Entrepreneurship, economic growth and distributive justice: The two faces of Janus Miguel-Ángel Galindo Martín University of Castilla-La Mancha (Spain) Author contact: [email protected] María-Teresa Méndez Picazo University Complutense of Madrid (Spain) Abstract As it is well known, in Roman mythology, Janus is the God of two heads facing opposite directions: one head looks at the past and the other one to the future. The same aspect arises when the distributive justice topic is considered in the relationship between entrepreneurship and economic growth. Economists have focused their attention in the last decades in analyse those factors that are economic growth enhancing. Among these factors, actually entrepreneurship plays a relevant role: thanks to such activity it is possible to reduce unemployment and to create new goods and services, that is to improve the country welfare. Several policies can be design to enhance entrepreneurship activity: to increase savings to create the necessary funds to invest and to introduce innovations in the production process to make products more competitiveness, are the most popular measures to achieve that goal. This kind of measures has important aspects to be considered, in the moment to be adopted as well as in the future. It is necessary to adopt policies, especially fiscal ones, to shift resources from some citizens, mainly consumers, to those that are going to invest or to innovate. Therefore, distribution problems, i.e. inequality, arise. From the neoclassical point of view it is expected that the economic growth created would reduce in the future these problems. But in this sense other questions must to be considered. For example, if the economic growth process would be sustainable in the future. If not, it would be necessary to shift more resources to enhance entrepreneurship activity, increasing the distribution problems. On the other hand, the innovation process implies to introduce new machines and the relationship between individuals could change. So, it is necessary to consider the effects of such introduction. And finally, the question about the price just also arises, because the some entrepreneurs would have a better situation in the market, thanks to innovations, and could introduce some pressures on prices. All theses questions will be analyse in the paper.

1.- Introduction Economists have focused their attention in the last decades in determine the factors that promote economic growth. Thanks to the development of mathematics and the data, it is possible to consider in the analysis quantitative and qualitative variables, being entrepreneurship one of the key variables in these studies. Thanks to entrepreneurship activity, it is possible to increase the country welfare because more goods and services are produced and increases the employment rate. For this reason different measures have been designed to enhance entrepreneurship activity. However, there are some questions that must be considered in this behaviour. As the Roman God Janus, this process shows two faces, facing opposite directions: the past and the future, the positive and the negative. Present policies would have positive and negative effects in the future that we must take into account.

2 From a libertarian point of view, these opposite directions would not appear, because the free market could reduce or eliminate the negative effects. Thanks to the invisible hand, individuals can obtain outcomes that not only benefit themselves but also to the others members of the society. On the other hand, the economic growth process obtained thanks to the economic policies designed to promote entrepreneurship activity (or other economic growth enhancing factor) would create enough results to compensate the potential losers. Therefore, from this perspective it is not necessary to be worried on the negative face of God Janus. However, arise some problems that free market cannot avoid. Sometimes, it is very difficult to compensate to losers. Entrepreneurs’ behaviours reduce competitiveness introducing monopolies activities in the economy. Fiscal distribution policies could create a “crowding out effect” and higher debt that would reduce the possibilities of our sons and grandsons... In sum, these problems are not only a matter of economics but also of justice and would damage the economic harmony necessary to achieve a society just. The objective of this paper is to analyse these questions. In section 2 entrepreneurship characteristics are showed. In section 3, the relationship between entrepreneurship and economic growth is analysed. In section 4, the issue of distributive justice is considered. Section 5 includes some conclusions.

2.- Entrepreneurship characteristics. The main difficulty in the entrepreneurship analysis is its delimitation. There is not a general definition of this concept. Wennekers and Thurik (1999) following the ideas exposed by Hebert and Link (1989), Bull and Willard (1993) and Lumpkin and Dress (1996), define it as the manifested capacity and desire of the individuals to create new business opportunities, that is, new products, new organization forms, new production methods,… and to introduce their ideas in the markets confronting uncertainty and other obstacles, adopting decisions on localization and on the resources use. These decisions could be adopted individually or in networks included or not in institutions. Following this definition several characteristics can be considered (Galindo, Mendez and Alfaro, 2010): 1. - The definition takes into account the economic agents behaviour. For this reason, entrepreneurship doesn’t mean an occupation but an activity that considers the different circumstances and aspects of a person. 2. - Entrepreneurships must consider uncertainty and several obstacles that are inherent in the business creation process. 3. - They must have information or idea about the efficient production processes, as well as new organizational forms. It doesn’t mean that they have had to attend special academic courses about management. They must have the idea and they can ask information or advice to experts to create the firm.

