Friday, May 07, 2021

Joseph Schumpeter And Me

Jeffery S. McMullen of Indiana University published an article in the academic journal "Business Horizons." It is titled

"Are we confounding heroism and individualism? Entrepreneurs may not be lone rangers, but they are heroic nonetheless."

At the end of the post is a link to this article.

McMullen cites a paper I wrote in the 1990s and mentions my name in the same sentence as Joseph Schumpeter, an important economist from the 20th century.

Click here to read a short bio of him

A few years ago I wrote a post called "My Favorite Economist Is Joseph Schumpeter."  Here it is

""Why is this blog called The Dangerous Economist? Back in the early 1990s, I wrote a paper called "The Creative-Destroyers: Are Entrepreneurs Mythological Heroes?" It compares the entrepreneur in capitalism to the hero in mythology. I was never able to get it published in an academic journal. One referee even said the idea was dangerous. I doubt much harm would have befallen the U.S. economy had this paper been published. It is now online at

Creative Destroyers

A shorter version is at

Shorter Version

If you clicked on the link about why I chose this name for my blog and then these articles and read them you would have discovered some of the things that I list below and they would have pointed you to Schumpeter.

The process whereby innovations occur was called "Creative Destruction" by Schumpeter in his book Capitalism, Socialism, and Democracy. "Creative Destruction" was

"The opening of new markets, foreign or domestic, and the organizational development from the craft shop and factory to such concerns as U. S. Steel illustrate the same process of industrial mutation if I may use that biological term-that incessantly revolutionizes the economic structure from with in, incessantly destroying the old one, incessantly creating the new one. This process of Creative Destruction is the essential fact about capitalism. It is what capitalism consists in and what every capitalist concern has got to live in" (p. 83).

In his book The Hero with a Thousand Faces, Joseph Campbell described the action of the hero with

"The standard path of the mythological adventure of the hero is a magnification of the formula represented in the rites of passage: separation-initiation-return: which might be named the nuclear unit of the monomyth. A hero ventures forth from the world of common day into a region of supernatural wonder: fabulous forces are there encountered and a decisive victory is won: the hero comes back from this mysterious adventure with the power to bestow boons on his fellow man. "(p. 30)

Campbell (1968) also has a section called "The Cosmogonic Cycle" which "unrolls the great vision of the creation and destruction of the world which is vouchsafed as revelation to the successful hero" (p. 38). The connection to Schumpeter's theory of creative destruction is clear. A successful entrepreneur simultaneously destroys and creates a new world, or at least a new way of life. Henry Ford, for example, destroyed the horse and buggy age while creating the age of the automobile. But even more to the point is the fact that the hero finds that the world "suffers from a symbolical deficiency" (p. 37) and that "the hero appears on the scene in various forms according to the changing needs of the race" (p. 38). The changing needs and the deficiency may directly correspond to the changing market conditions or the changing desires for products. The entrepreneur IS the first person to perceive the need or opportunity for market profits.

Joseph Campbell's book inspired George Lucas to make the Star Wars movies."
Link to the article by Jeffery S. McMullen of Indiana University. March 2017 Business Horizons.

The full text of the article is at the link.

Here is the paragraph where he mentions my name.
"While such mythological heroism –— either super or mundane –— has long ruled the box office, it appears to be out of vogue in scholarly research on entrepreneurship. This is ironic, given that modern entrepreneurship theory is deeply rooted in such a narrative. Cyril Morong (1994), for example, demonstrates how the entrepreneur of Schumpeter’s theory maps onto the hero’s journey as described by Joseph Campbell. In his Theory of Economic Development, Joseph Schumpeter (1934) clearly taps into the ethos of existentialism, arguing that the entrepreneur is motivated by the joy of creating, the dream of founding a private kingdom, or the will to conquer. These motives give Schumpeter’s entrepreneur the courage necessary to bear uncertainty and impose his will –— much like a Nietzschean ├╝bermensch –— onto his social system by introducing innovative new combinations of resources. In doing so, the entrepreneur transforms the economy and, by extension, society. Thus, one of the most in fluential theories of entrepreneurship conceives of the entrepreneur as a mythological hero Are we confounding heroism and individualism? Entrepreneurs may not be lone rangers, but they are heroic nonetheless." 
Here are the last three paragraphs.

