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Ideas have consequences and textbooks do matter. There’s been a lot of debate on what should go into a history textbook, here’s a piece that goes into something major that’s missing in economics textbooks.

. . .the IMF and other advisers were intently focused on privatizing existing enterprises but nearly completely ignored the other route to the private sector—the creation of new firms. This is what entrepreneurs do, and did, in the transition process in Europe, China, and elsewhere, yet it is nearly always neglected by economists because the theory upon which they rely is silent on the subject.

Reformers in nearly all transition economies did not foresee the rapid emergence of small enterprises from the ashes of the old Communist system. While this lack of recognition of the role of entrepreneurs is not surprising for those entrenched in the command economies of Europe, it stands as a substantial failure on the part of Western economic advisers as few of them predicted the important role entrepreneurs would play in the transition.

It would seem that advisors and transition policymakers perhaps should have paid more attention to the Austrian economists such as Mises, Hayek, Rothbard, Kirzner, and others. These scholars correctly argued that the entrepreneur is critical to economic growth—a theory that has been borne out by the experience of the transition economies. [italics in original]

Why should this matter? Well, because . . .

the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. [John Maynard Keynes. Brief commentary on the quote here and some interesting insight here.]

The entrepreneur is the main building block of the economy. Students who study the economy without realising this or studying the mechanisms and effects of entrepreneurship, grow up to be economists who are either unaware or (worse) dismissive of its power. I know. I was in the former category — I’ve used most of the textbooks mentioned by Brandon Dupont. Mathematical input-output models where everything was known in advance was the pinnacle of economic thought. In the real world, there are a lot of unknowns and uncertainties, and the entrepreneur has to deal with them to succeed. Studying those successes (and failures) helps one understand the economy better that mere maths.