Monday, September 10, 2012

The Kirzenerian Entrepreneur

In answering some of Peter Klein's specifics objections to my earlier posts, judging from the comments to my new post, I fear things have gone off track a bit relative to a consideration of what the essence is, in my view, of the Kirznerian entrepreneur. I would like to address this specifically.

In my view, the question comes down to what is the role of the entrepreneur, is he at his core a risk taker or opportunity spotter and actor on opportunities he spots?

It is easy to understand that a capitalist who puts money up is a risk taker in the sense that he can lose money from an investment. But is there some other element in acting man, whereby, action takes place but there is no risk? I would argue that such acting men exist and that it is best to call them entrepreneurs. That is, individuals who seek out profit opportunities, and in their role as entrepreneurs, do not expose themselves to risk but put operations together to seek out the profit they see.

I believe I have answered fully, Klein's introduction of the concept that there are "no objective opportunities", in my earlier post, when I point out man acts in an imprecise world and ignores far out possibilities.

But to go into further detail on this concept, it should be made clear that acting man may consider an opportunity to be "riskless" and an "objective" profit opportunity ex-ante, because he ignores extreme possibilities, but ex-post if the man in my earlier example stoops to reach for a ten dollar bill and it causes him to get hit by a meteor, a truck jumping the curb or a swarm of bees, may in actuality suffer a loss. Both Kirzner (see his video) and I do not rule out ex-post losses.

That said, it is hard to understand how these losses fall in the lap of the entrepreneur  versus the capitalist or laborer. In the case of my ten dollar bill example, the entrepreneur turns into a laborer when he stoops to pick it up, and any risk falls on the laborer. This is best understood, if we split the two operations up, say our acting man spots the ten dollar bill but is walking with a young boy and points out the bill to the young boy and has him pick it up.

In cases, where capital is involved, it is the capitalist who suffers such losses rather than an entrepreneur who spots the opportunity and brings capital together with labor to go after it.

Thus, in my view, it is hard to see how any projects are launched unless someone sees the opportunities, i.e., is alert to them. A man simply with capital, who sees no opportunities will not act. Spotting opportunities must somehow occur and appears to me to be the essence of what an entrepreneur does and this appears to be a different role than that of the capitalist who does assume risk---but only after an entrepreneur brings an opportunity to his attention (or acting on his own as an entrepreneur recognizes the opportunity for his capital).

1 comment:

  1. It resembles that of the Philippines business climate. Huge companies can start up within a few months while small and local companies are finding it difficult in the pure competition scene. start business philippines is derailed due to high electricity rates.