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Skip to 0 minutes and 11 seconds In this lecture, we will continue our discussion of entrepreneurship against the background of complexity and uncertainty. We will discuss the views of two authors, one being Knight and the other being Von Mises Knight has emphasised another aspect of the role of the entrepreneur.

Skip to 0 minutes and 33 seconds As mentioned earlier in this course, he, together with the economist Keynes, started to make the difference between risk, on the one hand, and uncertainty on the other hand. Recall that in a situation of risk all possible outcomes of an action unknown it can be listed. In such a situation, the probability calculus applies, and transactions can be insured or covered on futures markets.

Skip to 1 minute and 5 seconds In situations of uncertainty, on the other hand, not all outcomes of an action can be known. And this happens to be the situation in which human beings find themselves in making economic and also other decisions. We as human beings cannot know now what will be discovered in the future– what new knowledge will be produced in the future. Future innovation, future creative destruction, future entrepreneurial activity cannot be known now. The entrepreneur, according to Knight, is somebody who acts now in the face of uncertainty. His reward is the prospect of profits. The existence of profits follows from the existence of uncertainty. And that’s you.

Skip to 1 minute and 58 seconds The entrepreneur acts now, despite the fact that he cannot know now all the consequences of his present actions. This role is crucial. Without it, there would be no human action. There would hardly be an economic system. There would be no development and no civilisation as we know it. This brings us finally to Von Mises.

Skip to 2 minutes and 30 seconds He has analysed the constant feeling of uneasiness in human beings– their constant pursuit of wanting to improve their situation. And that prompts human action.

Skip to 2 minutes and 44 seconds That human action all this takes place under uncertainty in the sense of Knight and Keynes. Therefore, human action is always liable to error– to mistakes. And these errors and mistakes create opportunities for other to benefit– to make a profit. And in that process, economic development, social order, and civilisation emerge.

Skip to 3 minutes and 10 seconds The only way in which human beings can survive in which society can develop is through acting in the face of uncertainty by entrepreneurial activity. In this lecture, we have discussed the views of Knight and Von Mises, and entrepreneurial activity and its central role in creating a civilisation and economic development against the background of uncertainty and complexity.

Uncertainty as a driver of entrepreneurship

This video describes entrepreneurship from the perspective of the economists Knight and von Mises.

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Decision Making in a Complex and Uncertain World

University of Groningen

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