5 uses the pronoun 'it' to refer to a non-living antecedent. 1 or 2 cannot be the antecedents as they have multiple subjects which the pronoun it would qualify.
So 5 can either immediately follow 3 or 4. 4 is a general statement and 5 explains it more, so the flow of the passage has to be from 4 to 5, something that is violated in option 5. Hence It refers to Entrepreneurial knowledge and hence we would need 45 together. Also, 1 defines a variable and 2 mentions what economists did to deal with it. Hence 12 too must be together.
So we are left with options C and D.
2 has a phrase 'this non-rational for of knowledge' in which 'this' again refers to Entrepreneurial knowledge.
Hence the flow of the passage has to be from 4 to 2. Hence option D is the correct answer