few years ago a prominent New Jersey research firm issued a paper by
David P. Goldman which took an ambitious new look at the economics
of entrepreneurship. Right up front he pointed out one failure of
conventional economic analysis � that of addressing the real world
in which business people live.
According to Goldman, conventional economics diminishes the role of
risk-taking entrepreneurs who are the key to creating economic
growth, betting that their innovative idea or product will yield
outside gains. In the language of conventional economics, these
entrepreneurs are willing to accept the �uninsurable risk� that
makes the established securities (stock markets) skittish.
Goldman concluded in his paper that mainstream economists put too
much emphasis on the role of savings in their policy prescriptions.
Savings are important to the relatively established companies that
draw on organized capital markets, he argues, but scrappy
entrepreneurs seek out capital wherever it can be found.
Some entrepreneurs, for example, use barter effectively in the form
of trade credits extended by suppliers, or by persuading key
employees to take uncertain equity stakes in lieu of salary. Yet
others finance their start-ups by mortgaging their homes. In all of
these endeavors they are drawing on untapped sources of capital.
Reinforcing Goldman�s thinking is the fact that the commercial
barter industry continues to grow and prosper � largely because of
these scrappy entrepreneurs � with billions-of-dollars in products
and services traded worldwide annually.