Demagogues cry out against the greed of capitalists intent upon preserving scarcity. William J. Baumol is professor of economics at NYU, Alan Blinder a professor at Princeton. Blinder was a member of President Clinton's Council of Economic Advisors in 1993 and was Vice Chairman of the Federal Reserve from 1994-96. Baumol and Blinder's discussion of entrepreneurship and risk-taking covers only several pages and is hardly satisfactory for a book of its size and pretensions. But they do a fair job on p.382 of citing the contribution of the entrepreneur as an innovator .
Innovation is different from invention.
Business people are rarely inventors, but they are often innovators. When an entrepreneur innovates, even if her new product or new process is not protected by patents, she will be one step ahead of her competitors. She will be able to capture much of the market either by offering customers a better product or by supplying the product more cheaply. In either case, she will temporarily find herself with some monopoly power left by the weakening of her competitors, and monopoly profit will be the reward for her initiative. However, this monopoly profit, the reward for innovation, will only be temporary.