Reading: Lesson 4: The Entrepreneurial Society

Description: 

A society that embraces entrepreneurship creates more jobs, produces more wealth, and allows individuals to exercise their creative talents. A free market economy provides the type of environment necessary for entrepreneurship to flourish. Societies are shaped by the ideals they embrace. If we think entrepreneurship is a good thing, we should encourage more entrepreneurship by celebrating entrepreneurs and encouraging economic freedom.

In this lesson, students will watch and discuss a brief video explaining the important things entrepreneurs do for society. Students will then read an article and answer questions about the history of entrepreneurship in a fun team trivia game. Lastly, students will complete a self-study about society’s transition to embracing entrepreneurship.

 

Time Required:

45 min

 

Required Materials:

Internet connection, writing instrument 

 

Prerequisites:

None

 

 

 

 

1.4.A - Watch and discuss the following video using the questions below to guide your discussion [10 min]:

Video:(Kauffman Foundation, 3:20 min)

“This short video from the Kauffman Foundation illustrates three important things entrepreneurs do for our economy.”

Discussion Questions: The Three Things Entrepreneurs Do for Our Economy

1.  According to this video, what three important things do entrepreneurs do for our economy?

1. They “birth the new.” In other words, they innovate.
2. They create jobs. New firms create about 3 million new jobs every year. Almost all net job creation in the United States are the result of firms less than 5 years old.
3. They create new net wealth in society. Some entrepreneurs become very wealthy, but these entrepreneurs take in less than a fraction of a percent of the new wealth their companies generate for the society.

 

2.  The United States has a growing labor force which means we need to create about 3 million new jobs each. What contributes to the growing number of people in the labor force?

1. Entry of young people into the labor market.
2. Entry of immigrants into the labor market.
3. People returning to the labor market.

 

3.  According to the video, what will the world need as long as human beings walk the earth?

1. Innovators
2. Inventors
3. Entrepreneurs

 

 

 

 

Teacher Tip: Group students into teams of 3-5 students. Ask the 11 questions below. Encourage class participation by rewarding the team who answers the most questions correctly.

1.4.B – Read the following article and then participate in a team trivia activity. [25 min]:

Article: The History of Entrepreneurship by Ryan Allis (thestartupguide.com)

“To be a good entrepreneur it is helpful to understand how the system of the competitive market economy has developed.”

Team Trivia Questions:  The History of Entrepreneurship

1.  The first entrepreneurs began to trade goods or services for other goods or services without using money, as they moved around hunting and gathering. What was the key to being able to stay in one place and not needing to live a nomadic life?

1. The discovery of agriculture
2. The domestication of plants and animals.

 

2.  As people settled in one place, communities began to form. What was the main reason that the standard of living began to increase?

1. People began to specialize, which increased the quality of products and services.
2. They were also able to cut the time needed to create or produce products and services, thus increasing efficiency which benefited everyone.
3. “Agricultural settlements had put humanity on a rapidly developing path toward intellectual and scientific advancement.”

 

3.  What does the author identify as the major turning point for the human species?

1. Trade routes lead to the international trade of goods and ideas.
2. “Starting in 1492, Columbus’ voyages connected Europe and the Americas, bringing guns, horses, and disease. With the importance of Atlantic trade, power would shift toward the West in the coming centuries as Europeans colonized and laid the foundations for a globalized world. The reconnection of the hemispheres marked a major turning point for our species.”

 

 

 

4.  What was the main limitation of the barter system?

1. In a barter system parties had to want what the other party had for trade to occur.
2. People had to rely on a “coincidence of wants”, and people’s wants and needs didn’t always match. Therefore they needed another way to buy and sell products and services.

 

5.  What emerged to overcome the limitations of the barter system?

1. Money emerged as a tool people used to facilitate trade.

• Note: Money was not invented. It merged through a process called Spontaneous Order that we will learn about in Module 6 - What Institutional Factors Encourage Entrepreneurship?

1. “Early forms of money (called specie) would be often be commodities like seashells, tobacco leaves, large round rocks, or beads.”

 

6.  Why was the idea of efficiency and innovation frowned upon, stifled, and was even punishable by death in the 16^th century?

1. … “outlawed by the King under the pretense that such efficiency reduced the number of available jobs. ”
2. The myth that there are only a limited number of jobs persists even today. Of course, this is not true. Our wants and needs are virtually endless. As a result there are virtually endless jobs to be done.

 

7.  What was the prominent economic philosophy between the years 1550 and 1800 called?

1. “Between approximately 1550 and 1800, a philosophy called mercantilism was at the forefront. The mercantilists had the misguided notions that a country’s wealth was solely based on how much treasure and gold it could obtain and how much more it exported than imported.
2. Monopolies and tariffs were promoted and competition and trade were discouraged. But they had gotten it all wrong.”

 

8.  Who was the 18^th century philosopher who introduced a new school of thought that promoted commerce as the source of wealth and focused on rational self-interest as the guiding force in the economy?

1. In Adam Smith’s 1776 work An Inquiry into the Nature and Causes of the Wealth of Nations he explained:

• “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their self-interest.”

1. “…self-interest acts as a guiding force toward the work society desires.”

 

 

9.  Name the force that regulates self-interested behavior in the market.

1. Competition is the force that regulates people’s behavior in the marketplace.

• As Robert L. Heilbroner explains: “A man who permits his self-interest to run away with him will find that competitors have slipped in to take his trade away; if he charges too much for his wares or if he refuses to pay as much as everybody else for his workers, he will find himself without buyers in the one case and without employees in the other.”