3 4. - The entrepreneurs can be also encountered in big firms. In this case, they are named “entrepreneurs’” or “corporate preneurs”. Following the modern perspective it is possible to consider different main kinds of entrepreneurships: 1.- Innovator, following Schumpeter (1950, 1911) thesis. Schumpeter considers that entrepreneurship activity implies the innovation in the introduction of a new product, organization or process, generating a destruction process. He creates new industries and for this reason he causes relevant structural changes in the economy. Entrepreneurs cannot be considered as inventors because they adopt the inventions create by others. When an entrepreneur gives up of innovate, less his entrepreneur condition. For this reason the Schumpeterian vision implies that the entrepreneur is an innovator that destroys the existing structures. From a more modern and general point of view, entrepreneurship creates a new firm but it doesn’t implies that he must to create new products. He/she can generate a new business without being an innovator in the Schumpeterian sense and assimilate the technological advances. 2.- To take advantage profit opportunities (Kirzner, 1973, 1999). Kirzner as well as Schumpeter, considers that entrepreneur tries to take advantage profit opportunities, but in opposite to Schumpeter’s view, the entrepreneur learns on the past mistakes and tries to correct them driving the market towards the equilibrium. From his point of view, there is a relationship between institutions and entrepreneurships that enhances economic progress, due to two reasons. First, institutions facilitate the competitiveness level that entrepreneurships need. Second, they also facilitate the incentives structure that enhance to entrepreneurships to develop their activity. 3.- Uncertainty (Knight, 1921). Knight distinguished between risk and uncertainty. The former is insurable because it refers to recurrent evens whose relative frequency is known from the experience and the second is not insurable because it relates to events whose probability is only subjectively estimated. Knight considered uncertainty as an important factor considered by entrepreneurs. They have to take it into account and to adopt decisions in an uncertainty world. Their profits are a reward for bearing this uncertainty. 4- The entrepreneurship differentiation defended by Baumol (1990), ranking them between “productive” and “non productive”. From his point of view, the entrepreneurs are creative and ingenious searching the more appropriate means to increase their wealth, power and prestige. The existing environment around them has an important influence on their decisions. For this reason is possible to find different kinds of entrepreneurships. 5.- It is also relevant to consider the sociological point of view. Max Weber (1978, 1988) contribution is one of the most relevant to be considered in this group1. Following to Swedberg (2000) we can consider, at least, three main characteristics: a.- Charisma. Weber considered that the entrepreneurship is a kind of person who gets that other people wants to follow him. However, Weber also recognizes that 1

We have included Weber’s approach in the sociologist group. However, following to Swedberg (1998) he must be considered as an economist sociologist.

4 this charisma is not so relevant in the capitalistic society as in the early stages of mankind. In a capitalistic society the main factor for entrepreneurship is to take advantage market opportunities. b.- Religious. In his celebrated The Protestant Ethic and the Spirit of Capitalism Weber considered that certain form of religion that he called “ascetic Protestantism”, favoured the development a positive attitude towards moneymaking which facilitated the change in attitude towards the entrepreneur. c.- Bureaucracy. In some writings, Weber also counterpoised entrepreneur to bureaucrat. From his point of view, a society more rationalized bureaucracy becomes more relevant, both within enterprises and within the state. And the entrepreneur not only is the person who can keep the bureaucrat in his place, but also has better knowledge of the firm. 3.- Entrepreneurship and economic growth. From entrepreneurship point of view, in general terms their activity has positive effect on economic growth because it is necessary the existence of a group of persons that must be interested to assume risk, using their funds to generate new firms and business. This is the best way to achieve a sustainable economic growth. However, it is also necessary to take into account the indirect effect showed by Holcombe (1998). From his point of view, the behaviour of a certain entrepreneurship not only enhances to other entrepreneurs to follow his/her example but also creates new opportunities that can take into advantage by third persons. Obviously, it is necessary an adequate environment or climate to facilitate the activity and favours the achievement of the process described in figure-1. In this sense, “rule of law”, the private property protection, level of liberty, trade agreements, among others, are necessary requisites to create such environment (Harper, 1998, North, 1994, Olson, 1996). It must also take into account the existence of a possible feed-back effect in the relationship between entrepreneurship and economic growth, as it is shown in figure-1. As it is observed in the figure, socioeconomic circumstances, culture and country evolution have influence on entrepreneurship activity. 1. - Favourable entrepreneur environment, that from a historical perspectives, has sometimes not existed. Some literature, economic and non economic, has showed entrepreneur as an individual that is only profit seeking, acting in his own self interest. He/she only tried to achieve his/her personal profit not being interested about the consequences of his/her activity on the rest of economic agents. In such adverse environment it is quite difficult to incentive the entrepreneur activity.

