Saturday, September 8, 2012

A Reply to Danny Sanchez on Entrepreneurship

Danny Sanchez has replied in the comments section to my post on Israel Kirzner and entrepreneurship:

He writes:
Hi Robert,
The objections to Kirzner's "alertness" position concerns the catallactic function of entrepreneur, not the "ideal type" of entrepreneur-promoter. It is the latter that is what people think of when they think of Steve Jobs, etc. The entrepreneurial function is much broader, and deals with all human action insofar as it deals with uncertainty. Get rid of the Misesian idea of entrepreneurship and you get rid of the entire Misesian/Rothbardian system of functional distribution. Moreover the dice issue you raise is inappropriate because that is an instance of class probability (risk), whereas entrepreneurship has to do with case probability (uncertainty).
The points that Danny makes are important enough that I would like to address them in a full post, so more will view what I consider an important topic.


Dear Danny,

When you write:
The objections to Kirzner's 'alertness' position concerns the catallactic function of entrepreneur, not the 'ideal type' of entrepreneur-promoter. It is the latter that is what people think of when they think of Steve Jobs, etc.

I'm not sure of your point. I'm saying the key function of an entrepreneur is alertness. The other catallactic functions are just that, other functions. In my view, it is indeed an error to view Steve Jobs etc. as an entrepreneur because of his other skills (such as promotion), that it was his alertness (first to the programming/software design talent of Wozniak) which is why he should be considered an entrepreneur. He could have hired a promoter if he didn't have  promotion skills---Madison avenue is filled with such people.

In other words, I am recognizing more functions than you are, if you reject alertness as a separate function.

My problem with risk taking/uncertainty as the focus of entrepreneurship applies to both case and class probabilities, perhaps even more so to case probabilities. In the Kirzenrian view, it is not that entrepreneurs see risks and make bets on case or class probabilities but that they see very little risk, risk that is less than others may envision.

The gentleman I describe here is more like what entrepreneurs are really like in the Kirzenerian sense:

http://www.economicpolicyjournal.com/2010/07/why-you-sholud-buy-business-instead-of.html

Forgive the leaky metaphor, but they aren't rolling case or class dice. They aren't taking much risk. They are seeing Kirznerian opportunities.

Call them what you will, but these type operators exist. And, as I point out, if you knew the Koch brothers, Sheldon Adelson or Donald Trump, I surmise that it would be hard to spot them taking great risks. They are skilled at seeing opportunity. Perhaps it is because I have advised very wealthy men and have seen them up close that it is easier for me to see them as none risk takers, what they tend to have is Kirznerian alertness, when they make a move, not always, but mostly they are going to win.

The focus of risk taking as part of entrepreneurship comes, as Kirzner points out, from college professors. It is a myth that confuses a lot of youth that want to be entrepreneurs. Entrepreneurship is not as much about taking risks, as it is about spotting opportunities that are right in front of you that are not very risky.

But even here, Danny, your focus on risk is a limited deviation from what most Austrian's see as the problems with Kirzner's view.

The difference between Kirzner's view and that of some other Austrians was best described recently by Joe Salerno:
In his presentation, Klein challenged Israel Kirzner’s influential alertness paradigm of entrepreneurship.  Kirzner argues that alertness to and discovery of  profit opportunities–conceived as objectively and simultaneously existing differences in the prices of resources and products–is the crux of entrepreneurship.  Thus for Kirzner the entrepreneur is essentially an arbitrageur who buys a given good where prices are low and sells the same good where prices are high.  He faces no uncertainty, risks no capital, and always profits from his superior alertness to the existing profit opportunity.  Foss and Klein propose instead an approach to entrepreneurship based on Frank Knight’s and Ludwig von Mises’s focus on the “judgment” of uncertain future market conditions.   Judgment is exercised in the act of investing in  and allocating resources to specific time-consuming production processes that are organized and controlled by the entrepreneur until the completion and sale of the product.  For Foss and Klein the entrepreneur is therefore a capitalist and owner.  The capitalist firm is the organization created by the entrepreneur to facilitate ownership and decision-making control  over the productive resource combinations that embody his judgment of future product prices and markets.

