Austrians never tire of emphasizing Mises’ point that the entrepreneur is the driving force of the economy. But surprisingly, even though we write a lot about the theory and current practice of entrepreneurship, relatively little work has been done to apply the Austrian approach to economic history.
For this reason, entrepreneurship scholars should welcome the new book by Mark Casson and Catherine Casson, The Entrepreneur in History: From Medieval Merchant to Modern Business Leader. The book is an overview of entrepreneurial history in England from roughly 1200 to 2000, with an emphasis on innovative business practices and the role of technological and institutional change in encouraging or discouraging entrepreneurship.
What will interest Austrians in particular is how the authors ground their survey in economic theory, specifically, in the idea of entrepreneurship as judgment. The judgment approach was pioneered by Frank Knight, and figures prominently in the writings of economists like Frank Fetter, Ludwig von Mises, and several contemporary Austrians. In their latest book, the Cassons bring it to bear on a wide range of entrepreneurial ventures from England’s past, through a series of case studies of domestic and international trade across more than eight centuries.
One advantage of such a wide-ranging historical survey is that the authors can devote serous space to discussing pre-industrial forms of entrepreneurship, and thereby avoid focusing only on the disruptive innovations of the 19th century, which tend to get most of the scholarly attention. Also important is that in dealing with England’s more distant past, the Cassons point out the importance of institutions in shaping entrepreneurship.
For instance, it’s unsurprising that the commerce of the medieval period was a mixture of market and political entrepreneurship: lacking market-friendly social institutions to support a fully commercial society, medieval entrepreneurship frequently took the form of rent-seeking. Many entrepreneurs sought to obtain monopoly privileges in lucrative industries such as the wool trade, and vying for such privileges was commonplace, especially for goods sold internationally. Furthermore, the most successful merchants often became major sources of state finance, especially when royal military adventures exhausted public resources.
Importantly, these trends did not simply disappear in the industrial period; at best, they merely transformed to meet the demands of changing political institutions. For example, the industrial revolution, for all the good it did humanity, was not a golden age of unhampered markets. Networks of regulation and privilege existed throughout the era, and seriously affected how entrepreneurs did business, especially internationally—there was no shortage of rent-seekers in 19th-century London, just as there is none in 21st-century Washington.
Despite the many historical cases of monopoly privilege, however, not all entrepreneurs tried to stifle competition. There are some interesting cases where individuals simply tried to bargain with government for the ability to trade freely, as when merchants found ways to obtain exemptions from tariffs and taxes. Richard Spynk, for instance, was a 14th-century builder who donated £100 to the city of Norwich to repair its walls in exchange for an “exemption from all future taxes and a privilege that permitted any merchants travelling into Norwich to trade with Spynk free passage [sic] without paying the usual tolls” (p. 77). His bargain looks like an early case of an entrepreneur trying to circumvent an expensive regulatory system, although Spynk also seems to have been motivated by a genuine desire to help improve the city.
Another welcome aspect of the book is its discussion of women entrepreneurs, such as those who speculated in the South Sea Bubble (pp. 89-90) or found success as managing-owners in the shipping industry (pp. 99-100). Although relatively uncommon, these cases help demonstrate the under-appreciated entrepreneurial roles women played in the medieval and industrial ages.
In general, it’s encouraging to see this kind of economic history being done, especially because it highlights the practical value of the judgment approach, which I believe is more effective than some alternative theories that don’t have obvious historical or policy applications.
Entrepreneurship still isn’t very popular in economics, but books like this help illustrate the fact that Austrian ideas—or at least ideas sympathetic to Austrian economics—are increasingly influential in contemporary management research, where the future is bright for young Austrians.
You can read more about the book here.
