Tag Archives: Externalities

The Quest for a Life of Leisure: Prisoner’s Dilemma in Food Production

In a conversation about “vegan food in the workplace,” I heard a thoughtful comment that reminded me of the Prisoner’s Dilemma. Before I paraphrase the comment, here’s a quick video to refresh your memory on the Prisoner’s Dilemma:

So, now that we have a better understanding of the Prisoner’s Dilemma, let’s get back to the comment. Essentially, the person was making the argument that large-scale commercial agriculture and farming is unsustainable, harmful to plants, and harmful to animals. The person was making the point that this problem stemmed from the business models/practices required to sustain them (and not the animals/plants themselves). Further to the person’s point, they explained that we also play a part in this by the way we purchase food. Regardless of whether we buy local, wild-caught food or buy large-scale commercialized food, there’s still an impact on the environment.

Upon hearing this comment, the first thing I thought of was the Prisoner’s Dilemma. Let me explain. There’s a demand for food. Consequently, businesses will satisfy that demand by supplying food. [Econ 101, amirite?] But how businesses satisfy that demand is where things get tricky. They could do so in a number of ways, but let’s simplify it into two: large-scale commercial agricultural production or small-scale local farming. If businesses were to focus on small-scale local farming, they’d be supplying food for the town (or maybe the town and some neighbouring towns). Businesses that focus on large-scale commercial agricultural production aren’t supplying food for a town, they’re supplying food for a country or – countries.

The two-by-two that I see here is that if businesses “cooperated,” they’d be supplying food for the local town(s) and “everyone” would be satisfied (consumers get food, businesses make money, environment is ‘harmed’ as little as possible, etc.). The possible hitch here is that businesses see an opportunity to make more money, so they scale up production into a major agricultural conglomerate (i.e. food for countries). That’s not to imply that this is “bad,” just that the opportunity exists and many businesses seek to seize it. In so doing, that provokes other businesses to do the same – the businesses are “betraying” each other, leading to externalities borne out by things like the environment. [NOTE: I’m aware that this example is very oversimplified and does not represent the state of food in all countries, especially where food shortages exist.]

The irony of the race-to-the-bottom is that, often times, the people running these businesses are all in it for the same thing:

An American businessman was standing at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellowfin tuna. The American complimented the Mexican on the quality of his fish.

“How long it took you to catch them?” The American asked.

“Only a little while.” The Mexican replied.

“Why don’t you stay out longer and catch more fish?” The American then asked.

“I have enough to support my family’s immediate needs.” The Mexican said.

“But,” The American then asked, “What do you do with the rest of your time?”

The Mexican fisherman said, “I sleep late, fish a little, play with my children, take a siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life, senor.”

The American scoffed, “I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds you buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats.”

“Instead of selling your catch to a middleman you would sell directly to the consumers, eventually opening your own can factory. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually NYC where you will run your expanding enterprise.”

The Mexican fisherman asked, “But senor, how long will this all take?”

To which the American replied, “15-20 years.”

“But what then, senor?”

The American laughed and said, “That’s the best part. When the time is right you would announce an IPO (Initial Public Offering) and sell your company stock to the public and become very rich, you would make millions.”

“Millions, senor? Then what?”

The American said slowly, “Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take a siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos…”

And maybe that life of leisure is closer than we think or, maybe, as the above parable suggests, we had that lifestyle before we “betrayed” each other in the Prisoner’s Dilemma. In an article I read recently in The Atlantic [Emphasis Added]:

The Ju/’hoansi [of Namibia] not only managed to feed themselves better than many in the industrialized world, but that they did so on the basis of only around two hours foraging a day, and cheerfully spent the rest of their time on more leisurely pursuits such as napping, playing games, and making art.

[…]

Over time, a more sophisticated picture of the Ju/’hoansi’s affluence emerged—one I saw firsthand living in southern Africa for 25 years and one I describe in my recent book. The Ju/’hoansi had an unyielding confidence in the providence of their environment and in their knowledge of how to exploit it. This meant that the Ju/’hoansi, like other hunter-gatherers, focused almost myopically on the short term—if the environment always supplied food and materials and the seasons were broadly predictable, what point was there in worrying about the future? This confidence also meant that the Ju/’hoansi did not store food for more than a few days and only expended energy on securing just enough to meet their immediate needs.

