Why Entrepreneurship Is Essential for Economic Development

Since our banishment from the Garden of Eden, man has faced a central cultural dilemma: how do we fulfill God’s creation mandate in a world of aggravated scarcity without either starving to death or killing one another?

This is not at all a moot point.

Whether they know it or not, different societies seek to answer this question with every change of economic institutions and policies. History is full of stark examples revealing that different attempts to solve our dilemma have resulted in widely different consequences.

Key Components of Economic Development

Economic theory rooted in an understanding of man as a purposeful actor created in God’s image teaches that to materially fulfill God’s cultural mandate, we must take advantage of the division of labor, capital accumulation, and entrepreneurship.

• Division of labor opens the door to increased productivity by allowing people to specialize at lines of production where they are most efficient.

• Capital formation also contributes to economic progress by increasing the productivity of the user. Likewise, with more capital investment comes better technology that will further increase productivity.

In order for economic progress to continue over time, however, it is important not to waste capital that has already been accumulated. This is why entrepreneurship is the third major contributor to economic development. 

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