Austrian Economics and Entrepreneurship

I mentioned previously in an article that Entrepreneurship was in essence the story of the founding of America. What makes entrepreneurs unique is their ability to take risks when others seek safety and comfort. Entrepreneurs lives tend to move from one experiment to the next. They look to try with hopes of success but with no guarantees. They seek to find a need and fill it.

In an articled penned on the Mises Institute website by Hunter Hastings a Business Consultant best explains how Austrian economics aligns with the entrepreneurial mindset :

In Austrian economics, the role of the entrepreneur is to sense, through the application of empathy, the dissatisfactions of consumers — the signal that they are not experiencing the value they seek — and to rearrange resources into a solution that addresses that dissatisfaction. Because value is subjective in the consumer’s mind, and because the future is unpredictable, entrepreneurs exercise what Austrians call judgement: the commitment to action required to bring their new solution to market for the consumer despite the uncertainty of a profitable outcome. Mainstream economics is unable to comprehend entrepreneurial judgment. Why do 9 out of 10 entrepreneurial initiatives fail? Because, explain Austrians, such a high failure rate is to be expected as a consequence of high levels of uncertainty, consumer subjectivity, the limits on present knowledge. These cause entrepreneurial initiatives to be experiments in new knowledge creation, and the rivalrous actions of multiple entrepreneurs conducting contemporaneous experiments so that the sovereign consumer can choose the best one. Entrepreneurship is the dynamism of the unhampered economy, as more and more people are beginning to understand.

 

This truly is what the Free Market is all about, letting the customer/consumer decide to use or reject a product or service. If it (the product or service) meets their need they choose to use it. If not they choose another. It is really that simple. As Mr Hunter points out “mainstream economics” as he calls it does not comprehend this very well. I believe it is because “mainstream [government] education” does not teach Austrian economics and therefore the majority of Americans , economists, media, government officials, and the majority of Americans over the last 100 years although inherently as a consumer respond to the entrepreneur’s ideas they don’t necessarily understand their mindset. As humans designed by God to be free we unfortunately have been educated to seek security. We have all heard parents and others say; get a college education, a good job with good benefits, and you will be set for life (secure). Then when the secure job produces a product that doesn’t meet the need of the consumer, secure jobs may no longer be secure.

In the world of “mainstream economics”  that is when the lobbyists and government step in with hopes to change the market, which then no longer becomes a free market. The entrepreneurs response is to change and try something different. As much as those who may dislike change, those who aspire to be entrepreneurs realize it is a necessity to survival or success.

To create a foundation for a free life much the Founders who dreamed of creating the foundation of a free society like America one must take risks and then be willing to change to make those dreams a reality.

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