ABSTRACT
As anyone familiar with the history of economic thought will immediately recognize, practically all the economists of the nineteenth century and many of the twentieth have believed uncritically that all that is needed to explain a given historical development is to indicate conditioning or causal factors, such as an increase in population or the supply of capital. Creative response changes social and economic situations for good, or, to put it differently, it creates situations from which there is no bridge to those situations that might have emerged in its absence. The economic nature, amount, and distribution of the returns to entrepreneurial activity constitute a set of problems on which investigation may be expected to shed much-needed light. Entrepreneurial activity then affects wage and interest rates from the outset and becomes a factor-the fundamental factor in my opinion-in booms and depressions.
