Scandinavian Working Papers in Economics

SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

No 584: Is Neoclassical Economics still Entrepreneurless?

Milo Bianchi () and Magnus Henrekson ()
Additional contact information
Milo Bianchi: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Magnus Henrekson: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: We review and evaluate some recent contributions on the modeling of entrepreneurship within a neoclassical framework, analyzing how and to what extent the fundamental ingredients suggested in the social science literature were captured. We show how these approaches are important in stressing the main elements of a complex picture without being able to completely describe it. However, each modeling attempt focuses only on one specific feature of entrepreneurship. The entrepreneurial function broadly perceived eludes analytical tractability. As a consequence, the models can be useful in analyzing the effect of entrepreneurial behavior at an aggregate level, but not at explaining individual choices. From these observations we highlight how a simplistic interpretation of the existing mainstream approaches incorporating entrepreneurship runs the risk of leading to distortionary policy interventions.

Keywords: Entrepreneurial Choice; Entrepreneurship; Innovation; Neoclassical Modeling; Uncertainty

JEL-codes: B41; D81; J23; L23; M13; O31

24 pages, First version: January 31, 2005. Revised: March 29, 2005. Earlier revisions: February 2, 2005, February 22, 2005, March 18, 2005.

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