Laura E. Grube

The Role of Culture in Economic Action

Culture shapes economic action and, as such, impacts economic life. Although there is a growing recognition amongst economists that culture matters, there is nothing approaching a universal agreement on how to incorporate culture into economic analysis. We provide a brief summary of how economists have discussed culture and then argue that Austrian School Economics is particularly well suited to contribute to our understanding of the relationship between culture and economic action. Indeed, Austrian economics has an advantage (1) because of its links to Max Weber’s approach to social science and (2) because of its emphasis on economics as a science of meaning. A Weber-inspired Austrian economics that stresses meaning, we argue, brings a focus on culture to the fore of economic analysis and opens the door for a progressive research program within cultural economics. Austrian economists can and have made significant contributions to our understanding of the relationship between culture and economic action. Moreover, we argue, explorations of the connection between culture and economic action can be a fruitful field of study within Austrian economics.

How Entrepreneurship Promotes Community Recovery: The Cases of Hurricanes Katrina and Sandy

There has been an increase in the reported number of natural disasters throughout the world in recent years. According to the Centre for Research on the Epidemiology of Disaster (CRED), the number of natural disasters worldwide has steadily increased, with 24 in 1950; 65 in 1975; 296 in 1990; and 528 in 2000.1 CRED identifies 11 different types of natural disasters, including droughts, earthquakes, epidemics, extreme temperatures, floods, insect infestations, landslides, mass movements, storms, volcanic activities, and wildfires.2 Since 1950, there have been 12,813 natural disasters worldwide. Of these natural disasters, 62 percent were either floods (34 percent) or storms (28 percent).

The Organizational Evolution of the American National Red Cross: An Austrian and Bloomington Approach to Organizational Growth and Expansion

The American National Red Cross is in many ways the iconic symbol for disaster response and recovery. The organization, founded in 1881, has a long track record for coming to the aid of those in need in the wake of wars, natural disasters, and other crises. However, in the wake of recent disasters, the Red Cross has been criticized for underperforming. By combining the literature on bureaucracy in Austrian economics and the literature on monocentricity in the work of Vincent Ostrom and Elinor Ostrom, we provide an analysis of the Red Cross that helps explain the organization’s evolution over time and that also yields implications for disaster management more broadly. Specifically, the Red Cross is a bureaucracy that has become increasingly centralized and rigid as it has become further enmeshed with governmental responsibilities.

Regrowing Uprooted Social Networks

In addition to providing needed goods and services after a disaster, entrepreneurs repurpose existing social networks and help community members restore and replace social networks that were disrupted by the disaster. Recall that social networks play a key role in helping individuals recover from disasters but that disasters can disrupt and destroy those networks. For disaster victims, social networks can be a source of financial resources, emotional support, mutual assistance, and information about how to navigate the challenges of the post-disaster environment. In the language that we introduced in chapter 3, entrepreneurs that restore disrupted social networks and facilitate the creation of new social networks increase the probability that others will return and lower the cost of returning by giving the victims access to mutual assistance.

The Entrepreneur as a Driver of Social Change

Every good plot needs a protagonist. Of course, the setting where the protagonist’s story plays out, the constraints they must work within, and the circumstances that the characters must confront all matter. It matters, for instance, that Shakespeare’s Henry V is set in fifteenth-century England and France, that Henry V is a newly crowned King of England who also has a claim to the French Crown, and that the English army is much smaller than the French army they must combat. But without Henry V there is no British invasion of France, there is no Battle of Agincourt, and there is no British monarch on the French throne. In short, without Henry V there is no play.

