Entrepreneurship and Social Progress
The Christmas season makes us unusually conscious that we live in times of relentless innovation. It's true that we can be overwhelmed by it all, but would we have it any other way?
Unfortunately, some would. They oppose the free-market process that makes improvement possible. They seize on some innovation that they don't like, and instead of declining to buy, seek to deny that opportunity to others by passing laws against free exchange and economic progress.
Such people seem to be everywhere these days. The environmentalist movement is replete with them; indeed, the ideology pretty much defines the ideological Left. They preach that we buy too much, sell too much, and compete too much, while calling on the government to stop us.
This hectoring must carry some persuasive power, given how many people have been taken in by it. The mistake is in thinking that economic progress is driven by some strange force outside our control. In fact, material progress represents the social ratification of the ideas and actions of dreamers in a capitalistic marketplace, people seeking to bring us better ways of living, and using peaceful means to do so.
Consider what it would mean to put a stop to the innovative society. It would mean the end of creative thought as applied to our economic lives. Above all, it would mean eliminating an important aspect of what makes us human, namely the entrepreneurial drive. Animals do not expect nor seek material improvement in generation after generation. They do not search out new and better methods of production, nor make and trade goods solely for purposes of future production.
Animals operate by instinct, not reason. And it is reason that is the font of entrepreneurship. Now, there is a sense in which every human is an entrepreneur, from the time we first seek to make choices and pursue goals. The future is always uncertain, so all human action that is undertaken with purpose is speculative action.
There is a more narrow and more heroic sense in which we use the term entrepreneur, however. It refers to those who make speculative judgments in a capitalistic economy, risking their own resources to bring us goods, services, and techniques that we have never known before. It is the entrepreneur's intuition and imagination that make economic progress possible.
Capitalistic entrepreneurs are blessed with a special power of discernment that enables them to make prescient judgments concerning the future, to understand that a different and better use of scarce resources would reduce waste and serve consumers better. They see what others do not see: that a particular product or service would improve our lives but does not yet exist.
Entrepreneurs are also blessed with a special courage to risk their own resources. If they are successful, they can reap great rewards. If they are not, they risk the loss of everything. And they are intensely aware that costs, such as wages and capital expenditures, are part of the data of the past that cannot be regained. This is true whether or not there are profits in the future.
Contrary to the propaganda, money is for them not so much a motivating force as a sign and seal of their success. It is a ratifying symbol of a job well done. In the market economy, a job well done means serving the public. Profits, as Mises emphasized, accrue to individuals who serve others through enormous personal sacrifice.
Of course, whether the gift that entrepreneurs carry is used in socially beneficial ways is really up to the individual. We can think of the Parable of the Talents: here we find three people who received gifts, but one did nothing with his, while the other two used their gifts in productive ways.
Unlike capitalism, hardly anyone today is prepared to argue against philanthropy. We all understand that it is crucial to creating a better world. But how often do we think of the source of the funds? They come from the store of wealth generated by capitalism, and that wealth would not exist without entrepreneurship.
Philanthropy and entrepreneurship, then, do not stem from opposite impulses, as is commonly thought. They originate from the same source: the intellectual and even spiritual commitment to serve others and make a difference in the world for the good. They are different means of doing the same thing, distinguished from each other only in the method we use to account for them.
But what about us non-entrepreneurs? We can admire and support the men and women who have this special gift and the willingness to do something with it, as they make our lives better in so many seen and unseen ways. We can also learn about economics, and their unique role in the market, and do our best to take down the barriers placed in their way by greedy and envious politicians.
But these days, what are kids taught in school about heroes? Who are they told is responsible for making the world a better place to live? Almost always, politicians are heralded, people whose work mostly consists in erecting barriers to human progress, and otherwise shuffling around private wealth by force.
Generation after generation has been told that all idealists go into politics and government, whereas greedy people go into business. It is not only untrue; the truth is the opposite. The market is not the only place that permits idealists to serve society, but it does provide a test to make sure their ideals conform to reality.
The politician may claim to have ideals, but they mostly serve as a mask for the desire to exercise power. If you doubt it, look no further than programs such as Social Security and the Iraq War. They continue long after they have obviously failed, because they serve the interests of the politically powerful.
Is it any wonder, then, that the anti-capitalists have the ideological upper hand? People have been led to believe that shutting down entrepreneurship and the marketplace will improve the world. Actually, that way lies barbarism, and a system unfit for human beings.
Do your part to reverse the damage they have already caused, by celebrating entrepreneurs and the system of economics that enables their dreams to become our social reality.
This essay is based on remarks in honor of Robert Luddy, founder and CEO of Captive-Aire, Inc., on the company's 30th anniversary.