, ethics alone cannot accomplish this goal. Cooperation between praxiology and ethics creates the conditions enabling good practice in economic life and outside it [Gasparski and Ryan 2005, 175-190].

2 Praxiological Analysis of Entrepreneurship

Readers of Polish works on praxiology will find that the nouns “entrepreneurship” and “entrepreneur” are not featured in them. Neither Tadeusz Kotarbinski nor Jan Zieleniewski identify them in their treatises on praxiology and praxiological theory of organization. Does this mean these words did not belong among the concepts essential for explaining certain types of human actions, and organized actions in particular? To check this, it’s worth taking a look at Tadeusz Pszczolowski’s Concise Encyclopedia of Praxiology and Theory of Organization. It is a ple asant surprise to find not the noun entrepreneurship, admittedly, but the adjective enterprising, describing someone “who sets themselves and others objectives or tasks at their own initiative, and sees to their effica cious (primarily effective) accomplishment” [Pszczolowski 1978, 192], The adjective in question comes before the entry for enterprise which, however, contains no reference to entrepreneurs or entrepreneurship or even to the adjective itself. (Thus, the adjective seems kind of taken by surprise to be in the Encyclopedia despite lacking a reference to any written praxiological source). Meanwhile, such a source exists, though it is not of Polish but Austrian origin. In Ludwig von Mises’ Human Action: A Treatise on Economics, we read that “[...] it is impossible to eliminate the entrepreneur from the picture of market economy. The various complementary factors of production cannot come together spontaneously. They need to be combined by the purposive efforts of men aiming at certain ends and motivated by the urge to improve their state of satisfaction. In eliminating the entrepreneur one eliminates the driving factor of the whole market system.” [Mises 1966, 248-249],

Of course in the year (1978) that the Concise Encyclopedia of Praxiology and Theory of Organization was published in communist Poland, with its command economy, writing about the “driving force of the market system” was inappropriate. Those were the days of so called “real socialism” and the entry for “enterprising” had to play the role of a “knowing wink” that the Encyclopedia’s author gave his readers. Today, in almost two decades of political and economic transformation, the times are different. Polish translation of excerpts from Mises’ Treatise has been published in Prakseologia,² and entrepreneurship is the subject of lectures and publications,³ so it is timely to recover for lost time with regard to praxiology. Let us consider Mises’ work, then, or more precisely those parts of his work relate to that present issues related of entrepreneurship and entrepreneurs.

Presenting the scope and methods of catallactics, or exchange theory,⁴ Mises points out that the concepts of entrepreneur, capitalist, landowner, worker or consumer, as used by people studying problems related to human action and used in economic history, descriptive economics or economic statistics, mean something other than when used in economics. In the former case, these are ideal types, and in the latter—catallactic categories, i.e. relating to the functions they fulfill in market operations.

The fact that both acting men and historical science apply in their reasoning the results of economics and that they construct their ideal types on the basis of and with reference to the categories of praxiological theory, does not modify the radical logical distinction between ideal type and economic category. The economic categories we are concerned with refer to purely integrated functions, the ideal types refer to historical events. Living and acting man by necessity combines various functions; He is never merely a consumer. He is in addition an entrepreneur, landowner, capitalist, or worker, or a person supported by the intake earned by such people. Moreover, the functions of the entrepreneur, the landowner, the capitalist, and the worker are very often combined in the same persons. History is intent upon classifying men according to the ends they aim at and the means they employ for the attainment of these ends. Economics, explo ring the structure of acting in the market society without any regard to the ends people aim at and the means they employ is intent upon discerning categories and functions [Mises 1966, 251-252].

Economics, Mises continues, does not deal with people as such, but defines the function that people fulfill, a function that is not a quality of any special group of people, but is present in any action and applies to every performer of an action, thus being methodological in character.

The term entrepreneur as used by catallactic theory means: acting man exclusively seen from the aspect of the uncertainty inherent in every action. In using this term one must never forget that every action is embedded in the flux of time and therefore involve a speculation. The capitalists, the landowners, and the laborers are by necessity speculators. So is the consumer in providing for anticipated future needs. There’s many a slip ‘twixt cup and lip [Mises 1966, 253].

The entrepreneur understood in this kind of theoretical construct is not the owner of capital, Mises writes. He obtains capital from loans granted by capitalists, even though the law considers him to be the owner of the means of production which he purchased with the borrowed funds and owner of the increased funds acquired by the profit made from using them. In this approach the entrepreneur is an employee of the capitalists who risk incurring losses in case of failure. The situation does not change even when the capital in question is, in some part, great or small, owned by the entrepreneur himself. “There is no such thing as a safe investment,” is Mises’ point [op. cit., p. 253]. In economic theory “entrepreneur” means a person acting upon changes occurring on the market, or more precisely, changes in data that reflect market processes [ibid. p. 254].

Distinctly different the entrepreneur, the concepts of “capitalist” and “landowner” denote someone who acts on account of changes in value and price resulting from the difference overtime in how goods are valued today and how they will be valued in the future. The “worker,” or in more general terms—the “employee”—is someone who acts on account of the involvement of the production factor that is human labor. “Thus every function is nicely integrated: the entrepreneur earns profit or suffers loss; the owners of means of production (capital goods or land) earn [orginary] interest; the workers earn wages. In this sense we elaborate the imaginary construction of functional distribution as different from the actual historical distribution” [Mises 1966, 254].

Further on, the author quoted notes that economics uses the term “entrepreneur” in a different meaning than the one emerging from the construct of functional distribution. “Economics [... ] also calls entrepreneurs those who are especially eager to profit from adjusting production to the expected changes in conditions, those who hale more initiative, more venturesomeness, and a quicker eye than the crown, the pushing and promoting pioneers of economic improvement.” [Mises 1966, 255]. This concept, Mises says, is narrower than the one used in the construct of functional distribution; it does not account for numerous cases encompassed by that concept. Mises thinks it wo...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Table of Contents
• Editorial
• Introduction
• Part One: Perspectives on Entrepreneurship
• Part Two: Religion and Entrepreneurship
• Part Three: Entrepreneurship in Action
• Entrepreneurship, Values and Responsibilities: The Message
• Notes about the Authors and Editors
• Notes about the Publication Sources