Professor Israel Kirzner (a student of Ludwig von Mises) speaks to students at FEE (Foundation for Economic Education)

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Submitted by Anonymous Guest on Sun, 2011-08-28 00:11

This is a video from 1988 of Israel Kirzner (professor of economics at New York University) speaking to students at FEE about competition and entrepreneurship. Especially interesting are his statements regarding the topic of so-called "perfect competition" as used by mainstream neoclassical economists, and how that concept differs radically from the idea of real-world "rivalrous competition" as used by the Austrian school.

His views on entrepreneurship are quite interesting, too, as they illustrate, in my view, where Kirzner is right and where he is wrong. In my view, he appears to commit the same error regarding "entrepreneurship" as he correctly accuses the neoclassicists of committing regarding "competition": he invents a category of economic action that he calls "pure entrepreneurship" in which innovative activity can somehow exist apart from saved wealth provided by capitalists.

In Mises's view, though we can conceptually distinguish the "entrepreneurial function" from the "capitalist function", we cannot really separate them in an actual economy: in real life, when an innovative entrepreneur who has no capital of his own sees a profitable opportunity, he will need to locate a capitalist who has saved funds and who is willing to loan him enough startup capital to make an initial attempt at exploiting this profitable opportunity. The capitalist, however, would never voluntarily make such a loan unless he, too, were able to see this new profitable opportunity, because it's only by the success of this opportunity that the capitalist can receive his interest payments -- why would the capitalist lend money to someone simply because he asked him? This suggests that "capital", as provided by a capitalist, is a necessary element in any entrepreneurial enterprise, and cannot really be separated from it. So, again, though we can (and should) distinguish "capitalist activity" from "entrepreneurial activity" conceptually, I don't believe we can actually do so in real life. Therefore, I don't see Kirzner's notion of the "pure entrepreneur" as shedding any additional light on those older insights provided by Mises.

Aside from the above criticism, this is a worthwhile lecture from one of the most important Austrian theorists. Happily, though now retired from NYU, professor Kirzner is still with us.

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