The Use of Knowledge in Entrepreneurship
In a recent episode of the Economics for Entrepreneurs podcast, I interviewed Steve Mariotti, who has spent a lifetime teaching entrepreneurship to kids from difficult and troubled backgrounds in the US, as well as the sons and daughters of parents who lived through the USSR and Vietnamese communist regimes. He portrayed entrepreneurship as an escape from poverty and oppression for these young people, one they embraced with excitement and enthusiasm.
Mariotti found a guiding light for his teaching, and for the young people searching for their pathway out of poverty, in F.A. Hayek’s “The Use of Knowledge in Society.” He cited in particular paragraphs ten and eleven, where Hayek underlines “the importance of the knowledge of the particular circumstances of time and place” and bemoans the fact “that this sort of knowledge should today be generally regarded with a kind of contempt” compared to theoretical or technical knowledge. In other words, academics and institutional economists don’t understand or appreciate how entrepreneurs generate revenue and make profits as a result of their specialized individual knowledge.
Steve Mariotti’s insight prompted me to reread Hayek’s famous 1945 American Economic Review article through the lens of entrepreneurship. Here is a compressed paraphrasing of it.
We wouldn’t need entrepreneurs if we possessed all relevant economic information, if we knew every detail of customers’ preferences, and if we had complete knowledge of all the means by which customers could realize their preferences. But
Article from Mises Wire