Economists Used to Believe This

|Peter Boettke|

I have argued that history of economics can be usefully divided into (a) history of economic thought as intellectual history, and (b) history of economic thought as contemporary theorizing.  Following Boulding's idea of the "extended present", older thinkers and their ideas can still speak to us today in a productive manner about the problems we are hoping to solve.  I have referred to this as "opportunistic" readings within the broader category of "contra-whig" readings.

But I do also think history of economic thought as intellectual history is not only a worthy intellectual pursuit but a highly valuable one for economists and political economists (though it is undervalued currently in our profession).  But really good intellectual history seeks to always place "ideas in context".  Internal to the field of history of economics there is a debate raging between those who do history of economic thought, and those who do history of economics.  I do not wish to take a stand on this debate at the moment, but wish to only stress that importance of the putting ideas in context notion of intellectual history.

This brings me to the recent discussion on Israel Kirzner once again.  Perhaps I am beating my head against the wall and risking your loss of patience with me.  As Pete Leeson once asked me "Have you ever considered that everyone else is right and you are just wrong on this?"  I replied, "Yes, but I have rejected that hypothesis."  I just think I haven't expressed myself well enough to persuade others.  I am convinced that once you place Kirzner in the right context, his amazing contributions to economic science and to the intellectual culture of economic thought will be evident to all.  But to appreciate what Kirzner did, I think it is vitally important to remember what was being taught in microeconomics classes in 1950-1960.  This was the heyday of monopoly, imperfect competition, and market failure theories.  Laissez-faire markets, in other words, did not produce efficient allocations, but resulted in significant inefficiencies that had to be addressed, and corrected for, by pro-actively by enlightened government policy.  The structure-conduct-performance paradigm guided work in Industrial Organization and Anti-trust policy.  Advertising was considered a waste, asymmetric information resulted in missing markets, and any control over the price was considered evidence of exploitive market power and had to be countered by aggressive government protection.

Macroeconomics had supposedly demonstrated that the free market economy was unstable, microeconomics had supposedly demonstrated that the free market economy was inefficient, and the capitalist system was supposedly demonstrated to be unjust and incapable of philosophical justification.  Profits were ill-gotten and undeserved.  Capitalism, simply put, was unstable, inefficient, and immoral.

It is in this context that Milton Friedman went to work with such economic philosophy works as Capitalism and Freedom and Ayn Rand challenged the cultural zeitgeist with her novel Atlas Shrugged.  One has to remember that Milton Friedman was considered beyond the pale by the economic establishment at this time for his stance, and Ayn Rand was considered a cultural pariah.

But as these ideas of market failure and government as a corrective were confidentially espoused in the Ivy League classrooms and from those holding high political office, there was a growing counter-revolution in thought.  I do not want to talk about the macroeconomic counter-revolution in this post, but the revolution in microeconomics that challenged the market failure/government as corrective hegemony.  I want to suggest that these were divided into four challenges:

(1) Empirical

(2) Conceptual

(3) Public Choice

(4) Entrepreneurial

An example of the empirical critique was G. Warren Nutter's dissertation under Milton Friedman and Aaron Director that was later published as The Extent of Enterprise Monopoly in the United States 1899-1939, and argued that capitalism did not exhibit a tendency toward increasing concentration of industry.  In short, an empirical claim about capitalism was made, Nutter showed that careful empirical analysis demonstrated that claim to be false.

This also would lead to the conceptual challenge -- or at least an aspect of the conceptual challenge.  For example the Chicago "new learning" in industrial organization challenged the claims about monopoly by insisting on clarity in the definition of the relevant market.  If you define the market narrowly, then everything can be a monopoly; but if you define the market very broadly, then nothing can be a monopoly.  This mattered for empirical analysis that fed into public policy, such as concentration ratios in a structure-conduct-performance analysis of an industry. Yale Brozen's work here is essential reading, but so would Dom Armentano's Antitrust and Monopoly.  Antitrust policy based on the conceptually weak

Other conceptual challenges to the existing literature came in the form of an emphasis on clarifying property rights so that conflicts in the market were seen not as a result of the natural workings of competitive markets, but due to ambiguity in the property rights.  In other words, the so-called "market failure" was really a "legal failure".  In addition, there are conceptual issues associated with the subjectivism of costs and benefits.  Here I should point out that Murray Rothbard's Man, Economy and State is an essential reference as is Jim Buchanan's Cost and Choice.  It is not just the subjectivism point about notions such as "externality" that require careful re-reading of Rothbard, but also his very subtle but important point that in the market we have no idea what a "monopoly price" would be -- we only know empirically the "market price" and a "government set price".  Rothbard also anticipated in his discussion of "public ownership" the sort of conceptual critique one would later read in property rights thinkers such as Yoram Barzel.  I would also put in this category such works as Harold Demsetz's "Why Regulate Utilities?" where he anticipated with his argument about "competition for the field" what would later become known as the theory of "contestable markets" --- which also challenged the simple picture of the structure-conduct-performance paradigm in industrial organization and antitrust policy.  Also the entire "transaction costs" literature needs to be included is this category of conceptual challenges, especially the UCLA price theory idea that once transaction costs are fully incorporated into the analysis then deviations from marginal cost pricing are little more than a misidentification by the more conventional theorist of market theory and the price system.

