The word entrepreneurship is thrown around a lot, but rarely defined. As far as I can tell nobody really believes (or is willing to admit they believe) that entrepreneurship is anything less than highly important (“Green child entrepreneurs are our future! Support our troops against breast cancer!”). It’s probably a wise political move to not pin down the idea because it means anyone’s cronies can be considered entrepreneurs. Speaking of which, “crony” is almost the antonym of entrepreneur. Cronyism evokes images of stagnation, inefficiency, “innovations” that make things worse, and opportunities for genuine improvement that are ignored.

So what does entrepreneurship mean? There are two general definitions, and both bear on the question of how to go about having a peaceful, productive, and morally praiseworthy society. The more general of the two is judgment in the face of uncertainty. That is, given that we don’t know what tomorrow will look like, and we certainly don’t know what the world will look like in 10, 25, or 50 years, we have to make wise, forward-looking decisions. We don’t have enough information to simply plug the relevant data into an Excel spreadsheet and get the “correct” action from a formula. In other words, understanding the ubiquity of entrepreneurship means that we still consider The Use of Knowledge in Society to be relevant.

The more specific definition is pursuit of pure economic profit (above “normal returns to capital, labor, etc.”) by pursuing hitherto un- or under-exploited opportunities. Such breaks from the status quo are the creative acts necessary for economic progress. Entrepreneurship is the human face of economic change that provides a micro-level description of what economists might otherwise wave their hands over and call “technology.” This sort of entrepreneurship is an important source of uncertainty about the future. 2014 is so much different from 1964 because of the actions of innovative entrepreneurs out to improve their own lives.

You’ll notice that I haven’t defined entrepreneurship in a way that actually is inimical to cronyism. That’s because not all entrepreneurship is productive. Destructive entrepreneurship is the pursuit of economic profit that makes the entrepreneur better off at the expense of someone else resulting in a net-loss. So we should be concerned not only with allowing individuals the autonomy necessary to be entrepreneurial (rather than merely reacting formulaically to top-down commands), but also with establishing institutions that direct people to help others.