How does late-career entrepreneurship relate to innovation?

By Martin Murmann, Virva Salmivaara and Ewald Kibler. Published in Research Policy, Volume 52, Issue 6, July 2023.

This paper won the 'Entrepreneurship Research of the Year' award from Boardman Oy and Perheyritysten liitto.

"Highlights

• Older founders (~50 years and above) are more likely to introduce new products/services to the market than younger founders
• The most likely are older founders who combine an orientation to innovate with personal wealth and managerial experience
• The findings are based on an explorative study on 2,903 solo founders in Germany between 2008 and 2017
• These findings offer the first robust evidence of the innovation potential in late-career entrepreneurship

Abstract

In this paper, we present an explorative study that develops our understanding of the relationship between late-career entrepreneurship and innovation-driven business activity. Based on observations of 2903 solo founders of new ventures in Germany in 2008–2017, we offer first and robust evidence that late-career entrepreneurs (~50 years and above) are more likely than younger founders to introduce product/service innovations that are ‘new to the market’. Our explorations specifically reveal that older founders who draw on personal financial resources and combine their innovation orientation with prior managerial experience are most likely to generate the types of innovations that bring new products or services to the market. We conclude by discussing how our study's insights contribute to the research agenda on innovations in late-career entrepreneurship."

Related post:

Aging and Entrepreneurship (And The Coming Entrepreneurship Boom) (2009)

A comparison of the inflation rates, unemployment rates and poverty rates from 1975-83 with the current rates

The unemployment rate was 4.1% in Sept. after being 4.2% in Aug. The unemployment rate was 3.6% for all of  2022 as well as 2023.  Click here to go to that data. Also see Unemployment Rate from FRED (Federal Reserve Economic Data), the Research Division at the Federal Reserve Bank of St. Louis.

The inflation rate over the last 12 months is 2.44%. The CPI was 307.789 in Sept. 2023 and 315.301 in Sept. 2024. Since 315.301/307.789 = 1.0244, we have a 2.44% inflation rate. See Consumer Price Index Data from 1913 to 2024.  

The poverty rate for 2023, as reported by the U.S. Census Bureau last month, was 11.1% (that ties the 2nd lowest ever in 1973-the lowest ever was 10.5% in 2019). See Historical Poverty Tables: People and Families - 1959 to 2023. Then click on Table 2. Poverty Status of People by Family Relationship, Race, and Hispanic Origin. It is an Excel file.

The table below shows these rates for each year from 1975-83 and their averages.

Year	UE Rate	Inf. Rate	Pov. Rate
1975	8.5	6.9	15.2
1976	7.7	4.9	15.0
1977	7.1	6.7	14.0
1978	6.1	9.0	13.0
1979	5.9	13.3	11.7
1980	7.2	12.5	11.4
1981	7.6	8.9	11.6
1982	9.7	3.8	11.8
1983	9.6	3.8	12.3
AVG	7.7	7.8	12.9

Not only are the averages of the inflation rates, unemployment rates and poverty rates from 1975-83 much higher than the current rates but the lowest of all three of these during those years is higher than what they are now. Those lows are in bold red. The relevant years are 1979, 1980, and 1982 & 1983.

What should the interest rate be? More on uncertainty at the Fed

The first article is Interest Rates Will Be Higher in the Future, Especially if Trump Is President: Big tax cuts on top of high federal debt and less easy Fed policy could create perfect conditions for rising rates by Greg Ip of The WSJ. Excerpts:

"In economists’ jargon, the “neutral rate,” which keeps inflation and unemployment stable, has apparently risen. As recently as December, Fed officials thought neutral was 2.5%. By September, they had raised that to 2.9%, and some officials had put it at 3.5% or higher." [see the link below to a related post-that post has more examples of this uncertainty and a graph that explains how the neutral interest rate works]

"Since 2007, the federal debt has climbed from 35% of gross domestic product to 98%."

"in the past fiscal year, Washington borrowed $1.8 trillion. At 6.4% of GDP, that’s a record outside of war, recession or crises such as the pandemic."

"Research has found that bond yields rise by 0.01 to 0.06 percentage point for each 1% of GDP the debt rises"

"Research has found that bond yields rise by 0.01 to 0.06 percentage point for each 1% of GDP the debt rises, according to a review in a recent Fed paper. When those estimates are applied to the CRFB’s various scenarios for debt by 2036, that could imply anything from 0.25 to 2 percentage points."

"Other factors also matter. Higher inflation would aggravate the deficit’s impact on interest rates; lower inflation, a demand for bonds by an aging population or panicked investors would soften it."

"A recent study by the Penn Wharton Budget Model suggested that even though the U.S. controls its own currency, its debt would become unsustainable as it approaches 175% of GDP."

The second article is Fed Minutes Reveal Divide Over Size of September Rate Cut: While a ‘substantial majority’ favored the larger half-point reduction, some officials backed a smaller quarter-point cut by Nick Timiraos of The WSJ. Excerpts:

"Federal Reserve officials were divided at their meeting last month over how much to reduce interest rates, with a substantial majority favoring the larger half-percentage-point reduction that was ultimately approved, but others favoring a smaller quarter-point cut."

