I trust that you know these intricacies since you study deeply the literature. You said, ‘Kirzner’s “pure entrepreneur” does not invest even that. He simply “discovers,” without any expenditure of resources at all, even his own time and effort! (If effort is involved then the actor is engaged in Stiglerian search, not discovery, according to Kirzner.)’

When I read Kirzner as a non-specialist but as a subjectivist I do not see a problem with ‘discovery’ and I never assumed that the entrepreneur didn’t use his own time and effort since active entrepreneurship is technically an effort and it is a real world experience so it takes time.

I acknowledge that your very fine scrutiny is meant for specialists like yourself. Such in-depth examination will lead to refinements possibly and maybe Kirzner was a specialist of that degree which makes him ‘guilty’ of an error.

I am not doctrinaire with regards Kirzner or other great classical liberals but how accountable are our predecessors given the advantages we have (including their contributions).

This is the reason I still accept that pure entrepreneurship represents ‘something from nothing.’ But I still find your refinement interesting.

Empirically, of course, this kind of personal entrepreneurship, if we want to call it that, is not as important to the market economy as the entrepreneurship of the business investor, the firm founder, etc.

In the entrepreneurship literature in management is is common to separate the entrepreneurial process into distinct stages, such as discovery and exploitation. In my framework, this separation is illegitimate, because discovery without exploitation isn’t entrepreneurship at all. As Rothbard (1985) put it, “Entrepreneurial ideas without money are mere parlor games untilthe money is obtained and committed to the projects.”

I am trying to digest your points and I seem perfectly satisfied with your explanation.

Regards point #2, I was referring to the action of pure entrepreneurship which appears to have been further divided into two parts (intervals): opportunity discovery and then opportunity exploitation. They are a part of the same process and since one preceeds the other it can be viewed as a continuum. Since the discovery may or may not always be recognized (As I mentioned as a comment on the Mises Blog: ‘If my discovery is personal and ideal it is still mine and yet it may never appear as a transaction so it may never seem ‘exploited.’ But if action has taken place and my ‘property’ has expanded how can someone declare it insufficient to drive the market. It may be subtle but somewhere along the line the market will feel the effects!’)
it cannot be discrete enough to identify and classify without losing the reality that the subjectivist methodology permits. As a consequence this step of separating the two parts of the same action process has the effect of separating the model from reality. Nevertheless this model may yield useful insight.

My point is that pure entrepreneurship exists and that it is one of the ways, in the powerful and magnificent economy, that property rights are constantly revitalized, potentially rendering wealth into poverty and poverty into wealth and that it is available to every human being. It is as simple as moving from latent entrepreneurship to active entrepreneurship.

Sudha, you are right, of course, Kirzner’s pure entrepreneur is meant as an ideal type. He doesn’t claim that real, flesh-and-blood entrepreneurs cannot own property. My point is that the analytical separation of alertness and ownership makes sense only in a model without uncertainty. (See Mises’s discussion of “the imaginary construction of functional distribution,” discussed in Joe’s paper cited above.) Given Knightian uncertainty, entrepreneurship and ownership cannot be separated, even analytically. In such a world, what does it mean to “spot opportunities”? There are no opportunities, only entrepreneurial judgments about actions that might or might not generate receipts in excess of their outlays (with appropriate discounting).

Mises’s example of workers exercising entrepreneurship illustrates this perfectly. In a world of uncertainty all human action involves a measure of entrepreneurship, since we employ known means in pursuit of ends that may or may not be achieved. If I buy a new suit before a job interview I am acting entrepreneurially, making an investment I hope will pay off in higher wages. Workers, consumers, landlords, all exercise a measure of entrepreneurship. But the entrepreneurial function (judgmental decisions about deploying resources under uncertainty) can be separated, analytically, from the wage-earning or rent-earning or interest-earning functions.

To make a long story short, I don’t see how invoking “alertness” or “discovery” helps us here. What phenomena does it explain that judgment cannot explain?

Bruce, thanks for the kind words. You could have stopped there! :-) As for the rest, I’m not criticizing Kirzner’s subjectivism at all. Actually, one could argue that Kirzner’s concept isn’t subjectivist enough, because it treats profit opportunities as objective (albeit not universally perceived) phenomena. In the Knightian view profit opportunities don’t “exist” in any meaningful sense. Rather entrepreneurs take actions based on their perceptions of possible outcomes. What could be more subjectivist than that?

As for your point #2 about discrete intervals, I don’t get what you mean.

Paolo, as Nicolai and I have written in several papers, the “rights to use resources” cannot be separated from the ownership of resources if contracts are incomplete. Ownership implies residual rights of control, in Hart’s terminology — the right to make decisions about the employment of resources in situations not covered by contract. In Nicolai and Kirsten’s “assets and attributes” terminology, ownership gives the owner the rights to attributes of assets that are not known ex ante.

I have nothing but praise for your work and recognize that you are neatly bridging subjectivist economic science with the empirical attempts to describe economic action, but the essence of entrepreneurship is alertness.

There are many examples of how alertness appears in the economy and studying them intricately can be instructive but never will such an exercise justify losing the underlying essence of what it is.

Even though Kirzner was quite precise in his work and even empiricists can identify with his economic contribution he nevertheless was a subjectivist and his definition of pure entrepreneurship is one proof of that inclination. To try to say that his definition of pure entrepreneurship was a little off is mistaken for two reasons:
1. It subtly attacks the subjectivist methodology.
2. It fails to recognize that action is a continuum and not made up of distinct intervals or units. For detailed study it may be instructive to define intervals but that is not reality, only a model.

With warm regards,
Bruce Koerber

See Mises’ discussion of ‘ideal types’. Also his point that (eg) ‘workers’ exercise entrepreneurship when they move to an area in anticipation of higher wages.

I am not much of an economic historian, but if entrepreneurship is characterised as risk rather than ignorance would it not have been considered as a type of capital in neoclassical formulations?

In linking entrepreneurship to resources I do not at all mean to suggest that entrepreneurship is itself a resource. Rather, entrepreneurship is the faculty of identifying, valuing, combining, and deploying resources. (In long-run general equilibrium with no uncertainty, but positive time preference — what Mises calls the “evenly rotating economy” — laborers would continue to earn wages, landowners would collect rents, and capitalists would receive interest, but there would be no entrepreneurial profit and loss, because all factor payments would equal their discounted marginal revenue products, leaving no residual for the entrepreneur. Hence entrepreneurship is not a factor like land, labor, and capital.)

I agree with your characterization of Kirzner. But his discovery-process approach is not the only way to put entrepreneurship outside the usual optimization framework. Knight’s concept of judgment, which I prefer, does this too.