catallaxy files

catallaxy in technical exile

Everyone an entrepreneur

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One of our old books is called “Every Man His Own Mechanic”. It is actually a 130 year old version of the Readers Digest book for home handwork, renovation and repairs. It dates from a time when tradesmen of all kinds, including the building trades, were called mechanics (hence the “mechanics institutes” as the forerunner of the Workers Adult Education system).

The point is that everyone is an entrepreneur to a greater or lesser extent and the direction and outcome of our efforts depends a great deal on the situation where we are located (which of course is partly a result of our previous decisions) and the incentives that are provided (which are usually beyond our immediate control). For example the chief protagonist in Alan Sillitoe’s 1950s book “Saturday Night and Sunday Morning” worked in a bicycle factory. When he wanted to buy his mother a birthday present he lifted his workrate to earn some extra money, above what he normally required for his beer and cigarettes. When the workers in the old public telephone monopoly (pre Telstra) wanted extra money they worked slower during the week so they could finish the job on double or triple pay at the weekend. Sometimes the situation got out of hand. When Michael Costa (now a NSW Minister) joined state rail he found that some of the rosters at the main workshop for repairs and maintenance had a single worker delegated to punch the bundy for the whole group. Incidentally that points to another topic (to be pursued elsewhere), namely the destruction of potential jobs upstream and downstream from inefficient and over-manned worksites.

Our dockers became the most dangerous and exploitive workforce in the nation and along with featherbedding and the like they won the right to be paid for a full shift even if the work ran out early. Of course they normally took it nice and easy to keep the work going but when they got to the end with only a bit of cargo between them and the pub they remarkably achieved world standard in rate of crane movements.

The miners were almost equally militant with a terrible record of strikes during the war but when they work they are productive because they are still on piece rates (tonnage). And so it goes.

For a graphic image of perverse incentives, imagine a football game where points are awarded for fouls. Think of rent seeking as the equivalent of foul play in commerce.

Frederick Sautet at the Mercatus Centre has written a policy primer on the importance of the institutional setting for entrepreneurship, with special reference to Africa where the situation is especially bad at present.

This Policy Primer explains how institutions are vital to the expansion of entrepreneurial activity, which is at the heart of the process of development and economic growth. What is generally missing in countries with lackluster economic performance is not entrepreneurship as such but the right institutional context for entrepreneurship to take place and to be socially beneficial. What matters for development are the rules that individuals follow and how these rules are defined and enforced.

One of the really interesting writers on entrepreneurship and enterprise is (or was) David McClelland who pursued a remarkable program of cross cultural research on entrepreneurship and economic development that he reported in his book The Achieving Society. This is the table of contents.

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Written by Admin

January 11, 2006 at 9:05 am

Posted in Uncategorized

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