Is productive entrepreneurship getting scarcer? A reflection on the contemporary relevance of Baumol’s typology of entrepreneurship

This chapter focuses on the contemporary relevance of Baumol’s typology of productive, unproductive, and destructive entrepreneurship. Specifically, we evaluate the usefulness of Baumol’s typology for studying divergent development outcomes, measuring, and defining entrepreneurship motivations, understanding the dynamics of violent conflict, and helping to develop entrepreneurial ecosystems. We show that the typology is relevant for explaining the secular decline in business dynamics in many advanced economies over the past half a century. Entrepreneurship has become less productive and less socially beneficial as result of unintended effects of entrepreneurship policies adopted widely in western economies in recent decades. These policies have straitjacketed, distracted and zombified entrepreneurship and in doing so reduced productive entrepreneurship in absolute and relative terms. The chapter concludes that changing policies in favor of productive entrepreneurship would require the depreciation of critical so-called level-two institutions, such as democracy and science, to be halted and reversed.