The Ju/’hoansi shared their food with one another according to a set of social prescriptions that ensured pretty much everyone, including the young, old, or disabled, got a share. As a result the Ju/’hoansi were also thoroughly egalitarian, mercilessly ribbing anyone that developed delusions of grandeur and seeing no point in accumulating wealth or formalizing systems of exchange.

NOTE: This was cross-posted.

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Do New Stadiums Lead to an Increase in Business?

Unless you’re familiar with the literature in this arena (no pun intended) or you know about Betteridge’s law of headlines, the title of this post is actually still an unresolved question for you. Well, I won’t delay the inevitable: according to research published earlier this year, the answer is no — new stadiums do no lead to an increase in business.

There are two things I want to talk about as it relates to this research. The first is Richard Florida. If this area is an interest of yours, there’s a good chance that you’ve come across him. Florida has been a professor for the last 20+ years and has written extensively on cities. Here’s a post I found from him within the last year that talks about the very thing that the journal article discussed:

The overwhelming conclusion of decades of economic research on the subject is that using public funds to subsidize wealthy sports franchises makes zero economic sense and is a giant waste of taxpayer money. A wide array of studies have shown that professional teams add virtually no income to local economies. In fact, some of them find that large subsidies actually have a negative effect, taking money out of the local economy. Aside from the jobs generated by actually building the stadium, most jobs inside the stadium—selling food and beer or working at team concessions—are low-paying temp jobs. It’s even worse for football stadiums, which are used for games at most a dozen times a year, and maybe a few more times for concerts or large events. Public economic development dollars can be put to much better use on things besides subsidizing sports teams and their wealthy owners.

Ultimately, the burden of public subsides falls disproportionately on small cities that are the least able to bear the cost. For example, a $200 million public subsidy for a new stadium ends up costing a small city like Santa Clara roughly $1,650 per resident, compared to just $50 a person for L.A. And, of course, teams in bigger cities, with their bigger markets and more revenue, often do not need subsidies at all.

The reason I raise Florida’s name is because I was surprised that I didn’t see his name mentioned in the journal article. To be fair, I don’t think that Florida has done any primary research in this domain, but I would have thought that even in the opening introduction or literature review that there may have been some reference to Florida’s constant discussion of literature like this.

Anyhow, the second thing I wanted to talk about is something that might not be measurable. Well, it might not be measurable in a simple way. As a former amateur athlete, I have a special place in my heart for sports. Certainly, there are plenty of things that one could classify as “wrong” about sports, but part of me still wants to defend it/them and I’ll be upfront: that might be part of what’s going on with this section of this post.

Something I didn’t see in the article (and probably something I wouldn’t expect to find in any well-written article) is a measure of (or discussion of?) the positive externalities that result from a city’s team winning the championship or even the spillover effects from the possible positive externalities. Now that’s a tortured sentence. I’m talking about how the residents of a city feel after their team wins the championship (in a given sport). Naturally, not everyone would be watching (or care), but for those that are fans of the team that wins, there would certainly be elevated levels of joy and happiness immediately following the victory. If there were studies done on this, I suspect that there might be comparisons to those who have won the lottery in that a couple of months after, lottery winners return to a similar level of satisfaction/happiness that they had prior to the lottery win.

I wonder, though, could we measure the economic gains for a city from this positive externality and the resulting spillover effect (in this case, let’s say the spillover effect would be the “pay it forward”-ness of joy from the fans of the team to the non-fans that the fans will be interacting with in the weeks following the city’s team’s victory). Even if there is a tangible effect that can be measured, I’m sure that any reasonable cost-benefit analysis would still conclude that a new stadium isn’t worth it for a city.

ResearchBlogging.orgHarger, K., Humphreys, B., & Ross, A. (2016). Do New Sports Facilities Attract New Businesses? Journal of Sports Economics, 17 (5), 483-500 DOI: 10.1177/1527002516641168

The Cross-Section of Social Entrepreneurship and Externalities: Social Entrepreneurship and Externalities, Part 4

In the first post in this series, we looked at the definition of social entrepreneurship. In the second post in this series, we looked at the definition of externalities. In the third post, we looked at some solutions to externalities. In today’s post, the last in this series, we’ll look at the cross-section of social entrepreneurship and externalities and wrap up the paper.

