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Entrepreneurship: Productive, Unproductive, and Destructive - 25 Years On

Entrepreneurship: Productive, Unproductive, and Destructive - 25 Years On

In 1990, William Baumol published an article titled “Entrepreneurship: Productive, Unproductive, and Destructive.” In doing so he brought both the entrepreneur and the policy environment back into the discussion of why some countries are rich and others are poor. While the classical economists from Adam Smith onward had emphasized entrepreneurship and institutional quality, by 1990 the role of the ‘rules of the game’ in shaping the activities of entrepreneurs had receded into the background. As a result of Baumol’s scholarship, institutional quality and entrepreneurship play a much larger role in our understanding of the process of economic growth and development. By one count, “Entrepreneurship: Productive, Unproductive, and Destructive” has garnered over 4,000 citations since 1990.

This special issue honors and builds upon the work of William Baumol as exemplified in “Entrepreneurship: Productive, Unproductive, and Destructive.” The papers in this special issue were originally presented at a symposium that took place during the annual meeting of the Southern Economic Association in 2015. This symposium and special issue were organized by Dr. Alexandre Padilla of Metropolitan State College of Denver. The prominent scholars invited to present new research further exploring the themes of Baumol’s seminal article did not disappoint.

The papers included in this special issue:

  • apply Baumol’s work to the case of the Soviet Russia’s economic transition from a centrally-planned to a free market economy;
  • demonstrate that higher levels of institutional quality reduce the incentives of entrepreneurs to use their talents to seek “special treatment from the government” via unproductive entrepreneurship;
  • extend Baumol’s typology by introducing “indirectly productive entrepreneurship, a concept that is then applied to a case study of cell phone storage outside New York high schools;
  • introduce the idea of “evasive entrepreneurship” and illustrate the concept through a case study of the file-sharing platform The Pirate Bay to better understand the relationship between policymaking and entrepreneurship in the digital age;
  • integrate Baumol’s work with that of Israel Kirzner’s to show that they are complementary and then illustrate their complementarity through a discussion of legal and illegal drug markets;
  • show how the rampant fraud and corruption observed during U.S. interventions in Afghanistan and Iraq are examples of Baumol’s unproductive entrepreneurship;
  • expands upon the idea of destructive entrepreneurship within the context of security policy and countersurgency programs in conflict regions.
As these papers show, William Baumol’s insight on how different institutional arrangements provide different incentives for entrepreneurs to allocate their talents had a profound impact on researchers in economics and entrepreneurship. The common message communicated is that the insights of Baumol’s seminar article are far more powerful than might have been apparent in the early 1990s. There is a lot of more research to be done on the relationship between institutions – the rules of the game – and the role of entrepreneurs in the development process.


Baumol's productive and unproductive entrepreneurship after 25 Years,Destructive entrepreneurship and the security context: program design considerations for disarmament,demobilization and reintegration (DDR) and counterinsurgency.,Indirectly productive entrepreneurship,Introduction to William Baumol’s “Entrepreneurship: Productive, Unproductive, and Destructive” Symposium,Productive versus unproductive entrepreneurship: industry formation and state economic growth,The substance of entrepreneurship and the entrepreneurship of substances,Two sides to the evasion: the pirate bay and the interdependencies of evasive entrepreneurship,Unproductive entrepreneurship in US military contracting

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