Klein begins by writing:
First, the critical construct in Kirzner’s approach to entrepreneurship is not alertness (or discovery), but opportunities. What is it, in other words, that the entrepreneur is alert to? A skilled baseball hitter is particularly alert to the speed and position of the ball; a watchful mother is alert to the cry of her child; the successful hunter is alert to the movements of the deer; and so on. The problem with Kirzner’s metaphor is not the idea that certain people are especially quick to notice things, but the idea that profits exist out there, objectively, waiting to be noticed. In a world of uncertainty, there are no profit opportunities to be alert to.This simply, in my view, flies in the face of reality. Klein is using the word "uncertainty" in some type of absolute manner that ignores how acting man lives in a this world of "uncertainty." To get a better understanding of the situation, not only must it be considered how acting man handles "uncertainty" but it must be considered how acting man lives in a world of "impreciseness". In other words, we do not live in a world where acting man calculates every one millionth of possibilities and uncertainties every time action is taken. Our world is very imprecise. We ignore much.
For example, if we go to the store to buy a pound of meat. The butcher will put this meat on a scale to weigh out a pound. But is it really a pound? Or is it one pound plus .0000001 of a pound. Or is it perhaps .99999999999999999 of a pound and not a pound? In either case, the butcher and the meat buyer will, in our world of "impreciseness", be satisfied with the transaction.
Let us consider this willingness to accept imprecissness when Klein plays with the term "uncertainty" in our world. He is using an exacting sense of the word that acting man does not use. Can he really be serious that in the real world there are no objective opportunities to be alert to, because of uncertainty? If a man spots a ten dollar bill on the sidewalk on a calm windless day, is he in our world in any real sense uncertain that if he stoops down to pick it up there is a risk that he won't get it?
Yes, a meteor may fall from the sky that very moment and as he turns his head down, it could knock him dead. A truck could jump the curb and knock him dead. A swarm of bees could find him and sting him as he stoops. All these are indeed possibilities, but to acting man that will be satisfied with .9999999999999999 of a pound of meat when he has ordered a pound, the man most assuredly is not going to enter into his calculations that a meteor, truck or a swarm of bees will hit him just as he stoops for the ten dollar bill. In actuality, this was a riskless transaction, taken in the context that we must act within the realm of many minute uncertainties and much impreciseness.
Man simply does not live in a world of total preciseness. This does not mean man can ignore all impreciseness. A meat buyer isn't going to be concerned about the impreciseness of that .999999999999999 of a pound of meat, but he is going to be very concerned if he is charged for a pound of meat and given only a quarter pound of meat.
In the same way, a ten dollar bill in the middle of traffic is not as riskless to grab as one on the sidewalk. The dangers of traffic must be taken into consideration when a bill is on the street, something that need not be of concern when the ten dollar bill is on the sidewalk. When we understand this, we understand that some uncertainties must be considered, while it is absurd to consider all uncertainties when acting. It is all about degree in an uncertain, imprecise world---and not about complete preciseness or complete consideration of all uncertainties.
Klein goes on:
Of course, Kirzner recognizes that his metaphor is just that, a metaphor. My argument is that the metaphor is unhelpful and misleading. It takes our attention away from the uncertainty inherent in all human action, particularly regarding commercial behavior that involves the ownership and deployment of heterogeneous capital resources.Here, again, we have Klein with his over emphasis on uncertainty. With a man seeing so many uncertainties in the world, I am amazed Klein ever turns his laptop computer on. Is he not afraid that the battery will blow up on him? Does Klein really think he is unsafe and taking his life into his own hands when he starts up his computer? If he is in a classroom or hotel lobby, does he announce and shout out to everyone around him, "Clear the area, I am about to start my laptop"? If Klein doesn't do so and he recognizes that the battery could blow and he really believes all uncertainties must be taken into account, I would like for him to explain, why he does not issue such a warning?
The fact of the matter is that acting man ignores many uncertainties and distant possibilities. In this real world manner in which man acts, the opportunity for objective profit does appear to exist, that is a world wear acting man does not take into consideration extremely distant uncertainties.
