Friday, September 26, 2014

Austrian School Economist Named as Possible Nobel Prize Recipient

The Austrian School economist, Israel Kirzner, has been named by the Thomson Reuters news organization as a possible recipient of this year's Nobel Prize in economics.

Thomson Reuters makes their Nobek Prize predictions based on the number of citations and references the scientific community has made to the contenders' research and publications. Although not a perfect measure of prediction, Thomson Reuters has managed to successfully predict 35 Nobel winners since 2002, when they developed these forecasts, reports BI.

I have been on record since at least 2008, calling for Kirzner to be awarded the Nobel Prize. (I am also on record advocating the Nobel Prize be awarded to Walter Block and Lew Rockwell)

Kirzner studied under the great Austrian economist Ludwig von Mises and I believe his work on entrepreneurship is path breaking and has significant policy implications.

Kirzner's important insight is in drawing out the essence of what entrepreneurship is. He argues that entrepreneurship is the ability to recognize a potential opportunity and act on it. Notably, and this is where, in particular, many other Austrian economists differ with him, he does not see the risking of capital as a characteristic specifically tied to the entrepreneur.

He sees the awareness of where capital can be found to be part of what an entrepreneur must be aware of to successfully complete an entrepreneurial project, rather than that the entrepreneur himself must have capital at risk.

Thus, the role of the entrepreneur and that of the person who risks capital are generally tied close together, they are two separate functions.

If Kirzner is correct about this, and I believe he is, then it has profound policy implications, since those who argue that a person in poverty does not get an even break, are set back significantly by Kirzner's observation. Since if personal capital that is owned by the entrepreneur is not necessary to launch an entrepreneurial project, then the poor person is not at a disadvantage in pursuing entrepreneurial opportunities, simply because he is poor, Thus the poor do not need a special break. The poor who spot entrepreneurial opportunities, including where to find willing capital investors, can do so without the advantage of their own capital, and thus they can lift themselves from poverty just by keen entrepreneurial awareness.


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