Sunday, October 13, 2019

A Couple of Notes on Kirznerian Entrepreneurship


At the post, Why Israel Kirzner Should Be Awarded the Nobel Prize in Economics, some commenters have added observations that require discussion.

VS writes:

Wrong. Everyone sees opportunities. Those that risk capital to pursue them are taking unusual risks and are entrepreneurs. Kirzner's definition is like calling anyone who has ever dribbled basketball a "Basketball player". Its meaningless
VS has slyly entered a claim that is not part of Kirznerian entrepreneurship.

When Kirzner is discussing entrepreneurship, he is talking about acting man and not someone who just sees opportunities. That is, Kirzner's entrepreneur is acting on the alertness hs spots.

Kirzner writes in Competition and Entrepreneurship  (my highlight):
The profit opportunities represented by such price differences open up a dimension for purely entrepreneurial activity which requires the entrepreneur to contribute no resources whatsoever. This activity will consist exclusively and buying resources and selling products.
BE also fails to understand that Kirzner is talking about acting man, when he writes:
Entrepreneurism is complicated. Kirzner has identified one element in "alertness to opportunities." But one of my favorite entrepreneurs, Dennis Felix observed that ideas are a dime a dozen. The key to success is in the execution of the idea. 
Austro-Punk attempts to reintroduce the element of risk into Kirzner's entrepreneur which is not there:
 Entrepreneurs face risks and costs: opportunity costs, reputation, time, etc. This does not require capital.
AP here fails to understand that Kirzner is discussing the pure category of entrepreneurship and not a combination with other productive factors that are most often found in the real world.

A capitalist, for example, may have to make phone calls, write checks, etc. which are labor but when an economist is discussing the pure capitalist, he is discussing man acting in the sense of providing capital and nothing else.

When Kirzner is discussing the category entrepreneurship, he is not considering the risks associated with ancillary labor etc.

A further note: I am also having an email debate on Kirznerian entrepreneurship with Dr. Walter Block which I will publish in a separate post.

-RW





4 comments:

  1. Incorrect on my comment about time being a factor. In the category of "acting man and not someone who just sees opportunities" as you state, time is *inherently* a factor. From one action to the next implies passing time. An entrepreneur (in the Kirznerian sense) cannot act without time passing; it is impossible. Even you admit in an earlier post:

    "As for the time it took to set up the entrepreneurial opportunity, I DON'T DENY THAT THIS COSTS EXISTS, but, it is different from the capital risks that are at the heart of Klein's entrepreneur."

    https://www.economicpolicyjournal.com/2012/05/battle-over-essence-of-entrepreneurship.html

    Notice how you admit that the cost of time exists, and is therefore present in action. Let's look at Kirzner's quote from Perception, Opportunity, and Profit (pg 189):

    "Rather, *pure entrepreneurship* is responsible-in the sense relevant to the ethical connotations of "what a man has produced"-to the ENTIRE product.

    Tell me, how does an entrepreneur capture profit in the Kirznerian sense without the passing of time?

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    1. Well, I could say that the act of investing capital requires labor. How are you going to invest capital without some labor?

      The point is as I state "to understand that Kirzner is discussing the pure category of entrepreneurship and not a combination with other productive factors that are most often found in the real world" (time/labor).

      That is, we do not identify the labor extended by the capitalist in the real world as part of the pure nature of capitalism, even though it must exist. In the same way, we do not identify the labor (time required) by the entrepreneur as part of the pure nature of entrepreneurship.

      We are talking essences here not secondary derivatives which combine elements of the real world. Indeed, we may correctly say that in the real world an entrepreneur must use labor, and time invested (capital) to act on an opportunity but this simply obscures the essence of entrepreneurship which is acting based on alertness to opportunity.

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    2. While I understand what you mean by the "pure" entrepreneur and largely agree with the Kirznerian perspective, I think you weaken the case for it by casting these *necessary* aspects (time, opportunity costs) of it aside as "secondary derivatives".

      And your last paragraph is totally off. Mentioning that time is a component of entrepreneurship doesn't obscure anything. On the contrary, it makes it MORE realistic as a concept when combined with alertness to opportunity.

      In fact, look at your critique of another commentor:

      "When Kirzner is discussing entrepreneurship, he is talking about ACTING MAN and not someone who just sees opportunities. That is, Kirzner's entrepreneur is acting on the alertness hs spots."

      You emphasize there that it's not JUST alertness that comprises the entrepreneur, but ACTION as well. Yet with me, you state that it is action but ignore the Misesian insight that there can be no action without the passing of time. Speaking of any economic activity without incorporating time is a mainstream, static, equilibrium-based way of looking at economics

      Time is not a derivative of alertness. Alertness cannot exist without the passing of time.

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  2. I tend to agree with A-P in part because Kirzner's "alertness to opportunity" then acted upon by "selling resources and buying products" is a description of arbitrage. And I think entrepreneurism is more than arbitrage. Felix Dennis' belief that its the execution that makes a successful entrepreneur seems to encompass what A-P proposes. Academically I find the essence described by Rothbard and Mises more powerful. They believe the entrepreneur facilitates the conversion of subjective, immeasurable valuations of potential consumers into the objective, measurable prices used to guide business activity (especially capital investment) to a successful consumer satisfying conclusion. But identifying the essence of entrepreneurism is perhaps in the eye of the beholder.

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