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Figure-1: Relationship between entrepreneurship and economic growth

Socio economics environment and culture

Economic Policies

Country Economic Characteristic

“Entrepreneurship”

Firms Policies

Invest ment

Economic Growth

Foreign Sector

Source: own elaboration

2. - The environment of the own entrepreneurship. His/her training, education,…, favour or not the entrepreneurship activity. A higher education doesn’t not necessary incentive this activity. In some countries, universities students prefer a remunerated job instead of create a new business, because they avoid risk and consider that their wage is guaranteed. 3. - Culture. It facilitates not only the assimilation and introduction of technological advances but also confronts to modifications in the economic environment in a more effective way. However, culture could also have a negative effect form the workers point of view. An education improvement could increase wages and, as it has previously been stated, to discourage the entrepreneur activity, preferring to be wage-earnings instead of entrepreneurs. 4. - Expectations on economic activity. Positive expectations on economic results and economic growth could enhance individuals to create their own business. In that situation new market opportunities appear being a good opportunity to obtain relevant profits. So, the introduction of a new technology as well as the demographic and institutional behaviour creates new opportunities on the demand side that the entrepreneurs could take into advantage. The final result will depend on the individual capabilities. 5. - Foreign Sector. External sector would have a positive and negative effect on entrepreneurship. From positive perspective, free trade implies the free circulation of

6 persons and goods, increasing the business volume and facilitating the hiring of the most qualified workers. But on the opposite way, new and competitiveness firms are introduced in the domestic economy, increasing the competitiveness and doing more complicate the small firms activity. The technology is introduced by foreign industries and the more restrictive monetary policy trying to reduce inflation, will reduce the possibilities for new entrepreneurships (Galindo, 2005). 6. - Firms concentration. Some entrepreneurship activity, thanks to the innovation process developed by some foreign industries, would be able generate undesirable firms concentration. For this reason, sometimes a more active fiscal policy to help small firms is defended. However, together the positive effects of such instrument, it is also necessary to take into account the negative one derived from its financing and its “crowding-out” effect. All at all, there several channels through the relationship between entrepreneurship and economic growth could be studied. Some of them show positive relations, but there are also indirect negative effects that must be considered. And in this filed, institutions play a relevant role, because they give the resources, mainly monetary, that they need to develop the activity, they create the adequate social environment and create the rules that defend the property rights.

4.- Distributive justice enters: difficulties to achieve an economic harmony In general terms, justice tries to give to each what he or she is due. The problem in this statement is to determine what is “due”. So, from a functional point of view, justice is considered as a set of universal principles to guide to individuals in judging what is right or wrong, no matter society they live. Thanks to this guide individuals are able to develop their virtues or “good habits” that help to promote their human potentials. This situation enable them to serve their self-interest and to work in harmony with other individuals to achieve the common good. In this sense, distributive justice concerns on the social just allocation of goods in a society. The main problem is that distributive principles would vary depending on the subject to distribution: income, jobs, welfare, etc., on the nature of subjects of the distribution: persons, groups, etc., and on the basis of distribution to be considered: equality, maximization, personal characteristics, etc. Our paper will focus on distributive justice aspects related to the distribution of benefits and burdens among individuals in society. The analyse of these aspects is developed considering the scheme of social justice of Louis Kelso and Mortimer Adler. From their point of view there three essential and interdependent principles of social justice: The Principle of Participation, The Principle of Distribution, and The Principle of Limitation. All of them are necessary to achieve a social justice, if one of them is weakened or missing then the system of economic system will collapse. The principle of participation describes the process of making “inputs” in the economic process. it requires that the individuals that participate in the production of wealth receive a share that is proportionate to the value of the contribution each has