Fostering Resilient Communities

Entrepreneurs, as we discussed in chapter 2, recognize and pursue opportunities to change the world. For instance, they bring new products or services to the market, such as offering an automobile that has a bundle of features other cars do not have or starting a landscaping business in an area currently underserved, in the hope that potential customers will find these new products or services valuable. Similarly, entrepreneurs start social enterprises in an attempt to solve social problems, such as opening an after-school program for troubled teenagers or organizing a petition to change a city ordinance to prevent the dumping of trash in a particular area. They undertake these social enterprises in the hope that the lives of community members will improve and potential donors and volunteers, who are also concerned about these problems, will believe these social enterprises are helping to solve them. Given that the future is unknowable, an entrepreneur’s hopes could prove to be overly optimistic, in which case his enterprise will not succeed. If an entrepreneur’s hopes prove to be well-founded, however, she will provide goods and services that people actually desire, she will earn profits and/or receive donations, she will attract employees and/or volunteers, her organization will thrive, and she will advance broader social change. Purchasing landscaping services might allow working parents to spend their Sunday afternoons engaging with their children rather than caring for their lawn. Participating in an after-school program might alter the life of a disadvantaged student, increasing the likelihood she will obtain a college education and pursue a career she previously believed was beyond her reach. Entrepreneurs are, thus, social change agents who, despite the radical uncertainty we all necessarily confront in the world, notice, cultivate, and exploit opportunities to bring about economic, social, political, institutional, ideological, and cultural transformations.

Goods and Services Providers

As we have discussed in chapter 3, the post-disaster environment presents several unique challenges for disaster victims. Critically, as a result of the disaster, there is a sudden increase in the demand for certain goods and services, especially contracting services, building materials, and household items. As Chamlee-Wright (2010: 44) describes, “disaster sparks fierce demand for essential goods, services, and expertise the ordinary person does not possess.” Moreover, there is a sudden disruption in the pre-disaster sources of these goods and services, since many of the enterprises that serviced the area prior to the disaster as well as many of the employees of those enterprises will also be affected by the disaster. Entrepreneurs recognize this increased demand and work to satisfy it by resuming pre-disaster operations, offering goods and services that they did not offer prior to the disaster, or reorienting pre-disaster enterprises and service offerings to meet the now heightened demand. In the language we introduced in chapter 3, entrepreneurs lower the cost of returning and rebuilding and/or increase the benefits associated with returning and rebuilding by restoring or providing new goods and services. For instance, contractors, carpenters, plumbers, and electricians enter the post-disaster market (often from nearby communities) or expand their activities and offerings, thus, making available the technical skills needed to repair and rebuild homes. Similarly, entrepreneurs create or reopen establishments that sell groceries, clothing, furniture, appliances, and other household goods, allowing victims to replace items that were lost during the disaster. Additionally, entrepreneurs create or reopen restaurants, day care centers, schools, gas stations, laundromats, pharmacies, and other enterprises that offer essential services.

Entrepreneurs as Signals of Healthy Community Rebound

As discussed in chapter 3, disaster victims will want to know if others plan to return when deciding whether to return and rebuild or to relocate somewhere else. If everyone is waiting for signs from others before deciding how to react, recovery might never occur (Chamlee-Wright 2010; Chamlee-Wright and Storr 2009a, 2010a). Entrepreneurs, however, can act as “focal points” or “points of orientation” for residents as they decide whether or not to return and rebuild after a disaster and formulate their post-disaster recovery plans.

How Entrepreneurs Promote Post-Disaster Community Rebound

Although it is commonplace to describe the entrepreneur as fearless or daring or a maverick, Schumpeter ([1942] 1976: 127) has described life in advanced commercial society as essentially “anti-heroic.” As Schumpeter (ibid.: 128) explains, “success in industry and commerce requires stamina, yet industrial and commercial activity is essentially unheroic in the knight’s sense—no flourishing of swords about it, not much physical prowess, no charge to gallop the armored horse into the enemy.” Additionally, while it is easy to think of starting a charity as generous or noble, it is more difficult to think of starting a charity as being akin to leading soldiers against the battlements. Admittedly, depending on the environment, espousing certain beliefs could be quite dangerous, but many ideological entrepreneurs face, at most, social sanction for their preaching. Despite our efforts to analogize entrepreneurial activities to actions on the battlefield, there are obvious differences between the entrepreneur and the soldier.