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Fall 2019

ISSN 0890-913X

Volume 34, Number 3

Categories: Fall 2019 | Entrepreneurship

How Do Principles Textbooks Treat the Return to Entrepreneurship? The Missing Factor

John Estill, San Jose State University

Tom Means, San Jose State University

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TheJournalofPrivateEnterprise34(3),2019,35–42HowDoPrinciplesTextbooksTreattheReturntoEntrepreneurship?TheMissingFactorJohnEstillSanJoseStateUniversityTomMeansSanJoseStateUniversity______________________________________________________AbstractPrinciplestextbookshaveimprovedinincorporatingentrepreneurshipintheory.However,theystillgenerallylacksimpledemonstrationsoftheentrepreneurialinput,particularlywhenteachingthetheoryofanormalrateofreturn.Manytextsareunclearoverthedefinitionofanormalreturnanditsconstituentparts.Ourpaper(1)reviewsthetheoryoftheentrepreneurialinput;(2)sortshowpopulartextbookscalculateanormalrateofreturnconsistentwiththeirdefinitionoftheentrepreneurialinput;and(3)providesasimplenumericalexamplethatincorporatestheentrepreneurialinput,whichcanbemorefullydevelopedinintermediatetexts.______________________________________________________JELCodes:A22,D20Keywords:entrepreneur,normalrateofreturn,zeroeconomicprofit,principlestextbooksI.IntroductionGoingbacktothe1980s,economistshavecommentedonhowtraditionalmicroeconomicprinciplestextbookshavesaidlittleaboutentrepreneurship(Kent1989;KentandRushing1999).Sincethen,mosttextbookauthorshaveaddedinformationonentrepreneurs.However,theactualcontributionoftheentrepreneurinthecalculationofprofitsandanormalrateofreturnhasnotgenerallymadethistransition.1Asignificantdisconnectexistsbetweenhowtextbookauthorsdefinetheentrepreneur’sroleandhowtheyexplaintheactualreturntoentrepreneurialactivity.Toooften,economicprinciplesstudentsexitthecoursewithacompletemisunderstandingoftheentrepreneur’sactualcontribution1“Normalrateofreturn”and“normalprofit”areusedinterchangeablyinthesetextsandrepresentthesameconcept.Wefollowthisconventioninourpaper.

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Title	How Do Principles Textbooks Treat the Return to Entrepreneurship? The Missing Factor
Authors/Creators:	John Estill, San Jose State University Tom Means, San Jose State University
Year:	2019
Volume:	34
Number:	3
Pages:	35 - 42
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	entrepreneur, normal rate of return, zero economic profit, principles textbooks

Citation:
Estill, John; Means, Tom / 2019. "How Do Principles Textbooks Treat the Return to Entrepreneurship? The Missing Factor." The Journal of Private Enterprise, 34(3): 35-42.