A Theory of Entrepreneurial Work

Abstract

This research is inspired by Baumol’s lifetime effort in introducing the entrepreneur to mainstream economics. The paper examines entrepreneurial work and suggests a return to classical economic theory of the entrepreneur in the tradition of Max Weber and Joseph Schumpeter. We assume entrepreneurial work to be the intrinsic character of the entrepreneur, who divides her working time into subsistence and entrepreneurial productions. The entrepreneur taking pleasure from entrepreneurial work is the crucial conjecture of our analytical model. The model predicts 1) maximum utility can be reached if and only if the market value of the marginal product of labor in subsistence production is greater than that in entrepreneurial production; 2) government interventions artificially alternating the price of subsistent production may lead to misallocation of limited labor time into the two productions.