7 made to the production of that wealth (Kelso and Adler, 1958, p. 80). It is necessary to take into account that men have different innate talents and acquired virtues, so the main role of distributive justice would be to achieve that the share that they receive would be proportionate to the value of their contribution to production through their ownership of active productive property, capital or labour (Kelso and Adler, 1958, p. 86). One of the problems that arose in this principle is the “appropriation” of mankind knowledge or “old ideas”, for instance the wheel, to produce goods and services. In many cases it is not possible to proportionate a share of the production to their inventors especially if they died long time ago. In other case, the payment of patents is a good solution to this problem. However, as we will see below, a question remains in the case that some producers try to take advantage of some innovations to reduce competence in the market. The principle of distribution means that individuals have the right to maintain and preserve their life by adequate means (Kelso and Adler, 1958, p. 80). Taking into account this statement a society is just when its constitution, laws and arrangements recognizes and protects all of man’s natural rights (Kelso and Adler, 1958, p. 90). In this case two main rights can be considered from the economic point of view. First, the right to protect property. Second, the right to receive a “living wage”. From this perspective, society must be organised in such way that individuals can use their talent and capacities in the production process to obtain they wage that they need for living. This wage must not be a “gift” but it must be earned using their talents and taking into account the state of technology. There some questions that arise in this case. First, what we must understand as “living wage” and second if the introduction of new technologies introduce an important change in the production process reducing the possibilities to individuals to earn such salary. The principle of limitation means that no one has a right to extent his or her ownership of the means of production from the opportunity to participate in production to an extent capable of earning for themselves a viable income and to injure others individuals by excluding them from the opportunity to earn a viable income (Kelso and Adler, 1958, p. 81). So, it is important to avoid the concentration of ownership because it would exclude some individuals from effective participation in the production wealth (Kelso and Adler, 1958, p. 96). If these principles are introduced, then an economic harmony is achieved and the society would be just with probably few economic problems. However, there are several problems when the economic policy measures are designed. In this sense, one measure to adopt is to facilitate the necessary funds to entrepreneurs to start and to develop their activity, that is, to increase the savings rate of the economy or to obtain foreign resources. Two questions must be considered. First, it would be necessary to introduce some inequality in society because people with higher income show higher propensity to save. The reason to accept this inequality is to accept the hypothesis that the savings is positively related to income. So, if richer people increase their income they would save a higher amount of their income. For this reason some literature of the 1950s and 1960s it was accepted that higher inequality would enhance economic growth (e.g. Kaldor, 1956; Kelly and Williamson, 1968; Cook, 1995). Therefore, accepting this statement it is recommended the use of a redistribute

8 fiscal policy that shifts income from poorer to richer, who have a higher propensity to save. This view has been criticised and changed during the last decades. The empirical literature showed from this new position that could be a negative relationship between inequality and economic growth (Kuznets, 1955, Galor and Zeira, 1993, Persson and Tabellini, 1994, Bénabou, 1996, Alesina and Perotti, 1996, Aghion et al., 1999, Zou. and Li, 2000, Alfranca and Galindo, 2006). However, there are also problems from the justice point of view, because the principle of distribution considered before is not achieved. This position can be defended introducing arguments about the future benefits that individuals can obtain thanks to the economic growth or to consider the compensation principle based on Kaldor-Hicks criteria that states that an outcome is efficient if a Pareto optimal result can be reached compensating from those that are better off to those that are made worse off and all of them are no worse off than before (Hicks, 1939, Kaldor, 1939). Other alternative is the “Lockean Proviso” phrase coined by Robert Nozick (1974). Based on the Lockean ideas elaborated in his Second Treatise on Government, about natural right and the defense of private property, Nozick states that the “Lockean Proviso” “is meant to ensure that the situation of others is not worsened” (Nozick, 1974, 175). Accepting this point of view Nozick assumes that any adequate theory of justice in acquisition will not leave someone in a worse situation than he would have been without it (Nozick, 1974, 178). However, as Kirzner states (Kirzner, 1978, 23) the discoverer and it could be added the innovator, appropriates all of a limited deposit of a resource, he is worsening the situation of others. A sometimes they don’t know about the worsening of their situation. Another question to take into account in this field is the indirect effects of a compensation policy. Not only is quite difficult to determine the individuals that must be compensated, but if a fiscal redistribution policy is designed, the public debt to finance this instrument would arise interest rate and the crowding out effect would reduce the private activity, worsening the situation of some private agents, mainly entrepreneurs. Other effects can also be considered. The introduction of new technology and the slow process of skill improvement could generate job losses or lower wages for the unskilled work (Juhn, Murphy and Pierce, 1993, Piketty, 1997); credit market restrictions that reduce the investment possibilities of less rich people (Tsiddon, 1992, Saint-Paul and Verdier, 1992, Galor and Zeira, 1993, Banarjee and Newman, 1993); the role of the lobbies that reduce the effectiveness of the measures designed by policy makers (Persson and Tabellini, 1994). The second question to consider is the credit institutions behaviour in this process. In general terms their role is relevant because thanks to them it is possible to connect savers and investors in an efficient way. The main problem is due to the opportunities of the market, those funds are used in the productive process or in the speculative one. The former, does not present problems from the justice point of view. Considering the Principle of Participation, individuals participating in the productive process providing the necessary capital indirectly, through the credits obtained from the banks or buying the shares or bonds supplied by the firms themselves.

