Was Hayek a Kirznerian?

This comment by Neel is an interesting one and worth noting:

As for Hayek and Kirzner, well, I wonder whether the influence did not run both ways. Kirzner does refer to Hayek's writings ("Economics and Knowledge", "The Use of Knowledge in Society" etc.) in the works I mentioned , but these writings do not refer to entrepreneurial discovery as Kirzner was to elaborate later. I agree with Peter Klein that the idea of entrepreneurial discovery is a Kirznerian one, that does, however, build upon the Hayekian notions of dispersed, tacit, knowledge. It's only in 1968 that Hayek elaborates explicitly on the idea of "competition as a discovery procedure" (and talks about entrepreneurship in this regard), but this is...one year after Kirzner presented his paper entitled "Methodological Individualism, Market Equilibrium, and Market Process", in which he refers to "entrepreneurs discovering discrepancies between prices" and to the notion of "alertness", at the Mont-Pelerin Society Meeting in France. Maybe Hayek was a Kirznerian?!

An interesting hypothesis, but two good skims of the "Discovery Procedure" essay do not reveal the use of the word "entrepreneur" in any of its forms.  Hayek does, toward the end, refer to the "spirit of enterprise," but that's about it. 

In looking at that essay again, I think a better reading of it is that it's Hayek reworking "The Meaning of Competition" in light of his work on spontaneous order and knowledge.  There's a whole subsection on spontaneous order in there.  He also, by not mentioning the entrepreneur, leaves himself open to the "prices do it all" interpretation.  Yes, he talks about new producers "stepping in" as part of competition, in much the same way he did in 1940, but it still feels like it takes a back seat to the more "macro" level concerns about spontaneous order, competition, and discovery.  Again, I think those are all correct as far as they go, but you can't tell the whole story without entrepreneurship and, despite Neel's interesting hypothesis, it's not in that essay. 

That said, the broader question of whether Kirzner's work influenced Hayek is a great one, but I fear the answer is no.   A look at the index for Law, Legislation, and Liberty finds only one reference to Kirzner, in the third volume in a footnote talking about some then-recent developments in Austrian economics.  The cite is to Competition and Entrepreneurship.  The variants of "entrepreneur" do not appear in the subject index.

Off the top of my head, I cannot think of anywhere in his post-1973 work where Hayek has any real discussion of entrepreneurship (i.e., Klein is right), nor any other mention of Kirzner.  I'd be happy to be corrected on this.

Comments

[Daniel J. D'Amico]

Not related to this thread but thought Professor Horowitz would be interested in this essay by Theodore Dalrymple on Virginia Wolf.

http://www.city-journal.org/html/12_3_oh_to_be.html

[Vilfredo Pareto]

I had never heard about the Mont Pelerin episode. Hayek does not talk about Kirzner in the "Hayek on Hayek" biographical book. This is surely not a solid clue, but we can imagine that one refers to the most influential scholars in his autobiogaphy. No reference to Kirzner in the New studies (1978) too

[Neel]

Professor Horwitz,

Thank you for your comments.

Let me add, however, that I was not implying that Kirzner's Il Politico paper influenced Hayek to the extent that Hayek went on to develop a full-fledged theory of entrepreneurship. The influence Kirzner's Il Politico paper might have had on Hayek was, according to me, limited to his "Competition as a Discovery Procedure" (CDP) paper. Like you, I do not know any post-1973 Hayekian discussion of entrepreneurship.

The point I should have stressed in my comment is the following one: a young student of Austrian economics who reads Kirzner's "Competition and Entrepreneurship" (1973) after reading Hayek's CDP paper (1968) might naturally conclude that Hayek influenced Kirzner in his elaboration of the notion of entrepreneurial alertness to the discovery of profit opportunities. Yet, Kirzner's theory of entrepreneurship is already incipient in his "Economic Point of View" (1960) and "Market Theory and Price System" (1963), and explicit in his 1967 Il Politico paper in which he mentions the notion of "alertness" of entrepreneurs to the discovery of profit opportunities. So that, if there was an influence as far as the notion of entrepreneurial discovery of profit opportunities is concerned, it ran from Kirzner to Hayek rather than the other way round, according to me. Hayek's notion of dispersed knowledge influenced Kirzner in elaborating his theory of entrepreneurship, and Kirzner's notion of entrepreneurial discovery of profit opportunities as put forward in his Il Politico paper might have influenced Hayek's CDP paper.

