Kirznerian versus Knightian Entrepreneurs in Film

25 January 2011 at 8:35 am Peter G. Klein 4 comments

| Peter Klein |

Kirzner’s entrepreneur is a pure discoverer who owns no capital. Knight’s entrepreneur is an uncertainty-bearing, resource owner with skin in the game. So who do you think is the real entrepreneur, Jerry Lundegaard or Wade Gustafson?

Bonus: my favorite scene from Miller’s Crossing, useful to illustrate the differences between action (emphasized by Knight) and cognition (emphasized by Kirzner):

Tom
So the deal is, I give you Bernie, smooth it
over with Leo, and you bail me out with Lazarre.

Caspar
Yeah, then we’re all friends again: You, me,
Leo, the Dane.

The Dane sneers from the couch:

The Dane
We can maybe have tea sometime.

Caspar
C’mon, Dane, Friends is a mental state.
Wuddya say, kid?

Tom
. . . I’ll think about it.

Caspar
He’ll think about it. Hear that, Dane?
That’s terrific. The kid’s a thinker.

The Dane
Does he want a pillow for his head?

Caspar
Okay kid, think about it. It’s a mental state.
But make it quick, my family’s waitin’.

Tom
I’ll think about it and tell you later.

Dane
He needs to think in the thinking room.

Caspar shakes his head sadly.

Caspar
Kid, if it’ll help you think, you should know
that if you don’t do this you won’t be in any
shape to walk outa here.

Tom considers this.

Tom
. . . Would that be physically, or just a mental
state?

Entry filed under: - Klein -, Entrepreneurship.

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4 Comments Add your own

1. gabrielrossman | 25 January 2011 at 2:05 pm

also, “The Dude” is a pretty good illustration of a Simonian satisficer.
2. Peter Klein | 25 January 2011 at 3:41 pm

“Extant literature shows how agents respond to the higher piece rate by increasing effort levels while decreasing contributions to non-selling activities. In our model, however, the agent just wants his rug back.”
3. Michael E. Marotta | 25 January 2011 at 7:20 pm

It may be a distinction without a difference. Adam Smith nodded to the entrepreneur who invested his own savings in expansion. He did not like joint stock companies. In the 19th century, they became the norm. Then, in the 20th some theorized that the stock market made that sole entrepreneur investing his own savings obsolete. Then, it was thought in the 1960s that the “real” entrepreneur put together mergers and acquisitions, that the “problem of production” had been solved. (Which is what Marx thought before the invention of the electric motor … or the computer.) And, indeed, bringing entities together is a kind of entrepreneurship, as when J. P. Morgan created U.S. Steel, or when General Motors was formed.

Even in the 1970s, when firms such as Data General and Digital Equipment were being underwritten by venture capitalists, they expected the company principals – three men in a garage – to put up something, mortgages, whatever, to have “skin in the game” no matter how it was dwarfed by the IPO.

In the great age of railroading, John Stewart Kennedy (The Man Who Found the Money by Engelbourg and Bushkoff) started off as little more than a wholesale grocer supplying railroad construction teams. Eventually, he put together his own investment teams, ultimately for James J. Hill. Through all of that, through bankruptcies and reorganizations, buy outs and recapitalizations, there were always many ways to arrange management, control, reward and risk.
4. Joe Mahoney | 26 January 2011 at 6:34 pm

Arrow’s “paradox of information” comes into play as well.
Jerry gave his entire idea away for free. Doh!