Tuesday, October 8, 2019

Why Israel Kirzner Should Be Awarded the Nobel Prize in Economics

Israel Kirzner

By Robert Wenzel

The Royal Swedish Academy of Sciences will announce its 2019 award of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel (if any) on Monday, October 14.

I have been on record since at least 2008, calling for  Israel Kirzner, professor emeritus at New York University, to be awarded the Nobel Prize. 

Kirzner studied under the great Austrian economist Ludwig von Mises and I believe his work on entrepreneurship is pathbreaking 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. (See: Competition & Entrepreneurship)

Thus, the role of the entrepreneur and that of the person who risks capital 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.

Robert Wenzel is Editor & Publisher of EconomicPolicyJournal.comand Target Liberty. He also writes EPJ Daily Alert and is author of The Fed Flunks: My Speech at the New York Federal Reserve Bankand most recently Foundations of Private Property Society Theory: Anarchism for the Civilized Person Follow him on twitter:@wenzeleconomics and on LinkedIn. His youtube series is here: Robert Wenzel Talks Economics. More about Wenzel here.


  1. Kirzner's position on entrepreneurship used to be correct - if you've got a good idea you could raise funds relatively easily. That's how Silicon Valley worked before the first Internet boom.

    Since then it mutated into massive money laundering operation for converting freshly printed money into personal gains. The VCs are more interested in people who are "in" and known to be willing to play the pump-and-dump get-big-fast game. An entrepreneur can no longer just walk in the door and get a hearing for his ideas; you need introduction from the circle of trusted people.

    Thus, the formerly egalitarian Silicon Valley became a kind of neo-feudal society which effectively keeps out real entrepreneurs and promotes well-connected fauxpreneurs of Adam Neumann's and Elizabeth Holmes' ilk.

    1. This has interested me. I;d like to know where I can get a more in-depth analysis on this.

    2. "An entrepreneur can no longer just walk in the door and get a hearing for his ideas; you need introduction from the circle of trusted people."

      What's wrong with this approach? If I were going to invest in a venture, I'd want to check out the management team with folks I trust who know the team better than I do. Given how many ideas the venture firms learn about on a weekly basis, they have to have some proven ways to filter them and prioritize use of their scarce work hours.

      No one is stopping other investors from experimenting with hearing every idea that "walks in the door."

    3. Yeah, that kind of due diligence is how pretty well-regarded venture firms ended up investing ungodly sums of money into likes of Theranos and WeWork.

      Personally, I'd trust my money to an engineer before trusting any management type. The problem with engineers is that they tend to be honest - you can't BS a computer. They also want to build novel products rather than toil on putting lipstick on the warmed-over rehash of the good old. Hard to use a techie with an idea for a pump-and-dump scheme. The insular culture of "insiders" vs outsider unwashed masses cannot but turn corrupt. Or worse. There already are rumors of access being traded for sexual favors and such (not up to the Hollywood levels, but Hollywood had a lot more time to develop this "culture").

  2. 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

    1. Wrong. Not everyone sees opportunities. Entrepreneurs face risks and costs: opportunity costs, reputation, time, etc. This does not require capital.

  3. 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. Making it happen. That includes putting together the right team and raising the capital among a thousand other things. And Dennis made it happen to the tune of nearly $1 billion. He also made it clear in his book that egalitarianism had nothing to do with it (sorry averros). There are others besides Dennis of course but it is those who can think and do and become entrepreneurs that deserve the accolades. Besides is the Nobel prize of any real significance? After all Prez Obama received the Nobel peace prize and promptly destroyed the peace in more countries than any president before him.

  4. In my previous post I erroneously referred to Dennis Felix when I meant Felix Dennis. My humble apologies to the memory of Mr. Dennis who passed away a few years ago. A great entrepreneur.