Nicolai Foss recently posted a comment (see here) on my latest paper with Israel Kirzner (see here). I have always been a fan of Nicolai’s work. He was on my dissertation committee back in 1998 (along with Pete Boettke and others). He belongs to a rare breed of scholars who look across schools of thoughts and disciplines. He can also turn out a paper in the time it takes me to write the title. We had a “revise and resubmit” at JEBO together back in 2000, but I refused to change the passages about Kirzner’s work and we didn’t get the paper published. I probably would revise the paper today but at the time I was not willing to. I think Nicolai has been mad at me since then...
Nicolai is right to point out that my latest paper with Kirzner includes a whole discussion on institutions, culture, and policy, which is not very common in Kirzner’s work. This was why I wanted to write the paper with him in the first place. This said, I do think that scholars often underestimate how much Kirzner is interested in institutional and policy issues. As I argued in my paper, “Kirznerian Economics: Some Policy Implications and Issues” (published as part of the special issue on Kirzner in the Journal des Economistes et des Etudes Humaines in 2002), Kirzner’s work is very rich in policy issues, even if he doesn’t always draw the implications himself. The main policy themes in his work are: government regulations (including monopoly and antitrust) and tax policy. One should not forget that policy issues are also institutional issues.
While there is less material in Kirzner's work (besides our latest paper) on the issues of institutions and culture (as they are usually discussed), there is enough to understand his view. The role of property rights is very present, especially in so far as they affect entrepreneurial discovery. Kirzner has done a lot of work on ethics—probably more than the average economist. He explains the importance of meta-rules and belief systems that frame the market, and he developed the “finder-keeper” principle. Kirzner says that entrepreneurship requires a moral and institutional framework to take place. It cannot operate in a vacuum. This means that entrepreneurship must take place against (at least) a shared ethics. It is true that if one defines institutions as rules and their enforcement, it is not entirely clear whether Kirzner thinks entrepreneurship can take place at this level or not.
I disagree with Nicolai about the role of creativity in Kirzner’s work. The Kirznerian discovery process is fundamentally a creative process. It is about the introduction of new knowledge in the world. The act of discovery is a new understanding of causal relations, as the entrepreneur perceives them. Kirzner’s work rests on two fundamental tenets: subjectivism and uncertainty. By marrying these two concepts, he elaborated the role of the entrepreneur more than any other economist before him. Discovery became relevant as an economic concept because of subjectivism in a situation of uncertainty. Creativity is just another word for discovery. In my view, Kirzner’s work encompasses Schumpeter’s.
Pete and I will be in New York next week to meet with Israel Kirzner. We will be interviewing him and my goal is to ask him all the hard questions about his work—and the role of institutions and culture will be one of them.