"The decision to lower the benchmark rate to a range between 4.75% and 5% was supported by 11 of 12 members of the Fed’s rate-setting committee. One policymaker, dissented against the decision in favor of a smaller reduction, and the minutes suggested her reservations may have been shared by other policymakers."

"But the Fed often prefers to make quarter-point changes to its policy rate because that gives officials more time to study the effect of their policy changes. [this is another example of the uncertainty-if they have to do this it means they are not sure what the impact of their policy will be] Indeed, the minutes revealed an unspecified number of officials had thought the smaller cut last month would have been warranted given solid economic activity, low unemployment, and inflation that is still above the Fed’s target.

A few officials thought the smaller cut “could signal a more predictable path of policy normalization,” the minutes said. Some officials who supported the larger cut indicated they could have also supported the smaller move, the minutes said." 

"Officials agreed that the larger cut approved at the meeting shouldn’t be a sign of concern over the economic outlook or viewed as a signal that the Fed was prepared to rapidly lower interest rates"

"The Fed isn’t “in a hurry to cut rates quickly,” Powell said last week during a moderated discussion in Nashville, Tenn. If the economy slows down more rapidly than expected, “then we can cut faster. If it slows less than we expect, we can cut slower. That’s really what’s going to decide it.”"

Related post:

What are macro policy makers uncertain of? (2023) (It has links to 12 other WSJ articles)

Was 1800 (approximately) A Pivotal Year In Human History? Robert Fogel, Francis Fukuyama, And Deirdre McCloskey All Seem To Think So

Robert Fogel is a Nobel Prize Winning Economist. Here is something he said recently:

"Technology rescued humankind from centuries of physical maladies and malnutrition, Mr. Fogel argues. Before the 19th century (1800), most people were caught in an endless cycle of subsistence farming."

See Technology Advances; Humans Supersize.

Francis Fukuyama, author of the famous book The End of History and the Last Man, has a new book out. Here is an excerpt from a review of that book:

"But it is true that Mr. Fukuyama tracks a quest for "order" that often falls short of its goal until a decisive threshold is reached around 1800.

By then the Industrial Revolution—even at its earliest stages—had unleashed the forces of production in ways hitherto unimaginable, allowing for abundance rather than scarcity, not least in the production of food. But the threshold proved to be more than a matter of escaping "the Malthusian trap" of hunger and overpopulation. In the years surrounding the French Revolution, Mr. Fukuyama believes, politics began to shape itself—at last—into an orderly and sustainable form.

Obviously, political order had been achieved before then, but in a fitful and incomplete way. In Mr. Fukuyama's view, a durable political order can arise, and societies can fully thrive, only when a state is formed, when the state itself operates according to a rule of law, and when the state becomes accountable—that is, when it must answer to its citizens. Until the threshold point around 1800, he says, all three properties rarely existed together."

See From Dynasty to Democracy: Nations did not find stability, or sustained prosperity, until they became accountable to their citizens.

Deirdre McCloskey is a highly respected economic historian whose latest book is Bourgeois Dignity: Why Economics Can't Explain the Modern World. Here are some quotes from her:

"Modern economic growth—that stunning increase from $3 a day in 1800 worldwide to now upwards of $130 a day in the richest countries, and anyway $30 as a worldwide average—can’t be accounted for in the usual and materialist ways. It wasn’t trade, investment, exploitation, imperialism, education, legal changes, genes, science. It was innovation, such as cheap steel and the modern university, supported by an entirely new attitude towards the middle class, emerging from Holland around 1600. (It has parallels in classical music and mathematics and politics, in all of which the Europeans burst out, 1600-1800.)

Economics of the usual sort, whether Samuelsonian or Marxist, can’t get at why Europeans and then the rest of us started around 1800 to become insanely innovative. A new dignity for innovation and its market applications can: that’s a sociological change, supporting sensible economic policies.

What you can learn from the history is that stasis reigned until we discovered dignity and liberty for ordinary people, and in particular for the disturbing, irritating class of entrepreneurs."

See Don’t be snobbish towards merchants & entrepreneurs, and you’ll develop

The Seasonally Adjusted CPI Was up 0.180% in September

That was after it was up 0.187% in August.

See Consumer Price Index for All Urban Consumers: All Items in U.S. City Average from FRED (Federal Reserve Economic Data) compiled by the Research Division at the Federal Reserve Bank of St. Louis for data on the seasonally adjusted CPI.

That site shows a graph but if you click on the Download button you will get the actual numbers in Microsoft Excel.

The Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL) was 314.121 in August and 314.686 in Sept. Since 314.686/314.121 = 1.00180, that means it was up 0.180%. If we had that every month for 12 months it would be up 2.18%.

It was 307.288 in Sept. 2023. Since 314.686/307.288 = 1.024, that means it was up 2.40% over the last 12 months.

