The Forgotten: “Alternative Views of Mengerian Entrepreneurship”

25 February 2011 at 6:54 pm 5 comments

| Peter Klein |

A film blog I follow, the Mubi Daily Notebook (formerly called The Auteurs Notebook) runs a regular feature called “The Forgotten,” showcasing obscure but important older titles. I propose doing the same thing here. Our first entry is a 1979 article by Dolores Tremewan Martin, “Alternative Views of Mengerian Entrepreneurship” (History of Political Economy 11, no. 2). Martin provides an excellent summary and critique of Menger’s subtle approach to the entrepreneur, one largely ignored in the current entrepreneurship literature, even among Austrian economists. Contrasting Schumpeterian and Knightian views on entrepreneurship, Martin argues that Menger’s position is close to Knight’s (and, hence, that Knight is much closer to the Austrian school than is generally recognized).

As Martin points out, Menger’s entrepreneur (Unternehmer) is a resource-owning, information-acquiring coordinator seeking to acquire and combine undervalued assets (using an “input-computing capacity”). Entrepreneurial activity is scarce, in that it is associated with ownership of scarce capital, but also “unique in that, unlike other goods of higher order, it is not intended for exchange and therefore does not command a price.” There are important differences bewteen Menger and Knight concerning types of uncertainty and the effect of uncertainty on profit. Still:

Menger does not treat the entrepreneur as being the “innovator,” “mover,” or “force of change.” Menger places stress on the entrepreneurial function and the role of uncertainty, not innovation, as giving rise to the possibility for rewards. As Schumpeter [the historian of economic thought] suggests, the economic process viewed by Carl Menger is essentially similar to that of Frank Knight. . . . For Menger (as for Knight) the entrepreneurial activity consists of a more correct — “more rational” — evaluation of goods of higher order. This view contrasts with Schumpeter’s personification of the entrepreneur as the hero of the capitalist drama.

Entry filed under: - Klein -, Austrian Economics, Entrepreneurship, History of Economic and Management Thought, Theory of the Firm.

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5 Comments Add your own

  • 1. Michael Marotta  |  26 February 2011 at 4:45 am

    Unfortunately, the article is not available via JSTOR or Gale Cingage and the link requires a login or payment. This presents an example meta-economics: the markets for studying economics. Be that as it may…

    I benefit greatly from these topics on Entrepreneurship, as “business people” are too carelessly tossed under rubrics that function as buses. My sociology and criminology professors lumped them all together and then blamed them for what is wrong with society.

    Allow me to suggest that no one definition will meet all cases. Perhaps expecting to find or create such a definition is itself non-Austrian.

    By analogy, what is a “doctor”? First separate the Ph.D.s and EdDs etc from the MDs. When is an MD “really” a doctor? After medical school? Internship? Residency? Board licensing? What of researchers, as opposed to practitioners? And what of all the specialties? How can pediatrics and gerontology be subsumed by the same label?

    So, too, with entrepreneurship, are there many facets and aspects of a complex phenomenon. We choose which to focus on for specific purposes. Risk-taking, innovation, ownership of resources, carrying, all and more are available to the person whom we study.

    Yet, at some level, just as we are all responsible for our own health, so, too, is every human actor an entrepreneur. Some are so quite self-consciously. Millions are not.

    That entrepreneurship has no price, cannot be transfered, seems at once curious and yet perhaps axiomatic to the ethics of capitalism. In both formal philosophy and romantic fiction, Ayn Rand’s heroes are not for sale.

  • 2. Peter Klein  |  26 February 2011 at 11:16 am

    If anybody knows where to find an ungated version, please share!

  • 3. Per L Bylund  |  26 February 2011 at 11:58 am

    Surely it is “UnternehMer” and not “UnterneRNer”…?

  • 4. Peter Klein  |  26 February 2011 at 12:11 pm

    Yes, thanks for the catch, typo now fixed (the result of a bad copy-and-paste OCR conversion from the original PDF).

  • 5. paolo mariti  |  28 February 2011 at 12:57 pm

    Michael I agree very much with you. Let’s put it more bluntly: most -if not all – studies about entrepreneurship look like trying to provide an (of course deep) insight into what may be termed “chickenness”. We all roughly know what a chicken is. Try to answer the question:”what’s chickenness”?

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