1. “The wonderful paradox of the market, through the interaction of supply and demand and competition, creates a price that properly allocates industry so as to produce the proper quantities of goods and services. No intervention, planning, or forethought is needed to create exactly what society desires, in the exact amount it desires. What a wonderful contraption the market is. As long as society can promote competition and innovation, standards of living will continue to grow and wealth will increase.”

 

10.  What economic system led to the revolutionary progress that has occurred over the last 200 years to advance the well-being and prosperity of people all over the world?

1. “…the market system has been one of the most significant innovations in the history of humankind.”
2. Other names for the market system include: the free market, laissez-faire capitalism, and voluntary exchange 

 

 

 

1.4.C – Watch the following video [5 min]:

Video:(BBC, 4:47 min)

Teacher Tip: You may want to show students the Gapminder World Wealth & Health of Nation’s interactive graph and watch the evolutions of the United States’ movements compared to other countries around the world.

“In this spectacular section of 'The Joy of Stats' he tells the story of the world in 200 countries over 200 years using 120,000 numbers - in just four minutes. Plotting life expectancy against income for every country since 1810, Hans shows how the world we live in is radically different from the world most of us imagine.”

 

 

 

 

1.4.D – Self-Study: Read the following article and answer the questions below [15 min]:

Article: Small Business and Entrepreneurship by E.C. Pasour (FEE.org)

“In a free enterprise economic system, expected prices and profits provide incentives for entrepreneurial activity….Entrepreneurship may be aptly defined as an alertness to profit opportunities which have not been grasped and acted upon by others. It should be stressed that the potential for (and expectation of) profits in the competitive market process creates powerful incentives for profit-seeking individuals to discover and make use of information before it is widely known by other people.”

Discussion Questions: Small Business and Entrepreneurship

1.  How does a market economy provide incentives for entrepreneurial activity?

1. Potential for profits creates powerful incentives for entrepreneurs to discover and make use of information before it is widely known by other people.
2. According to Pasour, “A market economy is a dynamic discovery process generated by the competitive entrepreneurial scramble for profits…. market conditions are constantly changing due to the invention and introduction of new products, changes in production technology, changes in consumer preferences, and so on. Consequently, there are always profit opportunities available for alert individuals with innovative ideas.”

 

2.  New businesses and entrepreneurship is the leading source of net new jobs. What role does Pasour believe the government should play in encouraging entrepreneurship?

1. Pasour suggests it is not possible for the government to successfully pick winners and losers in business. To encourage entrepreneurship,   “…a more feasible alternative is for government to stress the creation of a favorable business climate—to adopt policies which are consistent with risk-taking and entrepreneurial activity.”
2. Pasour explains that “…high interest rates, high marginal tax rates, and government regulations have actively discouraged risk-taking and innovative activity in the United States.”

 

3.  Does the creation and development of a new product or service guarantee success for an entrepreneur?

1. No, because the entrepreneur must also be able to sell the product or service to willing buyers
2. They also must sell the product at a price that is above cost in order to make a profit.

 

4.  If entrepreneurship is a good thing, can you think of ways to encourage more entrepreneurship?

1. Pasour explains, “…governmental monetary and fiscal policies to control inflation along with a reduction of taxes and regulations are important in establishing the economic climate necessary for increased saving, investment, and capital formation.”
2. We, as a society, should celebrate entrepreneurs as heroes and encourage government to limit policies that restrict entrepreneurship.

Lesson Recap:

• Entrepreneurs do 3 important things for the economy:

ü  They innovate.

ü  They create jobs.

ü  They create new net wealth in society.

 

• Competition regulates behavior in the marketplace enabling people’s rational self-interest to serve as the basis for a healthy economy.

 

• In Adam Smith’s 1776 work An Inquiry into the Nature and Causes of the Wealth of Nations he explained:

ü  “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their self-interest.”

ü  “…self-interest acts as a guiding force toward the work society desires.”

 

• Small businesses and entrepreneurs are the leading source of new job opportunities in the United States. Smaller firms are able to adapt to ever-changing but unpredictable economic conditions.

 

• Society should celebrate entrepreneurs as heroes and encourage government to limit policies that restrict entrepreneurship.

Additional Resources

Video:(MRUniversity, 3:22 min)

“Why has innovation grown so rapidly? Economist Douglass North argues it has to do with institutions such as property rights, non-corrupt courts, and rule of law, which lay the foundation for innovation to take place. Others attribute the rise to factors such as education or access to reliable energy. McCloskey argues that what really kicked innovation into high gear is a change in attitude — ordinary people who once celebrated conquerors and kings began to celebrate merchants and inventors.”

 

Video/Documentary: Dog Days (Moving Picture Institute)

“A captivating portrait of American entrepreneurship, Dog Days explores themes of immigration, vocation, and the power of perseverance.”

                                                                                                                                                   

Article: Entrepreneurship: The Driving Force of the Economy by Peter G. Klein (mises.org)

 “Entrepreneurship, as decisive action under uncertain conditions, is at the very heart of a market economy. Entrepreneurship is the driving force of a market economy, and entrepreneurs need property rights, the rule of law, sound money, and free and open competition to be successful.”

 

Article: The Entrepreneurial Society (economist.com)

“The revolution for the current generation is the entrepreneurial one. This has spread around the world, from America and Britain to other countries and from the private sector to the public one. It is bringing a great deal of disruption in its wake that is being exaggerated by the current downturn. But it is doing something remarkable: applying more brainpower, in more countries and in more creative ways, to raising productivity and solving social problems.”