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However, there is another question to be considered in this field: the highly speculative capital or “hot money”, that is the flow of funds from one country to another to obtain short term benefits due to the interest rate differences existing among countries or to anticipate exchange rates variations. The main characteristic of this kind of capital is its quickly mobility in and out of markets, that could create market instability that potentially would have negative effects on real sector. In this case, the principle of participation is broken because the goal of this activity is not to increase or improve the productive process but to obtain benefits independently the situation of the real sector. The speculators are not worried about the situation or the problems that they can create in the country. As soon as they consider that they can not improve the results they will drive their funds to another country. Finally, other factor can be considered in this area. Previously we have showed the possibility of compensate those individuals that have been damaged for the measures introduced to increase savings to finance investment decisions designing a fiscal policy shifting incomes from the rich to the poor. However, several mechanisms could have some influence in this relationship. The introduction of new technology and the slow process of skill improvement could generate job losses or lower wages for the unskilled work (Juhn, Murphy and Pierce, 1993, Piketty, 1997); credit market restrictions that reduce the investment possibilities of less rich people (Tsiddon, 1992, Saint-Paul and Verdier, 1992, Galor and Zeira, 1993, Banarjee and Newman, 1993); the role of the lobbies that reduce the effectiveness of the measures designed by policy makers (Persson and Tabellini, 1994). Other problem to be considered is the business carried out by the banks. Logically their objective is to achieve the higher benefits possible allocating the resources in the operations and assets that give great yields. In a crisis situation, most countries have to design an expansive fiscal policy to reduce the negative effects of such crisis and to maintain the demand. Due to this policy higher public deficits appear and the governments try to finance them mainly issuing public debt. The result is that the interest rate of such debt increases and credit institutions are tempted to buy public bonds. Therefore, entrepreneurs don’t receive the necessary funds to develop their activity and the problem is shifter toward future generations that would have to pay the cost of the debt. So, those measures introduced to facilitate and to enhance the activity of the credit institutions to pass the resources from savers to investors would be inefficient. The second question to consider is the role of innovation policies. Modern economic growth models emphasize the relevance of innovation and research and development policies. The introduction of new production processes not only increase productivity but also competitiveness, having therefore a positive effect on economic growth and progress. Thanks to this process it is possible to compensate to those economic agents that could be damage for the income distribution policies designed to enhance the saving-investment process, reducing the unjust effects of such measures. However, there are some negative effects that must be also considered. Schumpeter stressed the relevant role of entrepreneurship and innovation in the economic growth process. In his article entitled “Theoretical problems of economic growth” published in 1947 (Schumpeter, 1947), Schumpeter shows that the literature