Concerning the use of the word "entrepreneur" in Hayek's CDP paper, there are in fact two references in the new translation published in the Quarterly Journal of Austrian Economics in 2002 (Vol. 5, No. 3). One reference is indeed to the "much-lamented absence of a spirit of enterprise" which you mention. The other is: "If even in highly developed economies competition is important primarily as a discovery procedure whereby entrepreneurs constantly search for unexploited opportunities that can also be taken advantage of by others, then this is true of course to an even greater extent as far as underdeveloped societies are concerned." This translation is slightly different from the translation that appears in Hayek's "New Studies" where the word 'prospector' is used (instead of 'entrepreneurs'). I do not know which translation is correct as I do not have the original German version of this paper. Nevertheless, the way in which Hayek writes this paragraph leads me to believe that he has already referred to the idea of entrepreneurial discovery of opportunities in the previous sections of his paper without, however, mentioning this idea explicitly. I read this sentence as follows: “OK, what I’ve just said about entrepreneurial discovery procedure in a competitive setting is important for developed countries, but even more important for underdeveloped societies.” So that, the entrepreneurial discovery was one among the several points Hayek was willing to put forward in his CDP paper.

As to how we should read Hayek's CDP paper, you suggest that we read it as an attempt to rework "The Meaning of Competition" in light of his work on spontaneous order and knowledge. I think this is a plausible interpretation – save for one reason which I mention below-, but it is one among the many interpretations that Hayek’s CDP paper affords. It is a plausible interpretation to the extent that Hayek does dedicate the section 2 of the paper (as reproduced in his “New Studies”) to the notion of spontaneous order and knowledge as you say. Yet, Hayek delivered this paper to a meeting of the Philadelphia Society in Chicago without this section 2 (see the first footnote in the “New Studies”), but with section 5 where the 2 explicit references to entrepreneurship appear. If it was indeed his intention to stress the idea of competition in the light of his work on spontaneous order and knowledge in this paper, why did he choose to skip just that section upon delivering the paper to the Philadelphia Society (supposing that he had already written the five sections of the paper as it appears in the “New Studies”)? Or else, maybe Hayek had not written section 2 yet when he delivered the paper in Chicago? If this is the case (in other words, if at that time, the paper was composed of only 4 sections, section 1, 3, 4, and 5, of the “New Studies” version), I fear that it is difficult to sustain the view that his intention in that paper was to rework “The Meaning of Competition” in light of spontaneous order and knowledge.

Moreover, a few months after the Philadelphia Meeting in Chicago, Hayek delivered his CDP paper at the University of Kiel in Germany. This time, he included section 2 in his presentation, but skipped section 5, that very section in which he refers explicitly to entrepreneurial discovery and its peculiar importance for underdeveloped countries. Further, when the CDP paper was first printed in German, it contained 7 sections, and no longer 5 as in the “New Studies” (and the 2002 translation in the QJAE contains the 7 sections). This means that there are four versions on this paper: 1) the Philadelphia version which omits section 2 of the paper which appeared in the “New Studies”, 2) The Kiel version which omits section 5 of the paper which appeared in the “New Studies”, 3) the version which appeared in the “New Studies” in 5 sections, and 4) the version originally printed in German (and now translated in the QJAE) which contains 7 sections! Depending on which version one reads, one can understand and interpret Hayek’s intent quite differently, which is why I said above that this CDP paper affords several interpretations. All in all, I find this paper quite different from many other papers written by Hayek (such as “Economics and Knowledge”, “The Theory of Complex Phenomena”, “Degrees of Explanation”, etc.): the logical beauty that characterizes the latter papers is simply not present in CDP. The “place of CDP in Hayek’s thought” still needs to be written in my view.