Last week ago, I was struck by this Wall Street Journal article recommended by Jamie Peterson at INVISTA. The article concerns the sprouting of entrepreneurship in the aftermath of the recent devastating Sichuan Earthquake in China (unfortunately, reading the full article requires a Wall Street Journal subscription).
Interestingly, entrepreneurs are often the first to swing into action following a natural disaster (the first trainloads of lumber for rebuilding arrived the very day after the Great Chicago Fire of 1871). However, sometimes the imposition of price controls and “anti-gouging” statutes quash these efforts by removing the incentives needed to induce the effort. Although price spikes following natural disasters are common, price controls only force the squandering of scarce resources within the affected area, while choking off flows of supplies from outside. If allowed to operate, the price mechanism usually forces prices back down fairly quickly and sometimes even gluts the market.
I wrote about this phenomenon a couple years back in the ABA's Journal of Natural Resources & Environment, and economist Russ Roberts has dedicated his latest work of economics-influenced drama to the topic. However, the overwhelming need for flexible markets following natural disasters is not the purpose of this post: it is that, despite decades of being told to despise entrepreneurship and other “bourgeois” values, in the wake of disaster, many Chinese discovered their inner entrepreneur. A lot of folks make silly comments like “markets are not compatible with _____ culture” (personally, I blame this false mental model on Max Weber’s attributation of capitalism to some vague notion of “Protestant work ethic”).
The Sichuan Earthquake reminds us that people are naturally entrepreneurial. Entrepreneurship is in our blood and no amount of cultural conditioning or even brute force can completely stamp it out (considerer the phenomenon of black markets). Of course, some countries exhibit greater levels of entrepreneurship than others, but this is because some countries do a better job of facilitating the human desire to benefit one’s self through the service of others. True, one’s inner entrepreneur maybe repressed by governmental, cultural, or overly bureaucratic corporate environments, but it is always there; and a little shove from within makes a much better catalyst than an earthquake.
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