10 has considered different factors that enhance economic growth: physical environment, social organization, institutions, technology… (Schumpeter, 1947, pp. 2-3). However, he explains, all of these factors are not enough to explain the economic growth process because “economic growth is not autonomous, being dependent upon factors outside of itself, and since these factors are many, no one-factor theory can ever be satisfactory” (Schumpeter, 1947, p. 4). However, at the end of the article, he concludes that “...since creative response means, in the economic sphere, simply the combination of existing productive resources in new ways or for new purposes, and since this function defines the economic type that we call the entrepreneur, we may reformulate the above suggestions by saying that we should recognize the importance of, and systematically require into, entrepreneurship as a factor of economic growth” (Schumpeter, 1947, p. 8). Considering his first quotation above, Schumpeter states that entrepreneur is a leader, who “leads” the means of production into new channels (Schumpeter, 1911, p. 89) and she or he is not necessarily “a genius or benefactor to humanity” (Schumpeter, 1911, p. 90 ff). Entrepreneurs have the profit expectation as a precondition for innovation decisions. From his point of view, entrepreneurial profit “is a surplus over costs [that is] the difference between receipts and outlay in a business.” (Schumpeter, 1911, p. 128). And in this situation, an entrepreneur who has a better situation would have higher profits. That is, an improvement of the product thanks to the innovation process provides a better position for the entrepreneur who then has the opportunity to achieve higher profits. Innovation plays this role. For this reason, the innovation process is growth and profit enhancing. In this sense, it is relevant to take into account the necessity to finance the innovation process. Credit institutions play a relevant role as well as the Central Banks that must supply the necessary resources to finance such activity if savings are scarce in the economy. Therefore, the main motivation of the principal monetary institution, the Central Bank, must be that small businesses generate benefits to society and foster the innovation process. In the Schumpeterian perspective, profit is an income derived from a monopoly power position (Oakley, 1990, p. 139), and this position is obtained through the innovation process. However, Schumpeter also focused in the social environment as a factor that could encourage the innovation process. From his point of view, there usually are reactions by social groups to the entrepreneurial activity, including the innovation process. Schumpeter takes into account five cases that promote economic development (Schumpeter, 1911, p. 66): “(1) The introduction of a new good (...) or a new quality of a good. (2) The introduction of a new method of production (...) (3) The opening of a new market (...) (4) The conquest of a new source of supply of raw materials or half-manufactured goods (...) (5) The carrying out of the new organisation of any industry, like the creation of a monopoly position (...) or the breaking up of a monopoly position.” Another factor to be considered is the social environment. In such a variable, Schumpeter includes the reaction of the social group to the entrepreneurial activity, including the innovation process2. He considers the existence of legal or political impediments, the culture, and could include the rule of law and the role of institutions. On the other hand, Schumpeter states that it would be possible to find some social opposition to the innovation process, in which case the entrepreneur would find it 2

On the schumpeterian economic growth model and evolutionary economics, see Alcouffe and Kuhn, (2004)

11 difficult to find the necessary cooperation. While such resistance was more relevant in the beginnings of capitalism, it is still effective nowadays (Schumpeter, 1911, p. 87). In this sense, Schumpeter is not sufficiently clear in designing the variables that affect such a social environment. In general terms, they would include the democracy level and especially income distribution. Income inequality reduction (a better distribution of the results from the innovation process) would reduce the social stress and the opposition to innovation. All in all, in the Schumpeterian model there are several ways in which institutions would have an indirect effect on economic growth process: through innovation and social climate. In this sense, as we have showed before, Schumpeter (1950, 1911) states that entrepreneur activity is characterised by the destruction process because the entrepreneurs are innovators that introduces new production process destroying the existing structures. And one consequence of this behaviour is that they can reduce the competence creating monopolies or oligopolies, reducing the consumer surplus and therefore the consumer surplus. However, this is not the only negative effect. As Adam Smith suggested, not only monopoly implies to increase prices but also monopoly powers destroy frugality (Smith, 1776, IV, vii,c.61) and is an enemy to good management (Smith, 1776, I.ix.b.5). Then, it is possible that it would have a negative effect on economic growth future due to the reduction of competitiveness Finally, in this analysis it is also necessary to consider the justice in transfer and the willfulness. Scholastics following the Aristotle’s statement that “nobody suffers injustice voluntarily” (Nichomachean Ethics, 1138a) and their just price theory, considered that a transaction is just if it has been undertaken and completed voluntarily (Chafuen, 2003, 90). In similar way, Nozick states that what has been acquired through market transactions is justly acquired because such transactions are voluntary (Nozick, 1974, 153). From his point of view, the justice in transfer is based in the consent of sellers and buyers to make the transactions (Nozick, 1974, 160-164). In this sense, Kirzner adds that the existence of a price differential constitutes a special attractive opportunity for entrepreneurs to achieve higher profits. Their activity mainly consists to buy at low price and sell at higher prices (Kirzner, 1978, 11). If the transactions are voluntary then they are just, and the possible existing errors in them must not affect the willfulness of the transactions (Kirzner, 1978, 12). However, it is possible to question this statement considering mainly two aspects. First, the monopolistic behaviour of some entrepreneurs-innovators. If we accept the Schumpeter point of view considered above, some reduction of competitiveness could appear and the prices can be affected. In this case, as Spanish Scholastic Francisco de Vitoria (1557?) stated, the situation were unjust for many people. He accepted the transactions that enriches one individual (the merchant-the entrepreneur) if the other individuals get also a profit, increase their welfare. The problem in the case of the monopoly is that only the entrepreneur improves his situation. Second, in a society characterised by the mass consumption, it is questionable that the consumers make some transactions voluntarily. As Kelso and Adler (1958, 18)

