Archive for 24 October 2008
Kirzner’s Tapestry
| Peter Klein |
One of the points I make in my forthcoming SEJ paper is that Kirzner’s metaphor of entrepreneurial discovery is, like Freud’s cigar, just a metaphor. It’s invoked by Kirzner to explain the tendency of markets to clear, not to describe a particular behavior or personality type. Applied entrepreneurship studies aimed at identifying what kinds of people really “are” more alert to opportunities, in some sense we can measure with a survey or experiment, misses the point of the metaphor. Likewise, Kirzner does not mean that opportunities literally are given, objectively, in the environment, independent of human creativity. “Discovery” is an analytical construct, an instrumental device, not a description of behavior.
Kirzner explains all this in a 1997 interview:
Q: What do you mean in saying something is “waiting” to be discovered?
A: Philosophically, people have objected to that. I do not mean to convey the idea that the future is a rolled-up tapestry, and we need only to be patient as the picture progressively unrolls itself before our eyes. In fact, the future may be a void. There may be nothing around the corner or in the tapestry. The future has to be created. Philosophically, all this may be so. But it doesn’t matter for the sake of the metaphor I have chosen.
Ex post we have to recognize that when an innovator has discovered something new, that something was metaphorically waiting to be discovered. But from an everyday point-of-view, when a new gadget is invented, we all say, gee, I can see we needed that. It was just waiting to be discovered.
Q: Consumer demand was there, resources were there, and the technology was there. . .
A: Yes, so there was no reason why it wasn’t being done. The entrepreneur is alert to this reality, to the profit opportunity it represents, and responds creatively to it.
Notice the emphasis on opportunities “metaphorically waiting to be discovered,” not literally waiting to be discovered. Kirzner isn’t offering a particular ontology or epistemology, just proposing an analytical device, designed for a specific purpose (to understand market clearing). Some of the literature comparing “discovery” and “creation” as alternative conceptions of the entrepreneurial act seems to me to read too much into Kirzner.
Economic Notes From the Underground
| Peter Klein |
An interesting call for proposals from EconJournalWatch:
Fyodor Dostoevsky’s novella Notes from Underground (1864) is a classic of introspection and confession. The symposium takes its title from Dostoevsky’s work.
The prospective symposium will consist of confessional essays by economists about their existence as economists. Only genuine narrative and sincere reflection are welcome. However, essays may be anonymous.
Here are the kinds of confessions the editors have in mind:
- Building models one does not really believe to be useful or relevant.
- Making simplifications that obscure or omit important things.
- Using data one does not really believe in.
- Focusing on the statistical significance of one’s findings while quietly doubting economic significance.
- Engaging in data mining.
- Drawing “policy implications” that one knows are inappropriate or misleading.
- Keeping the discourse “between the 40 yard lines” so as to avoid being outspoken; knowingly eliding fundamental issues.
- Tilting the flavor of policy judgments to make a paper more acceptable to referees, editors, publishers, or funders.
- Disguising one’s methodological or ideological views, such as by omitting revealing activities or publications from one’s vitae.
- For government, institute, or corporate economists: Having to significantly play along with things one does not believe in.
My reaction: Can a single symposium issue possibly hold them all?
Want to Understand the Financial Crisis?
| Lasse Lien |
This clip will tell you what you need to know.
HT: Erik Døving
Dead Founders
| Lasse Lien |
Here is a link to a very nice paper in the somewhat morbid empirical tradition of using death as a natural experiment. Hans K. Hvide looks at the value of the founder to a newly established firm by examining the performance effects of founder death (or the death of a member of the founding team). Using several empirical tests and an impressive battery of robustness checks, he concludes that the negative impact of founder death is almost unnoticeable on all the classic performance variables. Apparently the importance of the founder is as a discoverer of opportunities and an initiator. As a manger the founder appears to be quite substitutable (on average).
Organizations and Markets 
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