What is the difference between Kirznerian entrepreneurship and Schumpeterian entrepreneurship

Discovering Kirzner, Week 1

We had a pretty good discussion today, especially on the distinction between the Schumpeterian and Kirznerian entrepreneurs (perhaps too much on Christiansen).  Ladies and gentlemen, the Kirznerian entrepreneur (emphasis his):

For me the function of the entrepreneur consists not of shifting the curves of cost or of revenues which face him, but of noticing that they have in fact shifted — Kirzner, Competition & Entrepreneurship, p. 81.

For further explication of the differences between Schumpeter and Kirzner (beyond what’s on pp. 79-81), see this piece by Don Boudreaux.

391 DS – Discovering Kirzner

Today we concluded this term’s Schumpeter Roundtable, what I consider a reasonably successful, certainly enjoyable reading of Joseph Schumpeter’s Capitalism, Socialism, and Democracy.  Those who follow our blog have probably pegged its authors (notably me) as Schumpophiles, so to speak, but I think it was just a groove that we settled into following our reading of the Thomas McCraw biography, Prophet of Innovation: Joseph Schumpeter and Creative Destruction.

For the Spring term, we will take a crack at another noted entrepreneurship scholar, Israel Kirzner, whose Competition and Entrepreneurship is considered a classic in Austrian Economics.  This is a one-unit course that will meet weekly for about half of the term.  The requirements are to read, participate in discussions, and complete a short writing assignment.

Yes, but what is it all about?

According to the book’s publisher, Kirzner “provides at once a thorough critique of contemporary price theory, an essay on the theory of entrepreneurship, and an essay on the theory of competition. Competition and Entrepreneurship offers a new appraisal of quality competition, of selling effort, and of the fundamental weaknesses of contemporary welfare economics.”  And, writing for the Concise Encyclopedia of Economics, Russell Sobel gets at why this is important:

Two notable twentieth-century economists, Joseph Schumpeter and Israel Kirzner, further refined the academic understanding of entrepreneurship. Schumpeter stressed the role of the entrepreneur as an innovator who implements change in an economy by introducing new goods or new methods of production. In the Schumpeterian view, the entrepreneur is a disruptive force in an economy. Schumpeter emphasized the beneficial process of creative destruction, in which the introduction of new products results in the obsolescence or failure of others. The introduction of the compact disc and the corresponding disappearance of the vinyl record is just one of many examples of creative destruction: cars, electricity, aircraft, and personal computers are others.

In contrast to Schumpeter’s view, Kirzner focused on entrepreneurship as a process of discovery. Kirzner’s entrepreneur is a person who discovers previously unnoticed profit opportunities. The entrepreneur’s discovery initiates a process in which these newly discovered profit opportunities are then acted on in the marketplace until market competition eliminates the profit opportunity. Unlike Schumpeter’s disruptive force, Kirzner’s entrepreneur is an equilibrating force. An example of such an entrepreneur would be someone in a college town who discovers that a recent increase in college enrollment has created a profit opportunity in renovating houses and turning them into rental apartments. Economists in the modern Austrian school of economics have further refined and developed the ideas of Schumpeter and Kirzner.

That’s a good start, and I look forward to developing some auxiliary materials to help us to understand the material. It would probably help a lot of if you’ve had Econ 300, but I certainly won’t exclude anyone on that basis.  The course requirements are to read the book, attend several weekly discussions (likely five or six weeks), and complete one or two short writing assignments.

The sign up is 391 DS-Discovering Kirzner, as a one-unit course with either myself (Professor Gerard) or Professor Galambos.   We will arrange a time based on the schedules of those who sign up.