While Salerno correctly states that the non-Kirzenrian view ties in capital ownership (where more risk, indeed, does come in---in my view), it is interesting to note, Mises recognized the separate functions of capital and entrepreneurship clearly when he wrote:
 When economics employs the same terms it speaks of catallactic categories. The entrepreneurs, capitalists, landowners, workers, and consumers of economic theory are not living men as one meets them in the reality of life and history. They are the embodiment of distinct functions in the market operations.
And here is Mises slamming the notion that an entrepreneur needs to be a capitalist:
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.

As for your charge, Danny, that if you:
 Get rid of the Misesian idea of entrepreneurship and you get rid of the entire Misesian/Rothbardian system of functional distribution.
It's really hard to understand how it holds any water. Are you saying that in a Misesian/Rothbardian system of functional distribution that entrepreneurs are walking around blindly without alertness? That to me seems to be a prescription for a collapse of a  Misesian/Rothbardian system of functional distribution, or almost any other system, rather than the other way around that alertness moves an economy toward functional distribution.

20 comments:

  1. "He could have hired a promoter if he didn't have promotion skills---Madison avenue is filled with such people."

    When Danny says "entrepreneur-promoter" he's using the term promoter as Mises used it in human action as a kind of replacement for the term entrepreneur. It wasn't intended to cover what you are talking about in this line.

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    1. It is not at all clear, in what sense Sanchez is using the term promoter. He could very well be using promoter in the sense that Salerno does (Salerno, 1993, p. 123):

      "promoter-entrepreneurs are those who seek to profit by actively promoting adjustment to change"

      This falls more in line with the classic idea of a promoter, in which I am using the term, e.g. a promoter of a rock concert.

      Further, it is not unclear that Mises isn't doing the same. He writes:

      "The phenomenon of leadership is no less real on the market than in any other branch of human activities. The driving force of the market, the element tending toward unceasing innovation and improvement, is provided by the restlessness of the promoter and his eagerness to make profits as large as possible."

      In other words, Mises and Salerno are both intending to use the term exactly as I am. i.e. one who promotes to others a new concept, idea or product. Mises even discusses it in terms of "leadership" and specifically calls out to use the term entrepreneur-promoter to distinguish from other activities which are called entrepreneurial (in my view, alertness)

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    2. I don't see how anybody can interpret those quotes as defining "promoter" narrowly as "publicist". Publicizing is only one way among many in which a person can "seek to profit by actively promoting adjustment to change" and to lead toward "unceasing innovation and improvement."

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  2. Hi Robert,
    Thanks for the response post.

    "it is indeed an error to view Steve Jobs etc. as an entrepreneur because of his other skills (such as promotion), that it was his alertness "

    I think I wasn't clear what I meant by "promoter". I don't mean merely someone who publicizes a product. I meant Mises' broader notion of "promoter" which he used as an alternative term to "entrepreneur" in its not-catallactic sense.

    "Entrepreneur" (promoter) in that sense does indeed include "alertness". The promoters/entrepreneurs... (emphasis added)

    "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."

    And all those qualities are indeed what people think of when they think of the distinctive role that people like Jobs and Adelson play.

    But it's important to note that Mises considered that notion to be a "ideal type", not a catallactic function or any other kind of class concept, and as such it "cannot be defined with praxeological rigor."

    For more on the entrepreneur/promoter as an ideal type, see https://mises.org/humanaction/chap2sec9.asp

    The catallactic function of "entrepreneur" is broader still than the historical phenomenon of the "promoter-entrepreneur". Mises says that,

    "The term entrepreneur as used by catallactic theory means: acting man exclusively seen from the aspect of the uncertainty inherent in every action."

    Everyone, therefore, is an entrepreneur. "Entrepreneur", as the Mises quote you cite mentions, refers not to whole "living men" like "Sheldon Adelson" and "Donald Trump". It refers to a certain aspect of the action of those living men, as well as a certain aspect of the actions of "shoe-shine boys" (as Mises said) and others who wouldn't be characterized as "promotoer/entrepreneurs". And that aspect is uncertainty-bearing.

    Catallactic functions never represent whole men, but only aspects of them, as every man always embodies several different functions at the same time: consumer, entrepreneur, laborer, etc. That part of a businessman's proceeds that results from successful action guided by forecasting (judgment) of uncertain future valuations (especially future consumer demand) is entrepreneurial profits. That part of a businessman's proceeds that results from his technical proficiency and the expenditure of his personal energy is his wages as a laborer (even if the man is a CEO).

