No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Ten: It’s all About the Institutions! 234 own future. For example, if you know that there is a tremendous profit opportunity in creating a new service but all your previous attempts have been stifled by the local government’s refusal to give you a business permit, any knowledge you may have of future opportunities will be discounted since you may assume you’ll never be allowed to take advantage of it. It is no wonder that the entrepreneurial spirit was reduced in former command and control economies such as the Soviet Union. We also make new estimates of others’ plans as we look forward. Perhaps new information of others’ actions opens up opportunities for us. In the market setting, a competitor’s labor strike which shuts down his business may be your signal to at least temporarily expand production. It may even stimulate efforts to enter new markets against that firm that you may not have previously been competitive in. This might be analogous to our discussion of “the dating game” from chapter 9. Let’s say that your competitor for a date with Michelle moves to another school. This new knowledge may change your plans and encourage you to ask her out. It will also involve additional uncertainties—will other potential suitors step up? Should you act quickly to beat them out, or is Michelle still thinking about him such that asking her out is premature? Aahh. Decisions, decisions. A final consideration looking forward is a reexamination of our hopes and dreams. Just as our preferences change over time, so do our goals and objectives. Perhaps due to new realities made apparent by our increased knowledge, we may come to understand that while one opportunity is closed, we might be lured by another more attractive opportunity—perhaps an opportunity that we never would have considered absent the change in our knowledge. If Michelle turns us down, perhaps we’ll look and find that Emily is now available, and in fact, she’s much nicer than Michelle! Entrepreneurs may try producing one thing and while not intending to do so, may create something even better. You may have heard the story of 3M’s Post-it® Notes. The engineer originally working was trying to create strong adhesive. Fortunately, he failed. The weak adhesive he actually Increase in Knowledge and Uncertainty with time... PRESENT “knowledge in action” future past D e v e l o p R e v i s e I m p l e m e n t D e v e l o p R e v i s e I m p l e m e n t D e v e l o p R e v i s e I m p l e m e n t Anticipation of demand Ability to shape hoped-for future Estimates of other’s plans Link between means & ends Knowledge of “time & place” Successes and failures P L A N P R O C E S S Figure 10.1, Entrepreneur’s View of Market Process. All entrepreneurial action is in the present, but the present is always accompanied by memories of the past as well as expectations of the future. Plans developed in one period are impplemented in the following period and will be reviesed in the one after that. {[Photograph of The Thinker]. (2013). Retrieved June 25, 2013, from http://commons.wikimedia.org/ wiki/File:The_Thinker_(Le_Penseur)_ copy_at_Kyoto_National_Museum_ (side_view).jpg) ([Painting of Thor (public domain)}. (2010). Retrieved June 28, 2013, fro m http://commons. wikimedia.org/wiki/File:Thor.jpg) .}