The Cross-Section of Social Entrepreneurship and Externalities

Let’s revisit our definitions of social entrepreneurship and externalities. Social entrepreneurship is the application of innovative solutions to society’s most pressing social problems in the form of massive wide-scale change, usually to the system. Externalities are a cost/benefit experienced by someone who is not a party to the transaction. Just by looking at those two definitions, my first inclination is that externalities are absolutely essential to the understanding of social entrepreneurship. Given that many of society’s most pressing social problems – in some people’s minds – can be traced back to a transaction that resulted in the negative externality, it’s hard to imagine how externalities wouldn’t be essential to the understanding of social entrepreneurship. With that being said, let’s look at some examples where these two concepts meet.

The current Director of the Skoll Center for Social Entrepreneurship, Pamela Hartigan, recently wrote a book chapter entitled, “Creating Blueprints for Business in the 21st Century: Social Entrepreneurship Shows the Way.” In it, she talks about the specific role of social entrepreneurs in the economic ecosystem. “Economic literature often pays much less attention to the role of positive externalities than it does to negative externalities. In so doing, it neglects the primary drivers of social entrepreneurial action.”[1] Hartigan goes on to say that neglected positive externalities should be a main focus of social entrepreneurship. A really good example of this is Wikipedia, which was created by Jimmy Wales (who is also an Ashoka Fellow). Based on that citation alone, one would have to think that externalities are part of the understanding of social entrepreneurship, but let’s see if there are others.

A paper written by a professor at INSEAD, which is consistently one of the top business schools in the world, called A Positive Theory of Social Entrepreneurship offers some more insights into neglected positive externalities. In fact, the author’s first proposition states that, “addressing problems involving neglected positive externalities is the distinctive domain of action of social entrepreneurship.”[2] It looks like Santos and Hartigan share similar viewpoints in that neglected positive externalities are a key to social entrepreneurship. These two examples make it pretty clear that neglected positive externalities feature in the field of social entrepreneurship. Let’s move onto different examples to see if any other key points arise.

If you recall, one of the solutions to externalities had to do with the internalization of the externalities. There’s a book chapter entitled, “The NYC Watershed agreement: sustainable development and social entrepreneurship,” written by Joan Hoffman. In it, she addresses some of the challenges that are faced by those in watershed collaborations (combination of economic and environmental goals). “The economic concept of externalities, or impacts of market transactions on third parties, can be extended to describe the need for social entrepreneurs . . . The new organizations fostered by social entrepreneurs are designed to internalize consideration of these externalities.”[3] It turns out that social entrepreneurs, if not by intention at least by accident, are directly addressing problems of externalities through some of the solutions that have been proposed by economists and academics.

In answering our question about whether externalities are essential to the understanding of social entrepreneurship, we have inadvertently answered the second question: are economic theories of externalities used in the professional understanding of social entrepreneurship? In this last reference, we saw that not only was there a reference to an economic theory of externalities, but there was a reference to a solution of externalities (as offered by economic theory). As a result, I think it is safe to say, “yes” to both questions.

Closing Thoughts

In this paper, we have explored definitions of social entrepreneurship and externalities. We have explored some of the muddiness around both of these definitions. We have taken a closer look at some of the different kinds of externalities (positive, negative, positional, etc.). We have looked at some of the proposed economic solutions to externalities. Then, we looked at the cross-section of externalities and social entrepreneurship. We dove deeper into the intersection of these two concepts to find that at the heart of social entrepreneurship is an inclination to solve some of the externalities facing the planet. Lastly, we were able to answer, “yes” to the two main questions of this paper: “Are externalities essential to the understanding of social entrepreneurship?” and “Are the economic theories of externalities used in the professional understanding of social entrepreneurship?”

In closing, I wanted to revisit one of the ideas put forth by Barnett and Yandle in their paper, The End of the Externality Revolution.[4] Specifically, I want to address their idea that there aren’t any externalities – only inefficiencies. As someone who has had very little training in economics, but a great deal of training in some of the other social sciences, I can appreciate this reframing of externalities. In fact, I think it is appropriate to repackage our understanding of externalities as part of the “main” function of the transaction. In calling them inefficiencies, I don’t think that Barnett and Yandle are doing this. I think both names – externalities and inefficiencies – are not entirely representative of the true state of affairs. In doing research for this paper, I came across a quote that I think captures the essence of what I’m trying to say. It was written in the aftermath of the financial collapse of 2008,[5] [emphasis mine]:

The good news is that I think the economic system we will build next will be one in which environmental and social costs will no longer be externalities; costs that get pushed off the balance sheet. The cost of doing business to the planet . . . will now be factored in.