    "My problem with risk taking/uncertainty as the focus of entrepreneurship applies to both case and class probabilities, perhaps even more so to case probabilities. In the Kirzenrian view, it is not that entrepreneurs see risks and make bets on case or class probabilities but that they see very little risk, risk that is less than others may envision."

    The uncertainty "focus" (it's not really a focus, actually, but a definition) does not contend that the entrepreneur takes on more highly uncertain endeavors than others. Entrepreneurship is not about seeking out uncertainty; it's about how well one deals with the uncertainty they face.

    "Are you saying that in a Misesian/Rothbardian system of functional distribution that entrepreneurs are walking around blindly without alertness?"

    Not the particular kind of alertness that Kirzner has in mind: alertness to objective profit opportunities that are "out there" waiting to be discovered. And that is because profits are created, not discovered. (See Peter Klein's post on Circle Bastiat for more along these lines.)

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  3. See my above reference to Salerno and Mises and I note that your Mises quote even has Mises using the term "pushing" which is the more classic sense in which the term promotion is thought of.

    Further,I am not sure why you are singling out the "promoter" as something Mises considered an ideal type. I do not recall Mises ever referencing the "promoter" as an "ideal type". Do you have a reference to Mises doing so?

    Most oddly, though, with reference to your charge,Mises recognized that the terms entrepreneur, capitalist, landowners and consumers are often used as an "ideal type" by laymen, so it would not be a big deal for him to add "promoter" to such a list, even though I do not recall him ever doing so.

    That Mises says the promoter:

    "cannot be defined with praxeological rigor."

    Does not mean that it is not important concept or should be cast away as a non-economic "ideal type" concept. In fact, you cut off your Mises quote before he added:

    "In this [the "promoter" with its lack of praxeological rigor] is like the notion of money which also defies — different from the notion of a medium of exchange — a rigid praxeological definition.However, economics cannot do without the promoter concept."

    So Mises ain't no way, no how, throwing the promoter concept into the laymen's "ideal type" ash heap and leaving it there.


    Most of the rest of your stuff sounds like you are just quoting Mises, Klein or someone, with disjointed non-qoutes that fail to get to the heart of the matter: There is something that can be identified as "alertness". It is very important. I fail to see how under any definition of entrepreneur, alertness could not exist. Without alertness, just what is causing entrepreneurs to act?

    In this sense, identifying "alertness" to me seems to identify a very rarefied concept that certainly ranks up there as an economic category of acting man, which I believe Kirzner is correct in calling entrepreneurship--since it seems to get to the essence of the launch point of economic action. Other concepts that others seem to link under the entrepreneurial umbrella, such as capitalist, landowner, and, yes, promoter, seem to be able to stand on their own as economic categories---and further the economic actors in these categories can be used by an entrepreneur to advance a project that he was alert enough to spot.

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    1. "Without alertness, just what is causing entrepreneurs to act?"

      But isn't this also similar to the alertness necessary for the capitalist to act, or landowner to properly act? These all seem intertwined to me, but I think that calling special attention to alertness to smaller amounts of actual risk than others in the market are seeing is the right track.

      The entrepreneur is alert to the hole in the marketplace, while the capitalist is alert to the needs of the entrepreneur over his fellow capitalist (or perhaps he just found him first.) The capitalist is just seeing a different market.

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    2. Hi Robert,
      See my response above to the claim that Mises meant the standard, classic meaning of "promoter".

      You write:
      "Further,I am not sure why you are singling out the "promoter" as something Mises considered an ideal type. I do not recall Mises ever referencing the "promoter" as an "ideal type". Do you have a reference to Mises doing so?"

      Yes. I said in the post you're responding to:
      "For more on the entrepreneur/promoter as an ideal type, see https://mises.org/humanaction/chap2sec9.asp"

      I'm not saying that Mises did not consider the "promoter" sense of "entrepreneur" was unimportant. Indeed, he considered it essential to understanding real markets, which get most of their drive from the strivings of promoters.

      I'm saying that there is an even more important and more fundamental sense of the term "entrepreneur".

      And I'm not saying that there is no such thing as "alertness", nor even that it is not part of being a promoter-entrepreneur. In fact, as I emphasized above, a sense of "alertness" is included in Mises' own characterization of the promoter-entrepreneur ("quicker eye than the crowd").

