Entrepreneurs Do It Themselves

July 20, 2012 by Per Bylund

Sometimes a topic opportunity emerges that is simply too good to overlook. This is the case with President Obama’s latest gaffe, which has turned into quite an Internet storm of “memes.” Said the president:

If you’ve got a business, you didn’t build that. Somebody else made that happen

Of course, it is easy to understand what this can mean: without customers there can be no business; without employees there can be no firms; without suppliers there can be no end-products; and so on. These are all true. The interpretation that no businesses are successful without government, often found on liberal blogs, is far more of a stretch. Businesses may transport their goods on public roads, but do they have an alternative? And more importantly: if government didn’t supply roads, would it be impossible to run a business firm? Obviously not. There would be other, non-governmental, means of transportation. Such as private roads.

But if we look closer at the president’s statement, it is obvious that he has no understanding for what Mises calls “the driving force of the market”: the entrepreneur. If a business firm is simply putting different inputs together, then obviously what you do is not unique, novel, pioneering – or independent of the actions of others. In fact, “anyone” could do the same thing and, in fact, “anyone” probably would: why should we expect people not to act on an obvious opportunity to make money?

The problem is that for a generous interpretation of the president’s statement to be true, it must be as entrepreneurless as neoclassical economic theory. As Baumol (1968, p. 66) stated it:

The theoretical firm is entrepreneurless – the Prince of Denmark has been expunged from the discussion of Hamlet.

The president’s view of the market (and the firm) is just as entrepreneurless; there is no Prince of Denmark in the federal government’s Hamlet.

The entrepreneur is the innovator, the organizer, and the one exercising superior judgment to produce value for consumers. Entrepreneurship is hardly just combining existing pieces according to already existing blueprints – it is about creating new pieces, fitting them in new ways, and creating something new. It is about independent and pioneering vision – and taking the step from dream to reality through action. In this sense, an entrepreneurial creation is unique and something we have not seen before. It is consciously aimed for and created, even if it utilizes (previously undiscovered) strengths of others.

So, Mr. President, the fact is: the entrepreneur did build that.