© 2001 Society for Business Ethics 1 ENTREPRENEURSHIP AS ECONOMICS ENTREPRENEURSHIP AS ECONOMICS ENTREPRENEURSHIP AS ECONOMICS ENTREPRENEURSHIP AS ECONOMICS ENTREPRENEURSHIP AS ECONOMICS WITH IMAGINA WITH IMAGINA WITH IMAGINA WITH IMAGINA WITH IMAGINATION TION TION TION TION Saras D. Sarasvathy ABSTRACT ABSTRACT ABSTRACT ABSTRACT ABSTRACT: To date, economics has failed to develop a useful theory of entrepreneurship because of its inability to break out of the static equilibrium framework and the modeling of success/failure as a 0-1 variable. Entrepreneurship research also has not achieved this task due to its preoccupation with the quest for “the successful entrepreneur” and/or the successful firm. This essay calls for a new vocabulary for entrepreneurship, consisting of (1) a plural notion of the entrepreneurial process as a stream of successes and fail- ures, wherein failure management becomes the key science of entrepreneurship; (2) an effectual notion of bringing together par- ticular entrepreneurs and particular environments through creative action; and (3) a contingent notion of aspirations that places imagi- nation at the center stage of economics. Together, the new vocabulary allows us to ask new questions and develop new ap- proaches that allow entrepreneurship to tackle the central task of imagination in economics, i.e., to create from the society we have to live in, the society we want to live in. T he classic definition of economics was given by Alfred Marshall in 1890 on the first page of his Principles of Economics—“a study of mankind in the ordinary business of life.” To this the literary critic Northrop Frye would answer, “The fundamental job of the imagination in ordinary life . . . is to produce, out of the society we have to live in, a vision of the society we want to live in” (1964:140). Economists preach ethics unaware, but have limited their imagination in the telling of ethical stories (McCloskey, 1990: 148). At the heart of economics is an ethical story. From Adam Smith’s invisible hand (Smith, 1976) to Vilfredo Pareto’s innovation on the notion of optimality (Pareto, 1980) and Amartya Sen’s basic capability equality (Sen, 1998), econo- mists do indeed preach the ethics of creative freedom and allocative justice. Yet, the charge, that homo economicus as a species—decked out in rational raiment and utilitarian hat—has limited imagination, is not exactly specious. Economics has repeatedly been criticized for its (presumably) arrogant presumptions to “hardness” as opposed to other social sciences. Philosophers have criticized its utilitarianism (Rawls, 1999); psychologists have criticized its rationality (Simon, 1959; Gigerenzer, 1999); sociologists have criticized its