      I'm saying that there is no such thing as Kirzner's particular notion of "alertness", because, as Peter Klein has pointed out, that which the Kirznerian entrepreneur is "alert to" simply does not exist.

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    3. I cut you slack last time when you used that reference, but you are doing it again. So please point out to me where in your reference does Mises use the term "entrepreneur/promoter".

      Again, I don't have problem with Mises identifying "entrepreneur/promoter" as an "ideal type" (see my comments above) but I do not recall him ever doing it and he doesn't in the reference you provide. Therefore, it is illegitimate for you to claim that Mises considered the "entrepreneur/promoter" an ideal type and stated so.

      What exactly is the difference between the "alertness" Mises references and that of Kirzner?

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    4. In Human Action, Mises talks about a broader notion of "entrepreneur" and a narrower notion.

      In the section called "The Integration of Catallactic Functions" he defines the broader notion as "acting man exclusively seen from the aspect of the uncertainty inherent in every action." He refers to this as an "economic category" and an "integrated function". According to Mises, economic/praxeological categories can always be rigidly defined.

      This is in direct contrast to what he calls in that same section the "narrower" notion of "entrepreneur" which he says represents...

      "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. This notion is narrower than the concept of an entrepreneur as used in the construction of functional distribution; it does not include many instances which the latter includes. It is awkward that the same term should be used to signify two different notions. It would have been more expedient to employ another term for this second notion--for instance, the term "promoter.""

      This notion is NOT a praxeological category, because, as he says, "the notion of the entrepreneur-promoter cannot be defined with praxeological rigor."

      Now, in the Human Action section I linked to, called "On Ideal Types" Mises distinguishes between two kinds of notions to use when considering acting men. There are "praxeological categories" which can be rigidly defined, and there are "ideal types" which cannot be rigidly defined. He says that ideal types...

      "...are entirely different from praxeological categories and concepts and from the concepts of the natural sciences. An ideal type is not a class concept, because its description does not indicate the marks whose presence definitely and unambiguously determines class membership. An ideal type cannot be defined: it must be characterized by an enumeration of those features whose presence by and large decides whether in a concrete instance we are or are not faced with a specimen belonging to the ideal type in question."

      Mises says that "promoter-entrepreneur" cannot be rigidly defined. Therefore, it cannot be a praxeological category. And the only notion-type that can be used to group acting men that Mises ever says cannot be rigidly defined is the ideal type. Therefore, it is obvious that Mises is treating the entrepreneur-promoter as an ideal type.

      Furthermore, later in the "On Ideal Types" section, Mises raises as an example of the praxeological category vs. ideal type distinction the two different notions of "entrepreneur".

      He says...
      "The economic term "entrepreneur" is a precisely defined concept which in the framework of a theory of market economy signifies a clearly integrated function."

      This obviously is referring to the broader, rigidly-definable notion of "entrepreneur" discussed above.

      Of the other notion of "entrepreneur", Mises says,

      "The historical ideal type "entrepreneur" does not include the same members. Nobody in using it thinks of shoe-shine boys, cab drivers who own their cars, small businessmen, and small farmers."

      This is obviously the "narrower", non-rigidly definable notion of "entrepreneur" (the "promoter" notion) from above, which does not include ALL uncertainty-bearing, and therefore does not include "shoe-shine boys, etc".

      Mises has one major entrepreneur-notion dichotomy that he presents twice in Human Action. He would not have wily-nilly introduced another entirely different dichotomy without saying he was doing so.

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    5. By the way, I'm not the only one who realizes that Mises' entrepreneur-promoter is clearly an ideal type. Peter Klein wrote...

      "In his writings on entrepreneurship Mises is careful to distinguish the pure entrepreneurial function of judgmental decision-making under uncertainty with the flesh-and-blood entrepreneur of history, “those who are especially eager to profi t 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, Scholars Edition, p. 255). Mises suggests the term “promoter” for the latter, lamenting the fact that economists have used the term entrepreneur for both the praxeological category and the historical ideal type."

      http://bastiat.mises.org/2012/08/the-pointy-headed-promoter/

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    6. Danny you initially wrote:

      "The objections to Kirzner's 'alertness' position concerns the catallactic function of entrepreneur, not the 'ideal type' of entrepreneur-promoter." and "But it's important to note that Mises considered that notion to be a 'ideal type', not a catallactic function or any other kind of class concept, and as such it 'cannot be defined with praxeological rigor.' "

      You are clearly stating that the "entrepreneur-promoter" is only an "ideal type' and not a class concept as used by economists.

