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Modern economics is a theory of the economy that leaves no place for the entrepreneur. So where should entrepreneurs turn to improve their understanding? The Austrian school of economics might be the answer.
As economist Joseph Schumpeter argued, entrepreneurs are the lifeblood of the dynamic market economy. They are in the business of creating dis-equilibrium. They engage in “creative destruction.” The new that they create displaces the old and makes us better off. The mark...
With entrepreneurship at the core, “Austrians” only reluctantly use mathematical modeling and statistical analysis. After all, if the economy is a dynamic process of entrepreneurship and innovation, of what use are mathematical equations? Instead, their focus is on value creation...
Few entrepreneurs have heard of or studied Austrian economics. But my experience is that most entrepreneurs are Austrians without knowing it. They have learned from experience how the economy works and have developed an intuition. Their gut feeling, sometimes referred to as
Here are four insights from Austrian economics that are part of that entrepreneurial intuition:
Not only is the customer king, but all production aims to ultimately satisfy consumers in some sense by providing them with value. This value is entirely up to the consumer. Entrepreneurs can only provide the means, typically a good or a service, that help consumers beco...
With value being in the eyes (and experience) of the consumer, the price they are asked to pay must be (much) lower. The entrepreneur’s job is to figure out at what price their product is attractive, and then choose a cost structure that allows for profit. In other words, the price is a
Standard economics has turned its back on and developed models that exclude entrepreneurship. As Joseph Schumpeter, schooled in the Austrian tradition, put it: the market economy without entrepreneurship is much “like Hamlet without the Danish prince.” Indeed, en...
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