[1] Lopez-Claros, A. (2010). The innovation for development report 2010-2011: Innovation as a driver of productivity and economic growth. New York: Palgrave Macmillan.

[2] Santos, F. M. (2009). A positive theory of social entrepreneurship. Social Innovation Centre: Working Papers, 1-51.

[3] Perrini, F. (2006). The new social entrepreneurship: What awaits social entrepreneurial ventures? Northampton, MA: Edward Elgar Publishing Limited.

[4] Barnett, A. H., & Yandle, B. (2009). The end of the externality revolution. Social Philosophy and Policy, 26(2), 130-150.

[5] Jones, K. (2009). When more mission equals more money: The more a business focuses on its social mission, the more revenue it will generate. Stanford Social Innovation Review.

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If you liked this paper/series, you might want to check out some of the other papers/series I’ve posted.

Solutions to Externalities: Social Entrepreneurship and Externalities, Part 3

In the first post in this series, we looked at the definition of social entrepreneurship. In the second post in this series, we looked at the definition of externalities. In today’s post, we’ll look at some solutions to externalities.

Solutions to Externalities

There are a number of different ways to solve the problem of externalities. More generally speaking, these different ways of solving the problem of externalities fall into one of two categories: public or private. Under the category of public solutions to externalities, we have things like government provisions, subsidies, or Pigovian taxes. Pigovian taxes (the name comes from Pigou) are those taxes that are intended to influence a party away (disincentivize) from creating the negative externality. One kind of Pigovian tax is a ‘sin tax,’ which are those taxes that are applied to things like alcohol and tobacco. One of the main arguments for allowing for private sector solutions to externalities is internalization. What is meant by internalization? Consider an example where a fisherman owns a river and a steel plant pollutes the river. The fisherman would demand that the steel plant cease polluting because the fisherman had property rights of the river.[1] The fisherman internalizes the externality of pollution because the fisherman owns the river. The pollution is not an externality to the fisherman; it is a very real and present part of the equation. One of the problems with a solution like this is when the problem is scaled up. Consider the Atlantic Ocean. Who owns it? While property rights may work for some situations, it is most definitely not a viable solution to all issues involving externalities.

Recently, there was a very interesting proposal put forth that, “externalities seem destined to rattle forth from the grave.”[2] In other words, these authors felt that ‘externalities’ was no longer a relevant term in the lexicon nor as a concept to study. Instead, these authors feel that, “externalities do not differ in any substantive way from any other kind of inefficiency.”[3] The argument is quite compelling. They cite two main axioms regarding inefficiencies, “(1) All inefficiencies, including Pareto relevant externalities, represent unexploited gains from trade and (2) When free exchange is allowed and transactions are costless, all Pareto relevant inefficiencies will be negotiated away.”[4] When the argument is phrased in this way, it is hard to disagree. The authors are trumpeting the horns of the free market. In the concluding remarks by the authors, they make it clear that the aim of their article was to highlight the number of policies passed in the name of externalities. To their credit, they are absolutely right. There are a number of laws and regulations put into place in the name of externalities. Now that we have discussed some of the general theories regarding the solutions to externalities, we can dive deeper into the discussion around externalities and social entrepreneurship. Specifically, we can begin to answer some questions about the cross-section of the two concepts.


[1] Gruber, J. (2010). Public finance and public policy (3rd ed.). New York: Worth Publishers.

[2] Barnett, A. H., & Yandle, B. (2009). The end of the externality revolution. Social Philosophy and Policy, 26(2), 130-150.

[3] Ibid.

[4] Ibid.

Defining Externalities: Social Entrepreneurship and Externalities, Part 2

In the first post in this series, we looked at the definition of social entrepreneurship. In this post, we’ll look at the definition of externalities. Before we get into the post, I wanted to let you know that when I copied part of the paper into this post, the footnotes reset and started at 1. However, as we know from yesterday’s post the first footnote from Pigou is actually footnote #10.