      Show me anywhere, where Mises A. identifies an "entrepreneur-promoter" as an "ideal type", but more important, show me anywhere where Mises rules out the "entrepreneur-promoter" using the term as an economic class concept. In my quotes of Mises (above), I believe it is obvious he hasn't.

      As far as Klein stating the same thing you are, so what? I think it is a miss-reading of Mises. Mises clearly states that the ideal type is laymen's use of terms:

      "When men in dealing with the problems of their own actions, and when economic history, descriptive economics, and economic statistics in reporting other people's actions, employ the terms entrepreneur, capitalist, landowner, worker, and consumer, they speak of ideal types."

      Note that he includes entrepreneur and capitalist in these categories, so even if Mises were to include "entrepreneur-promoter" in this manner as an ideal type, it doesn't rule out the terms being used in a different fashion as economic categories.

      Mises writes:

      "When economics employs the same terms it speaks of catallactic categories. The entrepreneurs, capitalists, landowners, workers, and consumers of economic theory are not living men as one meets them in the reality of life and history. They are the embodiment of distinct functions in the market operations."

      Thus, while you and Klein are attempting to throw "entrepreneur-promoter" on the ash heap of the layman's term "ideal type", you are also sneaking in the clearly untrue conclusion that because "entrepreneur-promoter" can be an "ideal-type" it can therefore not also be an economic category. This is simply false.

      But again, please show me where Mises calls "entrepreneur-promoter" as simply the laymen's ideal type and rules out its value as an economic concept. I believe I have shown above that the opposite is more the case. Mises says that "entrepreneur-promoter" is an important economic concept.

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    7. Mises says "entrepreneur-promoter" cannot be rigidly defined. Class concepts can be rigidly defined. Therefore "entrepreneur-promoter", as Mises uses it, cannot be a class concept.

      Again, Mises says "entrepreneur-promoter" cannot be rigidly defined. The only type of grouping of human actors that Mises says cannot be rigidly defined is an ideal type. Therefore, the ONLY grouping in Mises' taxonomy of notions that "entrepreneur-promoter", as Mises uses it, can be included in is ideal type.

      "Note that he includes entrepreneur and capitalist in these categories, so even if Mises were to include "entrepreneur-promoter" in this manner as an ideal type, it doesn't rule out the terms being used in a different fashion as economic categories."

      Of course not. People can use words however they want. But when working in the tradition of Mises, I think it makes sense to use Misesian terms as he used them.

      And since Mises himself was introducing "promoter" as a new term in order to avoid the confusion of one term (entrepreneur) meaning two things, it would be 100% contrary to the term's very purpose for him to then extend its possible definitions to include the very thing it was meant to distinguish from.

      And that Mises quote does not mean that ideal types are "laymen's terms". Quite the opposite. "Economic history, descriptive economics, and economic statistics" are not laymen's endeavors.

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    8. Danny, we are really going around in circles at this point. Mises clearly makes the point that the "ideal type" is not a term used by economists. But he goes out of his way to point out that "entrepreneur-promoter" is an important economic concept, which means there is more to it than just an "ideal type".

      Mises writes:

      "It is to be admitted that the notion of the entrepreneur-promoter cannot be defined with praxeological rigor. (In this it is like the notion of money which also defies--different from the notion of a medium of exchange--a rigid praxeological definition.[16] ) However, economics cannot do without the promoter concept...There is, however, no danger that the equivocal use of this term may result in any ambiguity in the exposition of the catallactic system. Wherever any doubts are likely to appear, they can be dispelled by the employment of the term promoter instead of entrepreneur."

      Are you saying that Mises is talking here about the "promoter" as an "ideal type"? He most certainly is not.You are simply wrong when you write:

      "Therefore, the ONLY grouping in Mises' taxonomy of notions that 'entrepreneur-promoter', as Mises uses it, can be included in is ideal type."

      If anything, he is saying, when in doubt use "entrepreneur-promoter" instead of entrepreneur.

      As for laymen using the "ideal type". You should look at your own reference on "ideal types" (https://mises.org/humanaction/chap2sec9.asp) where Mises writes:

      "The layman too, in dealing with events of the past or of the future, must always make use of ideal types and unwittingly always does so."

      You must, I guess, be among the unwitting.