12 state this mass consumption is necessary if all the members of the society achieve a high standard of life. However, this mass consumption cannot exist or continue unless there is a redistribution of purchasing power, and in this redistribution several economic agents and institutions act as lobbies to achieve higher power (increasing wages, compensations...). In this sense it is also necessary the role of marketing to encourage consumption and to increase and to shift the demand from some goods to others. All in all the economic policy designed to enhance entrepreneurship activity has important negative effects that would appear in the future more or less closely and could be considered as social unjust. Traditionally is considered that thanks to the increase of economic growth due to these measures there would be a sufficient economic surplus to compensate to those individuals that have been damaged. During the last decades this surplus has been sufficient in general terms and many developed countries have showed high levels of social peace and welfare. The crisis has showed the defectiveness of the economic situation of these countries and the symptoms of social disharmony that would emerge in these countries. The countries must face not only to the economic problems existing and to develop or to change the economic growth model but also to consider the justice problems that have been created and could persist in the future. The use of new technologies, the consumers’ behaviour, the role of the institutions, etc., must be taken into account and only in these cases a sustainable development can be achieved. To avoid some of these problems and trying to achieve the economic harmony, a society more just, it would be necessary to take into account some principles. First, from the distribution point of view, the individuals should receive a share of the production in proportion to their competitiveness. Second, to limit the possibility that entrepreneursinnovators try to monopolise the transactions, it must not allowed that they can increase their position or power injuring the position of other individuals. Third, individuals have the right to obtain their means of subsistence participating in the production of wealth (Kelso and Adler, 1958, 18), as workers, capitalist or as entrepreneur. And finally, to avoid injuring one another.

5.- Conclusions The policies designed to promote economic growth have important implications that must be considered when the justice issue is analysed. Many libertarians attribute to Adam Smith the idea that market is the ordinary regulator of justice and the role of law is to leave it to act without interferences, being the invisible hand the motor of this process. From their point of view free market generate beneficial outcomes for all the members of the society. If some of them are injured at one moment, they would be compensated in the future thanks to the higher income generated through the economic growth process. However, Adam Smith discusses also cases where market fails to benefit individuals and distorts individual incentives (e. g. Smith, 1776, II, ii; V.i.g). Therefore, the idea about the God of two heads, Janus, appears showing that this behaviour has two opposite consequences. First, positive one, that is it is possible to increase the outcomes and therefore the welfare of the society thanks to a higher economic growth. Second,

13 negative, because some individuals could be harmed for that policy and it is not sure that could be compensated in the future. The reason for this result is the creation of monopolies activities, the inequality of wages due to the different education and training, the necessity to maintain a level of consumption, etc. As governments are tested considering their results about the economic growth rates that they achieve, they are interested to promote this economic policy objective. Government show to individuals that there is a higher welfare, that they can satisfy their necessities using more goods and services. If the economic process doesn’t stop it is very difficult to note the existing problems that are also creating. In crisis all the problems appears (inequality, unemployment, reducing social benefits...) strongly and it is very difficult to avoid them. This the main reason because it is necessary to ask about the type of society that we wish and we can maintain.

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