Defining Externalities

The process for defining externalities is as muddled as the process for defining social entrepreneurship. Since the term ‘externalities’ came first,[1] it might be more accurate to say that the process for defining social entrepreneurship is as muddled as the process for defining externalities. The first appearance of a definition of externalities comes in the early 1900s from Pigou,[2] a British economist, who comes from the field of ‘welfare economics,’ which focused on maximizing the well being of society. The general understanding of externalities hasn’t changed too much since then, leaving us with the following definition: “An externality is a cost or benefit that is experienced by someone who is not a party to the transaction that produced it.”[3]

This definition of externalities leaves us with the possibility for positive (benefit) externalities or negative (cost) externalities. An example of a negative externality could be the pollution to the air (or water) caused by a factory. An example of a positive externality could be the honey caused by the natural process of bees. Those two examples of positive/negative externalities are simple ones, but there are many more. Some cite traffic congestion as a negative externality[4] and some cite immunization as a positive externality.[5] The concept of externalities came out of economic theory and as such, we can highlight (through economic theory) some of the results that come from negative/positive externalities. “Negative externalities cause overproduction of the good in a competitive market, while positive externalities cause underproduction of the good in a competitive market, in both cases leading to a deadweight loss.”[6]

There is another kind of externality: positional externalities. “A positional externality occurs when new purchases alter the relevant context within which an existing positional good is evaluated.”[7] An example of this could be said to be when a job candidate starts to wear really expensive suits. The side effect of this is that other job candidates don’t make as good an impression upon the interviewer. From the perspective of the other candidates, it would be most beneficial to go out and purchase expensive suits, so as to make a favorable impression on the interviewers. “But this outcome may be inefficient, since when all spend more, each candidate’s probability of success remains unchanged.”[8] The last kind of externality of this similar vein (positive, negative, and positional) is a network externality. This is also referred to as a network effect and is most often seen in technology. Think about your cell phone. The value of your cell phone is somewhat dependent upon the number of other people [network] who also have cell phones. There is a further way to distinguish between different kinds of externalities: ‘internal’ and ‘external’ externalities.[9] Internal externalities are those externalities that are external to the contractual relationship, but internal to those parties within the contract. External externalities are those externalities that are external to both the contractual relationship and the parties within the contract.

At this point, we have talked about the various kinds of externalities (positive, negative, positional, network, internal, and external). To solidify the understanding of externalities, I’d like to provide an example of the creation of externalities by externalities:[10]

Jacksonville, Florida requires apartment complexes to provide 1.75 parking spaces per one-bedroom apartment – despite the fact that 16% of Jacksonville’s renter households even own one [sic] car . . . Most American cities require office buildings to provide four parking spaces per 1000 square feet of office space. Because four parking spaces consume about 1200 square feet of space, this means that a commercial landlord must allocate the majority of his land to parking.

Minimum parking requirements reduce population and job density, because land that is used for parking cannot be used for housing or commerce. Residents of low-density areas tend to be highly dependent on automobiles for most daily tasks, because they are less likely to live within walking distance of public transit and other amenities.

Minimum parking requirements indirectly discourage walking, by encouraging landowners to surround their building with parking. Where shops and offices are surrounded by a sea of parking, they are unpleasant places for pedestrians, because pedestrians must waste time walking through parking lots and risk their lives dodging automobiles . . .

By increasing the number of parking lots, minimum parking requirements may increase pollution from stormwater runoff. Rainstorms cause stormwater to fall on parking lots, collect metal, oil and other pollutants lying on the ground, and then run off into nearby waters, thus making those waters dirtier and more dangerous.

As one can see, this never-ending string of externalities seems to keep going. All of this stems from the initial action of a policy seemingly trying to do well by its citizens. Now that we have talked about some of the different kinds of externalities and explored a concrete example of how externalities can quickly multiply, let’s look at some of the proposed solutions to these externalities. But just before we move into the description of some of the solutions to externalities, I thought it a good place to add a note from Coase, who is often part of the conversation of externalities: “The traditional approach [to externalities] has tended to obscure the nature of the choice that has to be made. The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is; how should we restrain A? But this is wrong . . . The real question that has to be decided is: should A be allowed to harm B or should B be allowed to harm A?”[11] Coase is absolutely right in his critique of the framing of the question. Even in today’s discussion (Coase wrote this in the 1960s) about externalities, rarely is the question framed in the way that Coase has suggested.

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Note: when we next pick-up this series, we’ll look at some solutions to externalities.


[1] Pigou, A. C. (1920). The economics of welfare. London: Macmillan and Co.

[2] Ibid.