In the last 6 months it is up just 0.787%. If we had that for 12 months it would be up 1.579%

The non-seasonally adjusted CPI was 315.301 in Sept. and 307.789 in Sept. 2023. That was up 2.44%. So pretty close to the seasonally adjusted CPI. This is still above the Fed's target of 2.0% (although they prefer to use the Personal Consumption Expenditures Price Index which was 2.2% higher in Aug. 2024 than Aug. 2023). 

For more information, see Inflation rate hit 2.4% in September, topping expectations; jobless claims highest since August 2023 by Jeff Cox of CNBC. Excerpts:

"The pace of price increases over the past year was higher than forecast in September while jobless claims posted an unexpected jump following Hurricane Helene and the Boeing strike, the Labor Department reported Thursday.

The consumer price index, a broad gauge measuring the costs of goods and services across the U.S. economy, increased a seasonally adjusted 0.2% for the month, putting the annual inflation rate at 2.4%. Both readings were 0.1 percentage point above the Dow Jones consensus.

The annual inflation rate was 0.1 percentage point lower than August and is the lowest since February 2021.

Excluding food and energy, core prices increased 0.3% on the month, putting the annual rate at 3.3%. Both core readings also were 0.1 percentage point above forecast."

The article also discusses what is going up and what is going on. There is a graph of the monthly year-over-year percent change in prices and core prices going back almost 3 years.

Other related links:

Consumer Price Index for All Urban Consumers: All Items Less Food and Energy in U.S. City Average (CPILFESL) This is also from from FRED (Federal Reserve Economic Data), compiled by the Research Division at the Federal Reserve Bank of St. Louis. It has the seasonally adjusted core CPI.

Consumer Price Index Data from 1913 to 2023

Personal Consumption Expenditures Price Index 

The Bureau of Labor Statistics makes seasonal adjustments. See Consumer Price Index Summary.

What do economists think of anti price gouging laws?

With hurricane Milton about to hit Florida, there is the possibility that some sellers might greatly increase the price of things like gas and water.

Below is a poll of economists that was done in 2012 by the Kent A. Clark Center for Global Markets, which is at the University of Chicago Booth School of Business. Following that are statements by some of the leading economists who voted.

But first, to get some background on why economists are often against these laws see How Milton Friedman Can Help Us Get Through Hurricane Milton: To give storm victims the best chance at recovery, let local knowledge and markets guide decisions by Jack Nicastro of Reason.

I wrote an article that was printed in The San Antonio Express-News in 2017 titled Price-gouging laws can backfire.

Then this past August I had a post titled Kamala Harris Wants to Ban Price Gouging. What Do Economists Say? The line between gouging and normal market forces can be pretty thin. And stopping it is no easy feat either. 

Now the economist poll.

See Price Gouging. The poll was done by the Kent A. Clark Center for Global Markets, which is at the University of Chicago Booth School of Business.

"Connecticut should pass its Senate Bill 60, which states that during a “severe weather event emergency, no person within the chain of distribution of consumer goods and services shall sell or offer to sell consumer goods or services for a price that is unconscionably excessive.”"

51% disagreed or strongly disagreed. Only 8% agreed or strongly agreed. 20% did not answer. So, of those that answered, over 60% disagreed or strongly disagreed. Here is what some of them said:

"David Cutler: Without defining "unconscionably," I don't know what to think about this.

Darrell Duffie: I'm unsure how the courts will define "unconscionably excessive." Efficient allocation by market prices is good, absent monopoly effects.

Aaron Edlin: statute is vague. also statute could put goods in hands of those with limited need who hoard them.

Pinelopi Goldberg: Torn about this. The term "unconscionably" seems too loose - is it a 20% or 500% markup? But the goods need to be allocated somehow.

Michael Greenstone: unconscionably excessive is VERY imprecise. extreme weather can disproportionately hurt poor and this could be efficient redistribution.

Robert Hall: Goal is to allocate suddenly scarce goods optimally. Prices are only a tool, but often the right tool. Law doesn't have a good alternative.

Caroline Hoxby: I sympathize w the intention but goods must be allocated in some way & prices are better than first come or fights breaking out among people

Kenneth Judd: The vagueness of the law means more businesses will shut down, which is the same as setting price to infinity, a legal price.

Anil Kashyap: Seems like pandering, "post-storm cleanup or repair services" are included. It seems like those prices could reasonably soar after a storm.

Pete Klenow: Would presumably lead to misallocation and lower supply than optimal. There are better ways to redistribute

Edward Lazear: Inefficiency from short term monopoly that results in "gouging" is secondary to losses in efficiency from a getting items to right users.

William Nordhaus: At best, symbolic. At worst, would return to price controls of the 1970s.

Richard Schmalensee: Seeks to prevent prices from clearing markets; never a good thing. Standard is hopelessly vague so increases risk for affected businesses.

Nancy Stokey: State legislatures should focus on more important questions.

Richard Thaler: Not needed. Big firms hold prices firm. "Entrepreneurs" with trucks help meet supply. Are the latter covered? If so, bad."