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    9. Where does Mises say ideal types are never used by economists? It's not a praxeological category, but neither is money, and economists use the notion of money.

      Yes, laymen use ideal types. That doesn't mean only laymen use ideal types.

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    10. "What exactly is the difference between the "alertness" Mises references and that of Kirzner?"

      The Misesian promoter is alert to data that affects his judgment regarding the uncertain valuations of others. He uses this judgment to *create* profit opportunities that serve the vital role of adjusting production to better satisfy consumers.

      The Kirznerian entrepreneur is alert to "facts" concerning the valuations of others. He uses these discoveries to *grab* the profit opportunities laying around, and this serves to move the economy closer to equilibrium.

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  4. Klein seems to only want to change "alertness" with "judgement. It is all much ado about nothing. Klein is no entrepreneur and even less of a scholar.

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  5. "Koch brothers, Sheldon Adelson or Donald Trump, I surmise that it would be hard to spot them taking great risks."

    Sheldon Adelson has gone broke several times on risks. Jobs lost his job. Koch and Trump I'm not too familiar with but I'm sure they've had theirs. But I think that to say that 'opportunities' exist to be alert for violates Occam's razor. Of course 'opportunities' exist, man's wants are unlimited as are his choices. Would not the entrepreneur be the one whom bests acts with the given resources bearing the uncertainty (risk) of whether or not the wants they seek to fulfill will result in a profit? They are also ones who clearly understand that cost is ephemeral, or rather, they understand that they are acting in the present with present resources.

    If they are 'alert' to already existent profit potentialities (what I'm guessing is meant by opportunities), that is akin to saying they have a hard gauge on other's subjective preferences and value scales which guide them to the best possible use of the given resources (including time). It also is to say that wants are already existent and waiting to be discovered.

    I think that's an overreach.

    I say that this would be an example of judgment which is based solely on the subjective evaluation of the 'environment' on behalf of the entrepreneur and his given resources. This is not done because an opportunity has been spotted, per say, but because they are in hopes of satisfying a want. Whether it is existent or not is not for the economist to question nor investigate. To say the want already exists may in many cases fall short of an accurate analysis as it cannot be applied to all cases of entrepreneurial action and violates Occams razor through confusing the issue at hand.

    This reminds me of Hayek's critique of Galbraith in Non-Sequitor:

    "Professor Galbraith's argument could be easily employed, without any change of the essential terms, to demonstrate the worthlessness of literature or any other form of art. Surely an individual's want for literature is not original with himself in the sense that he would experience it if literature were not produced. Does this then mean that the production of literature cannot be defended as satisfying a want because it is only the production which provokes the demand?"

    (COMPLETED IN SECOND COMMENT)

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  6. I realize it's a bit of a stretch in this context but I thought about this passage because the entrepreneur in many cases is not certain whether or not they are already satisfying a want or will create one. In fact sometimes they are sure of one or the other completely; or a mixture of the two.

    Basically uncertainty cannot be avoided in the process. The entrepreneur thus fulfills the function of best allocating their resources (means) in the present in hopes of attaining a higher outcome in the future. They understand that they are only acting with present means, within tolerance of their own individual time preference, towards what they hope (or assume) to produce a higher rate of return than other endeavors. If this were not so they would not act on their impulse as it would be known not to produce a favorable result. Keep in mind that for some this return may be psychic, in any number of ways, and is to be determined by the actors themselves based on their own individual valuations so far as cost/benefit are concerned.

    If there is any alertness it is to the possibility of risk given uncertainty. With the cost, time preference, and expectations taken into account the entrepreneur acts, and the more adept entrepreneur acts responds quickly to their judgements and impulses. They are those who best trust their judgments. If there is any reward it is given to the entrepreneurs who best utilize their resources (keep in mind this includes time as it is scarce).

    I firmly do not believe that there are 'good' or 'bad' entrepreneurs in a certain sense, merely more or less skilled. There are only acting men and women in the present, with their given resources, and the environment in which they will use them. We are all then entrepreneurs to some extent. We are all unsure as to the future conditions therefore we must make judgments. 'Opportunities' are nothing more than 'better' judgments of future conditions and are only observed as such ex-post and if successful.

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  7. I am confused. How does an alert entrepreneur ever end up making a loss? surely there is some judgment involved before the guy actually puts some of his capital at risk, no?

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