Klein goes on to accuse me of miscategorization, when it is what he is doing. He writes:
The issue isn’t what these entrepreneurs think they are doing, but what they are actually doing.In my original comment, I never say that it is what entrepreneurs think. I am looking at their actions and classifying what they are doing. But Klein wants to turn the debate into some kind of psychology discussion on what entrepreneurs think. He writes:
Real-world entrepreneurs tend to be highly confident — overconfident, according to most of the research literature — in their judgments about the future. When they act, they have a particular image of the future in mind, and they are often sure their actions will bring about this particular future. But this is a statement about the entrepreneur’s psychology, not the economic function of the entrepreneur. The entrepreneur may believe he is seizing an objectively existing profit opportunity, but he isn’t. There are no such things to be seized.This is getting somewhat away from opportunities and alertness, but if Klein once to play here a bit, let's do so. Klein is simply wrong. Confidence has little to do with entrepreneurial ability. There may be plenty of entrepreneurs who are overconfident but there are certainly entrepreneurs who move ahead with very little confidence and worry all the way through. Indeed, fear, not confidence, may drive some entrepreneurs, causing them to pay attention to very many details that most of us would not tend to pay attention to, i.e. they are demonstrating more alertness because of their lack of confidence.
Maybe Klein in his entrepreneurial writing creations puts them together rapidly in slap-dash fashion with overconfidence, but I somehow doubt that there are not some writers who pause over every word fearing error, until and beyond when a writing is published.
But, this is pushing us way off track from the concern of whether in our world, in any sense, objective profit opportunities exist.
We finally have this gem from Klein:
Second, Wenzel misreads Mises on entrepreneurship and resource ownership (partly by quoting Mises out of context). This is understandable, because Mises’s own treatment of the distinction between entrepreneur and capitalist is uncharacteristically muddled.Ah yes, when Mises seems to recognize a clear difference between entrepreneur and capitalist, he is thus "uncharacteristically muddled." It looks pretty clear to me what Mises is saying, that the entrepreneur and capitalist are two different categories:
Let us try to think the imaginary construction of a pure entrepreneur to its ultimate logical consequences. This entrepreneur does not own any capital. The capital required for his entrepreneurial activities is lent to him by the capitalists in the form of money loans. The law, it is true, considers him the proprietor of the various means of production purchased by expanding the sums borrowed. Nevertheless he remains propertyless as the amount of his assets is balanced by his liabilities. If he succeeds, the net profit is his. If he fails, the loss must fall upon the capitalists who have lent him the funds.Mises gets muddled after that since he writes:
Such an entrepreneur would, in fact, be an employee of the capitalists who speculates on their account and takes a 100 per cent share in the net profits without being concerned about the losses.But the part I quote is not muddled, and not taken out of context, i.e. what Mises writes appears to be what he means and that putting in more context would not change what Mises appears to mean.
His follow up sentence (which I did not originally quote) is muddled since it is contradicted by reality. Indeed, operations that are more significant now than in Mises' time, are on display and reported in the pages of financial papers on a daily basis. Private equity operators regularly spot opportunities, structure deals where they use only the capital of others, take part in profits, do little, or no, management and have no participation in losses. It would be difficult to consider these operators first and foremost "employees".
Klein then gets into an even deeper discussion of "what Mises meant," which simply takes us away from an understanding of what an entrepreneur is. The fact of the matter is, and I repeat, there are people in the economy spotting opportunities, using no capital of their own, borrowing capital to advance their projects and capturing profit when their projects succeed. They, in short, appear to be looking for objective profit opportunities and acting on them.
My questions to Klein are:
1. Do you believe that a man picking up a ten dollar bill off a sidewalk is not taking advantage of a riskless objective profit opportunity in the sense that man acts in an imprecise world and ignores much that is imprecise with regard to risk and uncertainty when he acts?
2. Do you acknowledge that people exist, who are economic actors who spot opportunities and advance projects without using any capital of their own?
3. Do you believe economists should recognize the function these people play?
4. What do you believe it is best to call such people?