"Are entrepreneurs lone rangers? No, but that does not mean that entrepreneurship occurs without heroic individualism. Like entrepreneurship, true heroism is interdependent by its very nature. Even if an entrepreneur were somehow able to go it alone, his or her success would still depend on customers as well as other possible stakeholders (e.g., employees, investors, suppliers, distributors, etc.). Similarly, it is difficult to imagine how anyone could be heroic without a somewhat intimate knowledge of and concern for others’ welfare. Entrepreneurs must bear the costs of their actions before they receive the benefits, which only come if the costs the entrepreneurs incur ultimately benefit someone else.

Therefore, before we declare the heroic entrepreneur a myth, perhaps we should consider the term ‘myth’ as literally as Campbell has. Any innovative act exhibits an element of uncertainty and thus requires a corresponding degree of courage. Although this may only be a moment’s adrenaline rush, it is more likely an extended ride on an emotional rollercoaster that exhausts as well as elates. It is a hero’s journey of existential import and consequence. If this is true, then extraction of heroism from entrepreneurship is misguided, as it would do nothing to correct for scholars’ undersocialization of the entrepreneurial act. Instead, it would merely neglect the courage and sacrifice required from individuals like Elon Musk, who may not act alone, but nonetheless must act if entrepreneurship is to occur.

Ignoring this fact is not only likely to produce bad science but also may affect practice via bad policy. To the extent that policymakers erroneously believe heroism is unnecessary, they are likely to underestimate the costs entrepreneurs must incur not just to succeed, but also to try at all. Lack of sympathy about such sacrifices would likely shape institutional (dis)incentives. Thus, to deny that entrepreneurship is a heroic act is to neglect the need to reward its success and to forgive its potential failure. For these reasons, it may behoove scholars, policymakers, and practitioners alike to think twice before throwing out the baby of heroism with the bathwater of individualism."

Friday, April 23, 2021

How Much Is The Average MLB salary?

See Average MLB salary at $4.17 million, down 4.8% from 2019.

The article mentions that there were 902 players on Opening Day rosters. It also shows payroll for all teams.

So I added all that up ($3,825,147,026) and divided by 902 and got $4.24 million. I don't know why there is a difference.

The article also mentions "the average likely was lowered slightly by the expansion of active rosters to 26, which probably caused teams to add 30 players making near the $570,500 minimum."

I multiplied 30 times $570,500 and got $17,115,000. Then I subtracted that from the total payroll of $3,825,147,026. That left $3,808,032,026. That is total payroll without the one extra player (at a low salary) on each team.

Taking those guys out leaves 872 players. Then $3,808,032,026/872 gives us an average salary of about $4.37 million.

That is about 3% higher than the $4.24 million I got above. So if salaries are down 4.8% since 2019, then perhaps most of it is due to the extra players with low salaries being added in to the mix. The extra players might be having more than a slight effect.

Now the article did say the extra players made "near the $570,500 minimum." Maybe a few of the extras made more than that, so the affect might not be so big. But my guess is that it matters quite a bit.

The article mentions some particular cases of players with high salaries not making a roster, which lowered the average. Also, "The 50 highest-paid players are getting 33.4% of all salaries, up from 28.6% in 2017, and the 100 highest-paid are receiving 52.4%, an increase from 42.5% in 2017."

This reminds me of the book Can You Outsmart an Economist? by Steven Landsburg on the "stagnation" of incomes. He points out that for all sub-groups, incomes rose quite a bit over time. But more low income people joined the labor force, so it drags the overall average down and makes it look like wages or incomes stagnated, like in this case for baseball.

This table from Landsburg's book shows that from 1980-2005, all 4 groups (white men, nonwhite men, white women and nonwhite women) had increases in median income (adjusted for inflation) of at least 15% while the overall gain was just 3%.

The reason is that the lower paying groups grew more than the higher paying groups, keeping the average increase low.