The public choice critique largely, for sake of argument, left the market failure theory alone, but simply challenged the "government as corrective" side of the equation.  This was most famously illustrated in the "tale of the Roman emperor", where the Emperor is asked to judge a singing contest between two contestants, but gives the award to the second singer only after hearing the first under the false assumption that the second singer clearly could not be any worse than the first.  Of course, the second singer may in fact be worse than the first.  We have to let that second singer sing, and this led to the demand for an analysis of governmental behavior.  The theory of government failure evolved to exist alongside of the theory of market failure, and upon empirical examination it very well may be demonstrated that the government solution may be far worse than the market failure.

Finally, there is the entrepreneurial challenge to the hegemony of market failure and government correction.  The simplest way to state this challenge is that today's inefficiency sparks tomorrow's profit opportunity for the entrepreneur that can act on the efficiency and realize the mutual gains for exchange and mutual gains from innovation.  This is the mechanism by which the market is self-correcting, but it was overlooked by the then traditional paradigm.  An identified market imperfection (or friction) was prima facia evidence that a market failure existed and government was required to come to the rescue.  But if it is the case the market forces are in fact set in motion only because of the frictions, the identification of a friction is not a case for market failure, but a precondition for the market working.

So given this little detour down memory lane of economics circa 1950-1970, what is it that Kirzner accomplishes in his work?

He provides a positive analysis of markets that challenges the structure-conduct-performance paradigm, he argues how non-equilibrium prices generate the incentives and provide the information required for market participants to act to alleviate erroneous behavior and thus lead the market to self-correction,  he demonstrates the positive role of advertising in the competitive market process, he shows how the dynamic adjustment process of the market has welfare properties that are under-appreciated by the then standard price theory, and he ultimately provides a positive case for the legitimacy of pure profit in the market economy.  Remember, the dominant thinking of the time argued that capitalism was unstable, capitalism was inefficient, and capitalism was unjust.  Kirzner was not a macroeconomist (though his Essay on Capital does explain how economic activities on the market are coordinated through time and in-spite of an uncertain future) so he doesn't really address the macroeconomic instability point, but he is a microeconomist and thus his focus was both on demonstrating the self-correcting mechanism of the market guided through entrepreneurial action in the seeking for pure profit.

This last point raises another important context for Kirzner.  Kirzner insists that entrepreneurial discovery is not an act of deliberate search, but instead an act of "costless" discovery.  The context of his development of this point was his demonstration that even in a world of zero transaction costs there would exist undiscovered opportunities that required entrepreneurial alertness to grasp.  In other words, opportunities for pure profit exist for entrepreneurs to recognize and seize.  The entrepreneurial role is rewarded with profit, just as the role of labor earns wages, the role of capital earns interest, the role of land (or fixed factors of production) earn rent.  If, on the other hand, you insist that entrepreneurship is deliberate search then you don't have a case for pure profit.  In fact, if you take the positive transaction cost angle, you have no pure profits at all --- you have instead a zero profit condition.  And with that you have zero role for the entrepreneur.  Ever wonder why the entrepreneur disappeared in 20th century economics, and why it had to be rediscovered in the second half of the 20th century?  An equilibrium always economics has no need for an entrepreneur to act on disequilibrium prices to move toward an equilibrium allocation of resources.  But a dynamic understanding of the market economy requires that the entrepreneur play a central role in the analysis, and the opportunity for pure profit spur entrepreneurial action.  It is the discovery of hitherto unrecognized opportunities for mutual gain that entrepreneurs provide, and it is this mechanism in concert with the guiding role of relative prices that underlies the "invisible hand" of the market economy.

A lot has changed since Kirzner earned his PhD in the 1950s. The once dominant market failure and government as correction paradigm has been modified to a considerable extent by the critiques of an empirical, conceptual, public choice, and entrepreneurial nature.  Capitalism is, even now in the midst of the financial crisis, no longer seen as inherently unstable, fundamentally monopolistic and inefficient, and unjust and immoral.  Capitalism has its critics for sure, but those critics are not as vociferous as they were in 1950-1960, and those voices that are raised against capitalism are not as often found among elite research economists as they were during that earlier time.

