Teaching Entrepreneurship – Econlib

[Editor’s note: In her previous post, Temnick talked about how she teaches her students about human capital.]

Economics teachers never fail to introduce their students to the factors of production. Land, labor and capital all have their time. Too often, one of the most critical factors is left out: entrepreneurship. How do I learn it?

I start by asking for volunteers to try spelling the word out loud, without looking at a reference, entrepreneurship. For the first mistake, I sound a buzzer and move on to the next student, and the next. It usually takes three attempts by the student before it is spelled correctly. This may be the reason some textbooks replace the term company for this production factor. I prefer the first term. (I have a relentless goal of emphasizing spelling and geography lessons as opportunities arise in the middle school classroom. I rotate the seating in my classroom so that students sitting under the world map are responsible for pointing out the locations of countries that appear in different lessons.)

Continue after class Human capitalI ask the students how this production factor differs from entrepreneurship, and also for examples. Inevitably, names of individual entrepreneurs come up, Steve Jobs, Bill Gates, Elon Musk… mostly male and technology related. Why not Taylor Swift? Or Oprah Winfrey? After recognizing that these are indeed individual entrepreneurs, we discuss the definition of entrepreneurship: risk taking, innovation and organization of production resources. It is a process of discovery, usually a collaboration of many individuals over time, that leads to small and sometimes large changes in goods, services and processes.

In the tens of thousands of research and development departments of American institutions, patents are granted for new inventions or changes to existing products. This intellectual property award protects the owner from copying, using, or selling the invention by others for a limited time. About 90% of all patents are awarded to corporations (companies, universities and other organizations), while the rest goes to individual inventors. Entrepreneurs can receive patents or copyrights depending on the type of intellectual property they create. Patents are granted for useful new items, copyrights generally protect authorship (of books, software, music, etc.). The division of copyright between companies and individuals varies depending on the type of creative work.

I then ask. what are recent examples of inventions of brand new products? What are examples of adjustments or changes to existing products?

The Covid-19 vaccine, AI-powered health devices like Apple watches and Fitbits, plant-based meat alternatives, TikTok, craft breweries, eco-friendly cosmetic packaging… I encourage the list to continue as I type them into a smartboard, projected document.

Then I ask which countries in the world file the most patents? Which countries earn the most copyrights?

Here I remind myself of the great responsibility I have to connect the institutions of free market societies to the incentives that influence thriving entrepreneurship. Demographic differences or feverish patriotism are not the driving forces.

Entrepreneurship flourishes where contracts are upheld by the courts, where private property is protected and can be used as collateral, where profits can be earned and retained by the company or individual, risking their time and capital to innovate. These are just some of the characteristics of an entrepreneurial society. Others include an education system that promotes the exploration of creative endeavors, access to global markets, and cultural and community support for business ventures that encourage individuals to devote time, effort, and money to producing their products and ideas. A free market economy, as explored in Adam Smith’s Wealth of nations, highlights how resources – those production factors – can best be used to produce the goods and services desired by society.

I assure students that we will revisit the many topics raised in that description, but it is never too early to strengthen the market connection. Back to the question: ‘who leads the world in patents and copyrights, these symbols of a prosperous entrepreneurial society’? The correct answer is usually guessed, but that guess is hopefully more informed.

The US consistently ranks at the top in patent applications, mainly due to its strong technology, pharmaceutical and automotive sectors. Major companies such as Apple, IBM and Microsoft contribute significantly to the country’s patent applications.

The United States is the undisputed leader in global start-up companies. From Silicon Valley, the epicenter of technological innovation, to New York City and newer hubs like Austin Texas, talented workers are being drawn to startups across industries.

The US leads the world in copyright law, especially in entertainment, software and literature. The dominance of Hollywood, Silicon Valley and a robust publishing industry make the US a global leader in copyright law.

Moreover, it is worth noting how easily the spirit of existing and potential entrepreneurs can be crushed by an authoritarian regime that disrupts existing institutions. This can also start a conversation about countries with limited entrepreneurship.

As an advocate for the appropriate use of technology in the classroom, I now have students work in teams to do their own research on global patents and copyrights, or on business start-ups, research and development financing, or any other related topic. The teams then share with the class an interesting find or observation from a country other than the United States. (Students sitting under the map point to each location as students name their country and their unique findings).

The closing of the class is an opportunity for a student volunteer to differentiate human capital as the physical and intellectual work of the worker and the risky, innovative actions of the entrepreneur. This could generate interest in future work for a company that is part of the entrepreneurial activity in a growing economy.

Two factors of production have fallen, and now land and capital need an introduction. Available soon!