[4] Bento, A., Kaffine, D., Roth, K., & Zaragoza, M. (2011). The unintended consequences of regulation in the presence of competing externalities: Evidence from the transportation sector. Yale Center for Business and the Environment.

[5] Simpson, B. P. (2007). An economic, political, and philosophical analysis of externalities. Reason Papers, 29(1), 123-140.

[6] Gruber, J. (2010). Public finance and public policy (3rd ed.). New York: Worth Publishers.

[7] Frank, R. H. (2003). Are positional externalities different from other externalities? The Brookings Institution.

[8] Ibid.

[9] Buchanan, J. B., & Vanberg, V. J. (1988). The politicization of market failure, Public Choice Society Meetings.

[10] Lewyn, M. (2010). What would Coase do? (About parking regulation). Fordham Environmental Law Review, 22(1), 89-118.

[11] Coase, R. H. (1960). The problem of social cost. The Journal of Law and Economics, 3(1), 1-44.

Defining Social Entrepreneurship: Social Entrepreneurship and Externalities, Part 1

I enjoyed sharing the work that I’d done several years ago curating those quotes from various religious scriptures into a number of posts. As a result, it got me thinking of some of the other papers I’ve wrote and whether they’d be appropriate to share here. Since I just finished an MBA, I’ve gone through quite a number of case studies. Since professors tend to reuse those cases, it seems inappropriate to share the papers I wrote for those cases (as some students might try to pass it off as their own work). With that being said, yesterday’s post about fines vs. fees reminded me of a paper I wrote about a year ago for a class in social entrepreneurship. This paper wasn’t for a case, so I thought I’d share it in a number of installments. In today’s post, I’ll share the executive summary and the first section: defining social entrepreneurship.

Executive Summary

This aim of this paper is to answer two main questions: (1) are externalities essential to the understanding of social entrepreneurship? (2) are the economic theories of externalities used in the professional understanding of social entrepreneurship? To answer these questions, the definitions of social entrepreneurship and externalities are explored, along with the different categories of externalities. There is also a short examination of the different solutions to externalities. Following this, an analysis of the intersection of the two concepts (social entrepreneurship and externalities) is conducted, the results of which return answers of “yes” to both of the main questions of this paper.

Defining Social Entrepreneurship

Before moving into a discussion about social entrepreneurship and externalities, it is important to define these terms. As one delves further into the literature – both academic and popular – it quickly becomes clear that there are myriad understandings that cloud the space around these terms[1] and thusly make the task of definition that much more important. To begin, I will define social entrepreneurship, but before that, it might be more appropriate to start with a definition of entrepreneurship.

Most definitions of social entrepreneurship begin with an attempt to define entrepreneurship and logically so, as ‘social’ acts as a modifying word to entrepreneurship. One definition of what it means to be an entrepreneur that I particularly like, “A person is an entrepreneur from t1 to t2 if and only if that person attempts, from t1 to t2, to make business profits by innovation in the face of risk.”[2] Subsequently, the definition of entrepreneurship follows as, “The process of attempting from t1 to t2, to make business profits by innovation in the face of risk.”[3] While there is disagreement among some about how to define entrepreneurship, this basic understanding will suffice for the purposes of this paper.

Now that we have defined entrepreneurship, ‘business profits by innovation in the face of risk,’ we can move on to define social entrepreneurship. Similar to entrepreneurship (and maybe understandably so), social entrepreneurship lacks a consensual definition among those who study it. The Skoll Centre for Social Entrepreneurship at the University of Oxford defines social entrepreneurship as, “[being] about innovative, market-oriented approaches underpinned by a passion for social equity and environmental sustainability.”[4] Others believe that social entrepreneurship is, “ a process that catalyzes social change and/or addresses important social needs in a way that is not dominated by direct financial benefits for the entrepreneurs.”[5] While those definitions are similar, one could identify differences. The first definition includes an approach and the second definition includes a process. Part of the issue surrounding the definition of social entrepreneurship is that, “it means different things to different people.”[6] I may be a bit biased as I’m currently interning with Ashoka, but I think the person [Bill Drayton, founder and CEO of Ashoka] who ‘created’ the term[7] should have a great deal of say in the definition of said term. As such, Ashoka defines social entrepreneurship in following way:[8]

Social entrepreneurs are individuals with innovative solutions to society’s most pressing social problems. They are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change.

