Israel Kirzner

Israel M. Kirzner (born 1930) is an Austrian-American economist, born in London, who studied under Ludwig von Mises at New York University and earned his Ph.D. there in 1957, taking a faculty chair in 1968. He taught at NYU until his retirement in 2001 and built, with Ludwig Lachmann, the graduate programme that trained much of the modern Austrian School in the United States.

He is best known for a theory of entrepreneurship built on the idea of alertness.

Entrepreneurship as alertness

Kirzner's central claim is that the entrepreneur's distinguishing function is neither bearing risk nor supplying capital nor managing a firm, but noticing an opportunity that others have overlooked. Where the same good sells for different prices in two places, or where inputs can be combined into something worth more than they cost, a discrepancy exists that anyone might in principle exploit. What is scarce is not the resources but the alertness to see that the opportunity is there.

The entrepreneur so understood need not own anything. He earns profit by acting on a discrepancy, and in acting on it he removes it: buying where the price is low and selling where it is high narrows the gap. Entrepreneurial activity is therefore an equilibrating force, driving the market toward the coordination it never fully reaches.

This is a deliberate contrast with Joseph Schumpeter, for whom the entrepreneur is a disruptive innovator who displaces an existing equilibrium. Kirzner argued that both descriptions capture real behaviour but that the equilibrating function is the more fundamental, since without it markets would exhibit no tendency toward coordination at all.

The debate with Lachmann

Kirzner's position was contested within the school by his own NYU colleague Ludwig Lachmann, who held that in a world of genuine uncertainty and divergent expectations there is no reason to expect entrepreneurial activity to converge on anything. On Lachmann's radical subjectivist view the market is a continuous process without a destination, and expectations are as likely to scatter outcomes as to coordinate them.

The exchange is one of the defining internal disputes of the modern Austrian School, and the two positions continue to mark a division between those who emphasise the market's coordinating tendency and those who emphasise its open-endedness.

Selected works

• The Economic Point of View (1960)
• Market Theory and the Price System (1963)
• An Essay on Capital (1966)
• Competition and Entrepreneurship (1973)
• Perception, Opportunity, and Profit (1979)
• Discovery and the Capitalist Process (1985)

See also

• Entrepreneur
• Austrian School
• Ludwig von Mises
• Market
• Competition

Links

• Works by Israel M. Kirzner at the Liberty Archive
• Daily articles by Israel Kirzner
• Israel Kirzner at Wikipedia