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An Outline of the Concept of Entrepreneur: The conception of classic liberalism

Adam Smith, as a representative of classic liberalism, did not distinguish between capitalist as holder of financial “stock” and entrepreneur (manager) as a final elaborator of decisions. Nevertheless, in the “Wealth of Nations”, Adam Smith clearly separated the functions pertaining to the capitalist and those of a manager and he emphasized the fact that the “profits” pertaining to the capitalist exclude management “salaries” as payment for “inspection and directorate work”. The capitalists are the privileged of the economic system. They “get away” from the competition since they hold the “manufacturing” secrets and they may unite themselves in powerful coalitions, holding information to which the other social categories cannot have access. Thus, they adopt a position by means of which they can influence the political authority, giving the impression that the general interest coincides with their personal interest.
Smith’s conviction, which is based upon factual observations, was that “to the extent to which the capital accumulation is anticipated to be necessary to continue the great perfection of the work productive forces, the accumulation normally leads to such perfection. The person (capitalist) who uses his capital by making use of other’s work is obviously willing to use it in such a way that he manufactures as much products as possible. This is the reason why the capitalist strives both to share the work quantity among his workers in an equitable manner as well as to supply the best machines that he may invent or afford to buy”.
The first clear emphasis of the entrepreneur’s role is found at Thunen, who defines the entrepreneurial gain as the income resulted apart from gross profits resulted from business operations after the payment of interests on capital invested, of management salaries and of the insurance premium against the loss calculated risk. Regarding the entrepreneur, Thunen tells us that the insurance premiums related to risks must cover them because the risks are unpredictable. From here, given the fact that it is impossible to state the probability of gains or losses, the entrepreneur is necessary in terms of “innovator and exploiter in his field”. Thus, we must observe the entrepreneur’s artistry in settling the risk related covering residual income, which is an unpredictable income. Polytechnic Colleges

The French economist J. B. Say stated in 1800 that the entrepreneur takes out the economic resources from a field of low productivity and inserts them in a field of high productivity and higher yield. However, his definition does not identify the “entrepreneur”.
Since Say invented such theory almost 200 years ago, there was a total confusion regarding the definition of “entrepreneur” and “entrepreneurial system”.
Emphasizing the qualities of an entrepreneur, Say asserts that he/she needs “a combination of moral qualities, judgment, perseverance and knowledge of the world and business”. Say was an admirer of Adam Smith: he translated Smith’s work “Wealth of Nations” in French language in 1776 and ceaselessly spread during his entire life, Smith’s ideas and political trends. The industrial revolution marked Say’s conception over economy, in some aspects detaching him from Smith in a positive way. However, his personal contribution to the economic thinking, the concept of entrepreneur and entrepreneurial system is independent from the classic economy and indeed it is incompatible with it.