Rather than leaving societal needs to the government or business sectors, social entrepreneurs find what is not working and solve the problem by changing the system, spreading the solution, and persuading entire societies to take new leaps.

One of the important distinctions regarding Ashoka’s definition of social entrepreneurship is that the idea precedes the doing. That is, the social entrepreneur plans to address the problem (or social ill) before s/he begins the venture. This will be important later on when we talk about externalities. Another important distinction here is the specification of ‘changing the system.’ This is key because one of the more recent academic articles published on the topic of social entrepreneurship isolates four main factors of the definitions of social entrepreneurship, none of which are ‘changing the system’. They include: characteristics of individual social entrepreneurs, their sphere of operation, the processes and resources used by social entrepreneurs, and the mission of the social entrepreneur.[9] Let’s use the definition of social entrepreneurship provided by Ashoka and move on to define the next piece: externalities.

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Note: Check back tomorrow for the next section: defining externalities. Below, you’ll find a list of footnotes from this first section of the paper.


[1] For social entrepreneurship, see: Tan, W., Williams, J., & Tan, T. (2005). Defining the ‘social’ in ‘social entrepreneurship’: Altruism and entrepreneurship. International Entrepreneurship and Management Journal, 1(3), 353-365. For externalities, see: Barnett, A. H., & Yandle, B. (2009). The end of the externality revolution. Social Philosophy and Policy, 26(2), 130-150.

[2] Tan, W., Williams, J., & Tan, T. (2005). Defining the ‘social’ in ‘social entrepreneurship’: Altruism and entrepreneurship. International Entrepreneurship and Management Journal, 1(3), 353-365.

[3] Ibid.

[5] Mair, J., & Marti, I. (2004). Social entrepreneurship: A source of explanation, prediction, and delight. Journal of World Business, 41(1), 36-44.

[6] Dees, J. G. (1998). The meaning of ‘social entrepreneurship.’ Stanford University: Center for Social Innovation. See: http://www.caseatduke.org/documents/dees_sedef.pdf

[9] Dacin, M. T., & Dacin, P. A. (2011). Social entrepreneurship: A critique and future directions. Organization Science, 22(5), 1203-1213.

 

Maybe We Don’t Need to Workout At All

About a week ago, I wrote a post about the perfect exercise routine. My point was that there is no universal perfect exercise routine because there are so many different people on the planet, but that there may be some universal principles that could be applicable across peoples. It turns out that one of those “perfect” exercise routines might just be not exercising at all. Curious?

I recently came across a post from Harley Pasternak in, of all places, People. The post has a great opening illustrating just how sedentary our lives have become — amounting to the fact that we spend 45 minutes at the gym and the other 23 hours and 15 minutes sitting at our desks or sleeping. I really encourage you to read it because it paints quite a picture.

After I read it, I was reminded of the post I wrote a week ago that I referenced above (perfect routine), but also of the post I wrote about the obesity crisis. In that post, I focused on the neuromarketing aspect. That is, the idea that consumers may not have an *unbiased* choice to make when they reach for that bag of potato chips or for a second piece of chocolate cake. My main point in that post was that neuromarketing is having a large impact on the choices that are leading to the obesity epidemic. Pasternak argues that are innovation is also leading to obesity. Because we’ve worked so hard to make it easier to do things, we’ve cut out a lot of the time we spend getting from A to B or completing task A and completing task B:

They take leisurely daily walks, do their errands on foot, and walk, bicycle, or take public transportation to work. To make my case, consider this: the average European walks 237 miles every year and cycles 116 miles. The average American walks just 87 miles and cycles just 24 miles. No wonder Europeans are healthier – they’re three times as active!

It never occurred to me that public transportation would be linked to a country’s health, but I guess that just goes to show you the power of externalities and unintended consequences. This revelation makes me think that it’s even more important for the US to get on with advancing the infrastructure of the public transportation in the country.

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This brief bit about public transportation increasing a country’s health does remind me of something I read recently about the amount of time that patrons spend walking to and from public transportation. Something to the effect of it doubling the number of steps they take in a day. I couldn’t find that particular article, but I was able to find something from the CDC (Center for Disease Control and Prevention) that supports that finding:

Walking to and from public transportation can help physically inactive populations, especially low-income and minority groups, attain the recommended level of daily physical activity. Increased access to public transit may help promote and maintain active lifestyles.