The world loves entrepreneurship. Many policymakers and think tanks say that entrepreneurship is the source of job and wealth creation.
Universities set up programmes to teach students to be entrepreneurs and companies around the world hire consultants to help employees to be “more entrepreneurial.” I think it’s safe to say that, in general, entrepreneurial behaviour is something the world wants.
Being entrepreneurial means pursuing opportunities to make a profit. So whether people are seeking profit by opening a restaurant in a location that needs one or coming up with a better drug to treat cancer, they are behaving the way that policy makers, pundits, corporate leaders, and many others think people should behave. Most of the time.
Even though we routinely praise people for “being entrepreneurial,” there are times when we criticise people for it.
For example, credit card companies make money by taking a small percentage of the price of a transaction. Like other vendors, charities pay for this service. Most of the time, we’re fine with that, but sometimes credit card companies are criticised for charging charities to process their credit card payments.
When people donate money to fight poverty in Africa or help the homeless in the United States, credit card companies make a profit on those transactions. But when credit card companies were doing this for donations to help with Haitian earthquake relief, they were criticised, leading many of them to waive these fees.
Similarly, National Public Radio (NPR) recently reported that bus drivers in Haiti (who tend to be independent entrepreneurs) raised prices dramatically in the aftermath of the earthquake there – something that many people saw as inappropriate.
However, the bus drivers might have simply seen that their costs had risen or that demand was high and supply was low and they could make money.
The
Wall Street Journal reported in
"Underground Trade Emerges From Rubble" that market women in Port-Au-Prince were searching rubble where shops had stood previously to find goods and sell them.
The Journal also pointed out that “other businesses also sought opportunity, often by jacking up prices. The Hotel Oloffson where many journalists are camped up was charging up to $100 per night – for a mattress in the parking lot. A bottle of Gatorade at the hotel was going for seven dollars.”
Similarly, in Haiti, as in the aftermath of Hurricanes Katrina and Ike, the price of gasoline rose as entrepreneurs (and big companies) raised prices. As the Wall Street Journal reported in the same report, “Petrol in Port-au-Prince used to sell for the equivalent of three dollars and change. Now it often goes for $12.”
Now some have argued that these actions amount to price gouging. And there are many legal issues related to price gouging that I am not qualified to tackle. But in many cases, when entrepreneurs raise prices after natural disasters, investigations show no evidence that they violated any price gouging laws. They are just responding to opportunities for profit.
The problem here is that it’s hard to turn the pursuit of opportunity on and off depending on whether we think it fits a particular situation.
Entrepreneurs make choices to pursue opportunities (like providing transportation services in Haiti) and then circumstances change, leading their costs to rise or demand to spike. It’s tough for the entrepreneurs to abandon their opportunities just because circumstances are bad for others, especially if they have already incurred costs.
In short, we have to accept the fact that in our desire for more entrepreneurial behaviour, we sometimes end up in situations in which we wish we had a little less of it.
Email the writer:
s.shane@alrroya.com
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