Bob, a brief reply. I was obviously unclear in my post. My point -- which I borrow from Cantillon, Menger, Knight, and Mises, among others -- is not that uncertainty prevents individuals from acting. Quite the contrary, human action, in the Misesian sense, *is* acting under uncertainty! The point is to define profit and loss. When action is successful, meaning that it brings about the results sought, the result is profit (monetary or psychological). When unsuccessful, the result is loss.
Peter in your original post you wrote:
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.I think you are in a box, while you recognize that uncertainty does not prevent individuals from acting, (a view I certainly don't object to), for some reason you refuse to accept that profit opportunities exist in an uncertain world in the same manner. It's clear that's what you write:
In a world of uncertainty, there are no profit opportunities to be alert to.My argument is that you use "uncertainty" in too grand of a manner that causes you to fail to see that man acts with uncertainty all around AND searches for profit opportunities despite uncertainties in the grand sense.
Consider Mises's definition of the evenly rotating economy. In this imaginary construct, there are capitalists, earning interest, but no entrepreneurs, because there is no uncertainty, and hence no profit and loss. I.e., absent uncertainty, there are capitalists who are not also entrepreneurs. In the real world, the capitalist is always an entrepreneur, as Mises states in the passage I quoted in my post.
It's true there is no uncertainty in an evenly rotating economy, but I am not sure what this has to do with anything we are discussing. For example, if I spot a book in a used bookstore for $10.00 and I know I can sell it to my friend sitting in a car outside for $50.00. I can complete, what I would view as an entrepreneurial effort, and profit by buying the book from the bookstore owner and selling it to my friend in the car. In an ERE, since Mises rules out profit and loss, the bookstore owner would somehow magically become aware of this opportunity, I guess, and thus there would be no need for such type entrepreneurial alertness. My thought is so what? What does this have to do with entrepreneurs and capitalists in the real world other than making it clear that a capitalist is necessary in a world even where entrepreneurs do not exist, which makes it clear that there is an element to being a capitalist that has nothing to do with being an entrepreneur. I think this ERE discussion is making my point, not yours.
1. Yes, it is not riskless. He may be mistaken. It may be a counterfeit bill. Someone else may grab it. The wind may blow it away. Of course, in this example the uncertainty is trivial but, then, it's a trivial example. Real-world business opportunities are not like this. Indeed, I use this example all the time in my teaching. The Knightian-Misesian entrepreneur thinks he sees a ten-dollar bill, but it is partly buried under a rock. To retrieve it, he must buy a five-dollar shovel. If it really is $10 then (ignoring the opportunity cost of his time), he has earned a $5 profit. Otherwise, he has earned a $5 loss. This is a better metaphor for real-world entrepreneurship than Kirzner's idea of costless discovery.
Your example presents a case probability which actually helps understand the Kirznerian perspective versus your narrow Knightian-Misesian entrepreneurial perspective. Because you fail to recognize the difference between an entrepreneur and a capitalist, you lump them together as one acting individual facing profit or loss. But in the real world, this is not generally the case as demonstrated by many financial transactions done on a daily basis. But lets keep it simple and stick to your possible ten dollar bill under a rock. As an entrepreneur, who spots the possible bill under a rock, instead of financing the bill digging venture with my own money (as you suggest), I may go to a capitalist and say, "Hey, I know where there might be a $10.00 bill under a rock, if you buy the shovel with your capital and use your labor to dig out the rock, if there is $10.00 under the rock, I'll split the profit with you, $2.50 to each of us, plus you get the return of your capital."
I am acting as a pure entrepreneur, with no exposure to risk.
Of course, the question you have to answer is how, in your (and Kirzner's) framework, do you explain economic loss? Entrepreneurs lose money every day. Firms go bankrupt. Business debts go unpaid. If entrepreneurship is costless discovery, how can this happen?
See above, you are mixing up capitalist and entrepreneur. Also see my post on ex-ante and ex-post profit opportunity.
I see some progress here in that you recognize that there is an "idea man". I consider that man the catalyst,.i.e. the entrepreneur.
Rothbard is absolutely correct that "ideas without money are mere parlor games until the money is obtained and committed to the projects." It is part of the role of the entrepreneur to be alert to where money might exist for a project, otherwise it is a parlor game. But Rothbard doesn't say the money has to be the money of the entrepreneur.
3. Sure, such people play an important economic function. It is labor. (Of course, to the extent that the agent is paid on a contingency basis, he is acting partly as an entrepreneur, because his return is uncertain. It all depends on the contract between the agent and the resource owner.)
Again, I am glad that you see such an "idea man" as playing an important function. This is progress. But, I still don't get why you want to lump this type of actor on a pile with capitalists or laborers, when it is clear that such an acting man may not put up any money or do any labor!
4. I call them "idea men," or "consultants," or sometimes "founders," depending on the context. It's confusing because the practitioner literature typically calls them "entrepreneurs." Mises was quite clear that this is a different category than the entrepreneur, noting that economics "also calls entrepreneurs those who are especially eager to profit from adjusting production to the expected changes in conditions, those who have more initiative, more venturesomeness, and a quicker eye than the crowd, the pushing and promoting pioneers of economic improvement" (Human Action, p. 255). He suggests the word "promoter" to describe this kind of agent, lamenting that the economics literature has used the same word to refer to the distinct functions of uncertainty-bearing and eagerness etc. Unfortunately, Mises's terminological suggestion didn't catch on, so we're stuck using the E word for both concepts.
I think there is major progress here in that there is recognition that acting man does something that is not labor and not in the role of a capital provider, but is still very important to the launch of economic projects. Call such individuals what you will, I will call them entrepreneurs, since there are other terms for the capital provider, capitalist, and for the worker, laborer.