Böhm-Bawerk's Approach to Entrepreneurship

Journal of the History of Economic Thought, Vol. 36, No. 4, pp. 435-454, 2014

36 Pages Posted: 9 Nov 2014

See all articles by Matthew McCaffrey

Matthew McCaffrey

University of Manchester - Manchester Business School

Joseph T. Salerno

Ludwig von Mises Institute; Auburn University ; Pace University - Lubin School of Business

Date Written: 2014

Abstract

This paper explores the neglected theory of entrepreneurial profit proposed by Eugen von Böhm-Bawerk. Although historians of thought often dismiss Böhm-Bawerk’s writings on this topic, we argue that he did develop a coherent theory of entrepreneurial decision making and profit distinct from his theory of interest. We first discuss Böhm-Bawerk’s ideas about futurity, uncertainty, and expectations in his theory of goods, which help form the foundation of his theory of entrepreneurship. Further, we connect his notion of uncertainty with his thoughts on money. We then turn to several of Böhm-Bawerk’s ideas about entrepreneurial profit. Entrepreneurs purchase and allocate factors of production; these decisions are speculative because production takes time, and therefore entrepreneurs bear the uncertainty of the market. Their judgment thus yields profits or losses based upon the ability to anticipate the future state of consumer demand. Finally, we discuss the views of several of Böhm-Bawerk’s contemporaries, in order to place his theory in historical context.

Keywords: Eugen von Böhm-Bawerk, Entrepreneurship, Profit, Loss, Uncertainty, Judgment, Austrian Economics

JEL Classification: B13, B53, H54, L26

Suggested Citation

McCaffrey, Matthew and Salerno, Joseph T., Böhm-Bawerk's Approach to Entrepreneurship (2014). Journal of the History of Economic Thought, Vol. 36, No. 4, pp. 435-454, 2014, Available at SSRN: https://ssrn.com/abstract=2520053

Matthew McCaffrey (Contact Author)

University of Manchester - Manchester Business School ( email )

United Kingdom

Joseph T. Salerno

Ludwig von Mises Institute ( email )

Auburn, AL
United States
3343212113 (Phone)

HOME PAGE: http://www.mises.org

Auburn University ( email )

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Auburn, AL 36849
United States

Pace University - Lubin School of Business ( email )

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