Entrepreneurship and Comparative Advantage

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Table of Contents

Introduction
Article Summary
Strengths and Weaknesses
Critical evaluation
Conclusion
Works Cited

Introduction

The article by Dorobat and Topan is entitled “Entrepreneurship and Comparative Advantage.” The work is devoted to the problem of the role of entrepreneurs in international trade. The authors tackle the problem through integrating entrepreneurial judgment and comparative advantage. They also maintain that it is impossible to predict a pattern of international specialization in any other way but from inside the market without ruining the order of the most beneficially allocated resources.

The following paper is aimed at critically evaluating the insights presented in the article. The conceptual framework will be linked to the materials learned from the course. The ideas expressed in the text can serve as a baseline for reconceptualizing the realities of Qatar’s comparative advantage and international trade and are generally worth speculating upon.

Article Summary

The article is subdivided into several sections. In the first one, the authors construct a theoretical framework of the role of entrepreneurs in international trade. They start by analyzing the historical development of the concept. The authors mention Adam Smith as the one to use some “underdeveloped” ideas of entrepreneurship and expand the framework from the point of other theorists (Dorobat and Topan 2). The authors state that the history of the economic theory has largely excluded entrepreneurs from its domain.

In the second subsection, the authors discuss in what respects entrepreneurial judgment makes a difference in international trade. They explain that an entrepreneur makes an uncertain decision on how to utilize existing or newly-acquired resources to make up for the future conditions. In case the decision is correct, the entrepreneur makes profit; an incorrect decision results in loss (Dorobat and Topan 7). The entrepreneur can reduce the uncertainty by allocating private resources (the ones that belong to them) and bearing all possible losses.

In the third subsection, the authors reject the neoclassical idea that comparative advantage is the result of the intrinsic qualities of the country. Rather, they state that individuals and groups prefer to specialize on what they are suited for. This process requires comparing the resources and the output – which is what entrepreneurial judgment is about (Dorobat and Topan 9-12). The authors conclude by stating the restitution of entrepreneurship to the international trade theory.

Strengths and Weaknesses

The strong points of the article include, primarily, the vast theoretical base. The authors refer to the works of such theorists as Adam Smith, Mises, Pareto, Samuelson, and others to back up their framework. More importantly, the authors provide an insightful view on the notion of entrepreneurial judgment that seemed to have been continuously – and groundlessly – overlooked in the history of economics. The idea that comparative advantage and the specialization pattern are not inherent but guided by the experience and skill of entrepreneurs might present a point of interest to students of economics.

Among the weaknesses, one can state the lack of concrete examples of how entrepreneurial judgment can determine specialization and gain comparative advantage. An evidence-based (rather than speculative) approach could have sufficiently improved the credibility of the article and backed up the subject matter.

Critical evaluation

As stated, the extensive literature base can be enlisted among the strong points of the article. However, one cannot but mention that Adam Smith, the political economy pioneer, did not receive more than a couple of lines in the article. The authors could do this purposely, considering that the theorist’s signature work was written in the late 18th century. On the other hand, the significance of Smith’s work for contemporary economics is immense, and the way they overlook him in their article appears rather odd.

Aside from the unfair treatment of Adam Smith’s contribution, the authors’ ideas coincide with those learned throughout the course and considerably expand them. Specialization pattern, for example, appears to be determined by two factors: the land’s comparative advantage and entrepreneurial judgment. Comparative advantage, as outlined in the textbook, comes from the factors for production, which the country should have in abundance (Hubbard, O’Brien, Eid, and El Anshasy 443-444). According to the article, it is the entrepreneurs that operate the factors using their judgmental skills and taking risks (Dorobat and Topan 8).

Consequently, entrepreneurs are able to determine specialization. A good example of such capabilities is provided in Chapter 2 where Canada and the U.S. are both producing maple syrup and honey; it takes entrepreneurial judgment to estimate whether the countries can specialize in a single set of goods and go into trading instead (Hubbard et al. 48). It is true that Canada, as well as the U.S., can be naturally good at producing both honey and syrup. On the other hand, a Canadian entrepreneur can decide the country can produce the syrup with less expenses and import the honey from the U.S. at a lower cost. Thus, the article successfully demonstrates the criticality of the entrepreneur’s role in international trade and gains from it.

Entrepreneurial judgment is significant for Qatar’s international trade as, for example, a natural gas producer. Qatari oil and gas reserves are the country’s factors of production. People, many of which have temporal residence, make up for another factor. The comparative advantage of Qatar, therefore, lies in its ability to produce natural gas with less expenses than most of other countries and the abundance of workforce. On the other hand, the entrepreneurs can consider other factors that Qatar is naturally good at. Advantageous location and rich history (along with the workforce) can make Qatar an attractive touristic destination. Such advantage can make the country gain from services and tourism as well as from producing gas. As the article shows, the decision is for the entrepreneurs to make.

Conclusion

To conclude, the article by Dorobat and Topan convincingly shows the importance of entrepreneurs in international trade. Countries that have a competitive advantage can specialize in what they are naturally good at. On the other hand, with a fair share of entrepreneurial judgment, countries can gain even more if they take risks; at that, the role of an entrepreneur is hard to overestimate.

Works Cited

Dorobat, Carmen Elena, and Mihai-Vladimir Topan. “Entrepreneurship and Comparative Advantage.” The Journal of Entrepreneurship 24.1 (2015): 1-16. Print.

Hubbard, R. Glenn, Anthony Patrick O’Brien, Ashraf Galal Eid, and Amany El Anshasy. Principles of Microeconomics. New York, NY: Pearson, 2011. Print.

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