Academic journal article
By Horwitz, Steven
Journal of Private Enterprise , Vol. 25, No. 2
This comment on papers by Klein and Briggeman (2010) and Kirzner (2010) argues that Kirzner's work on entrepreneurship and coordination is best understood as offering a "solution" to the problem of how knowledge is spread through markets as posed in Hayek's "Economics and Knowledge" essay (1937). It is the entrepreneur who facilitates this microeconomic coordination by bridging those knowledge gaps. This concept of coordination is distinct from Klein and Briggeman's "concatenate coordination," as Kirzner notes. The paper tries to clarify these issues and suggests that Klein and Briggeman are really talking about "order," not "coordination."
JEL Codes: B25, B53
Keywords: Coordination; Entrepreneurship; Equilibrium
The exchange between Klein and Briggeman (2010) and Kirzner (2010) involves some of the most abstract and complex questions we face in trying to understand what it is that market economies do and how exactly they do it. They are also questions of great importance for our ability to defend the classical liberal argument for the beneficence of markets, as the back-and- forth over those issues in the exchange bear out. And, as Kirzner notes, the very nature of economics as a distinct science is also at stake given the argument that Klein and Briggeman (henceforth, following Kirzner, K-B) make.
Even as I understand the concerns that K-B have about the "100%" categorical claims they believe Kirzner to be making, concerns that I share in many ways, I do think that they are unfair to Kirzner along several dimensions. As Kirzner himself notes, they have misread his view of what precisely constitutes coordination in a strictly economic context. Kirzner's focus is more narrow than that of KB, and the result, from my perspective, is that K-B end up arguing for a position that contrasts itself with one that Kirzner does not himself hold. What K-B call "concatenate coordination" is a different animal from the "coordination" that is at the center of Kirzner's work. Despite their attempts at using the adjective to distinguish them, I want to suggest that a better word for what K-B are talking about is "order." In fact, Austrians covered this "coordination vs. order" ground many years back, and reviewing the issues raised there may help us to understand the core of the debate at hand.
II. Kirzner's Entrepreneur as the Misesian Solution to a Hayekian Problem
One element of K-B's argument is to try to "dehomogenize" Mises and Hayek, though around issues different from those raised by Salerno (1993) and others. K-B are troubled by what they see as Mises's categorical claims about markets and his a prioristic methodology and its "apodictic certainty." They argue that Kirzner's work is in this Misesian tradition, and one way of reading their paper is that it is a plea to Kirzner to become more "Hayekian" so that all the good things in Kirzner's work would be more persuasive to more people. Kirzner responds, rightly in my view, that this is a fundamental misunderstanding of his work in that Kirzner has never been committed to Mises's epistemology and that Kirzner has had a much more Hayekian vision of economics and the economy than KB give him credit for. Saying that an author has a better understanding of his own work than do his critics seems a rather obvious point, but it is worth making anyway: I think Kirzner is correct here.
Perhaps one way to see the point is to offer yet another way of summarizing Kirzner's work on competition and entrepreneurship. What the entrepreneur does, for Kirzner, is to provide a Misesian solution to a Hayekian problem. The Hayekian problem is the one Hayek raises in "Economics and Knowledge" (1937, pp. 50-51). There Hayek says:
The problem we pretend to solve is how the spontaneous interaction of a number of people, each possessing only bits of knowledge, brings about a state of affairs in which prices correspond to costs, etc. …