Wednesday, December 13, 2017

The Significance of the Rothbard vs. Kirzner Debate on Entrepreneurship

From the always welcome comments by The Napster, at the post, Rothbard vs. Kirzner on Entrepreneurship he writes:
Robert, what is the practical significance of classifying a profit-maker as an entrepreneur or not an entrepreneur? Why does this matter?
This debate is extremely important but not because of simple classification. Rothbard believes capital is required to become an entrepreneur, Kirzner does not.

If Kirzner is correct, as I believe he is, it means that the lack of capital is not an impediment to becoming a successful major league profitable entrepreneur. Thus, it is not an impediment to those in middle and lower classes who don't have their own capital.

On the other hand, if Rothbard is correct and capital is required to be an entrepreneur this seemingly makes it impossible, or extremely difficult, for a poor person to gain significant entrepreneurial profits. It would be a great plodding at best.

In short, Kirzner's view suggests hope, opportunity and the potential for great gains without personal capital, while Rothbard's perspective does not. It suggests a great impediment for the lower classes to break into the entrepreneurial class to any significant degree.



  1. The bottom line her is scale and regulation. If you are small resource capable and monopoly or cost of doing business is a high impediment this is a moot point.

    Just look at the decline of small business in this country!

  2. OK, Silicon Valley 1970's:
    I got a great idea (think Jobs / Woz).
    I shop it around. Hook up with Markula, shop around higher echelon, get funding to really produce product, product takes off, etc. etc.
    No capital in that. Capitalists (vulture capital) are in a different line of endeavor. They don't design, code, or market. They just put up their MONEY. This is heroic, BTW. It's Real Money!
    Anyhow, the product succeeds, the entrepreneurs (Jobs, Woz, Markula) make out. The capitalists make out (track AAPL from 1975 to today), and that's the game.
    Entrepreneurs and Capitalists are not the same function (but MAY be the same people). I've been laboring this idea since the 1970's, but nobody seems to get it (except Kirzner).

  3. Robert, thanks for your response, but I'm not sure I fully follow you. Perhaps my original question wasn't clear. My point is that this seems to be a very academic debate of no practical significance.

    If you believe that it is a fact of reality that someone can make profits without risking his assets, then that reality cannot be negatively impacted by someone holding Rothbard's view, nor positively impacted by someone holding Kirzner's view. Moreover, not only do the folks looking to make profits not care about this academic debate, they may not even know about it, so which way it concludes cannot be said to give them "hope" or despair.

    Don't get me wrong, I love a good academic debate, and I continue to disagree with your conclusion, but if everyone suddenly agreed with Rothbard/Peter Klein, that wouldn't have any impact on who makes profits and who doesn't.

  4. The way I see it the capitalist and the entrepreneur are separate entities. But they need each other. Capital is required to be an entrepreneur but, to be an entrepreneur you do not need to be the supplier of capitol. A capitalist that cannot conceive of, construct and run a business needs people that can.

    I am not an academic so correct me if I am wrong. A capitalist is someone that risks capital. Capitol are assets other than land and labor (although my pea brain thinks land should be included as capitol). An entrepreneur risks their ideas and or their time without compensation other than a piece of the pie.

    Real world example. Speedplay Pedals. At the time the business was started the person with the original concept of the product had very little capitol. At the beginning the business was bank rolled by other than the inventor of the pedal and all inside labor (manufacturing was subbed out) was done by partners without salaries and payroll.