The Essential Effects of Any Entrepreneurial Act

Every entrepreneurial act produces three extremely important, indeed vital, effects, and these effects lie at the heart of the knowledge economics can provide about the market process. The three effects that result from the entrepreneurial act are: first, the creation of information; second, the transmission or communication of information; and third, coordination or adjustment. In the past, there have been other economists and schools that have focused on entrepreneurship, but always partially. For example, Joseph Alois Schumpeter. Schumpeter talks about the process of creative destruction in capitalism. He examines the process of creativity and sees it as a gale that is often destructive. This is a partial view, though in a sense, it is a step forward with respect to the throng, the army, the majority of economists, who remain confined to their mathematical models in a frozen world of equilibrium adjustment, a world devoid of entrepreneurs. Another economist, a Nobel Prize winner named Douglass North, concentrates solely on the adaptative and coordinating quality of the entrepreneurial act. Notice how I have described the three effects: first, creation, to which Schumpeter limits his incomplete analysis; second, communication or transmission; and third, coordination. Creation and coordination. Creation and coordination. Gale and order. Two sides of the same entrepreneurial coin.