Defining inequality and how entrepreneurship affects the market

Thursday, October 19, 2017

Entrepreneurs are seen to be synonymous with success and innovation, but that innovation can disrupt the market and increase inequality. On the other hand, an entrepreneur who enters the market can increase equality by offering competition, as well. So, why isn’t this topic as simple as we think it is?

Oklahoma State University assistant professor of entrepreneurship Per Bylund researches all things entrepreneur. By researching the topic of inequality and how it relates to entrepreneurial activity, Bylund felt the term “inequality” needed to be defined more clearly. He partnered with Mark Packard, assistant professor at the University of Nevada at Reno, to do just that.

“Inequality is a very provocative and hot topic right now, and what we argue in this paper is that it’s misunderstood and made a little too simple in the debate,” Bylund said. “We think there might be more to it, and a deeper analysis might help us understand the concept and all the nuances to the concept. What we look at is how entrepreneurs, in different ways, contribute to inequality or equality.”

What Bylund and Packard found is that some entrepreneurs increase inequality when they enter the market, but others decrease inequality as well by competing with current businesses. For example, when Apple invented the iPod and iPhone, it changed the way the market behaved and benefited some while others lost. But the most important finding discovered came down to differences in views: should we define inequality as the difference in the standard of living between people, or is it by a dollar amount?

“The fact here is first, you increase inequality by innovation and then you decrease it by competition, and both are the effects of entrepreneurship,” Bylund said. “Considering this process where income inequality increases and decreases, and it does constantly in the market, what we might want to look at instead is whether we are overall better off or not. One of the questions we ask in this paper is, “Should we really look at income inequality, or should we look at our wellbeing?”

The entire article can be found here.