I do not claim that Kirzner's work is responsible for this change --- instead it was a consequence of the multitude of thinkers that constituted the counter-revolution in economics since the 1950s that included not only Chicago school economists, but also the development of Law and Economics, New Institutionalism, Property Rights Economics, Public Choice Economics, and Market Process Economics.  Kirzner is the individual most responsible for this last element in the counter-revolution.  From where we were, to where we are, this was no small feat to accomplish as a scholar and a teacher.

Comments

[Rafe Champion]

Beautiful!

There is also scope for (5) the epistemological and metaphysical challenge which has been led by Barry Smith.

[Steve Horwitz]

This post is the economics equivalent of Marshawn Lynch's TD run.

[Peter G. Klein]

Pete, I appreciate what you're trying to do here, and admire the time and effort you're putting into it. But I think this post is largely beside the point you're trying to make. You've offered a great summary of some recent developments in "market-friendly" economic scholarship. But you end with a giant non-sequitur. Basically, you argue that individuals X, Y, and Z offered strong arguments against policies or views a, b, and c, and therefore, these individuals' works are responsible for the profession's questioning or abandonment of a, b, and c. But this doesn't follow at all. Take competition policy. As you note, Kirzner's arguments against the structure-conduct-performance paradigm appear alongside those of the Chicago "new learning" guys, Williamson's transaction cost economics, the contestability literature, etc. How, then, do you conclude that Kirzner's arguments had any *influence* on the mainstream?

To demonstrate that Kirzner's work, on the margin, had some influence on the profession's thinking on these subjects, you need to provide some argument or evidence -- citations, documentary evidence, etc. But you don't give us any data. Just for fun, I looked up a few classic contributions in this area on Google Scholar. Competition and Entrepreneurship clocks in at 3,247, an impressive number, though I suspect most of those are from "opportunity-discovery" papers in entrepreneurship journals, not economics papers. Still, much better than Bork's (admittedly more focused) Antitrust Paradox (1978), which racks up 1,198 cites. But the Baumol, Panzar, and Willig (1982) book on contestable markets -- a technical and fairly boring book for specialists -- has 3,240 cites. The Demsetz-Lehn article in JPE (1985) on profits and concentration has about the same number, 3,457. And they're all dwarfed by Williamson's Markets and Hierarchies (1975), which posed a fundamental challenge to the SCP view on vertical restraints, and has a whopping 14,368 cites.

Look, I'm not bibliometrician, and these numbers should be taken with a grain of salt. Perhaps a better way to show influence is with a detailed narrative account -- e.g., Paul Joskow's 1985 paper on the influence of Chicago and transaction cost thinking on antitrust (jleo.oxfordjournals.org/content/7/special_issue/53.full.pdf), which argues that Chicago was more influential than TCE. Your GMU colleague Josh Wright has a nice paper on the rise of "post-Chicago" antitrust.

Anyway, to show that Kirzner's market-process economics has influenced the profession at large, you need to give us much more than a summary of Kirzner's thought!

[Peter Boettke]

Peter,

As I said to you over email, I don't disagree with the need for objective measures such as citations, etc. And I am careful to say that Kirzner isn't responsible for the intellectual shift solely, I just am saying he had a part in it.

Obviously Williamson made a major impact, much greater than the measured impact of Israel Kirzner.

As for "influence" and narrative accounts, I refer everyone back to Langlois's original edited work on New Institutional Economics, and his essay that framed that volume and the Littlechild essay that follows it. see Economics as a Process (Cambridge, 1989).

On influence, there is always the question of direct and indirect influence. Was Kirzner indirectly influential on works such as Easterly's work on the "searchers" versus the "planners" and entrepreneurship in development?; did Kirzner exert an influence by keeping Hayek's ideas relevant in the modern academic economic literature? etc., etc.

Anyway, I agree with you that there are burdens of proof that I have failed to meet. My point merely was to emphasize the context within which Kirzner made his contributions and for people to come to appreciate the intellectual quest his career represented.

Pete

[Jerry O'Driscoll]

I second Peter Klein's acknowledgement of Pete's efforts and persistence. Pete is passionate and committed in pursuit of his argument.

I will add, personally, that much of what Pete attributes to Kirzner I learned from (a) Mises and Hayek, and (b) the UCLA/Chicago tradition that had temporal priority to Competition and Entrepreneurship. I consider Israel's contribution to be integrating Misean logic with the UCLA/Chicago critiques of then-mainstream positions.

To further his argument, Pete must operate at two margins. First, he must make a better case that Israel advanced beyond Mises. Israel himself downplayed that.

Second, Pete must show that Israel influenced the mainstream. Peter Klein has offered empirical evidence to the contrary. Peter's logic cannot be countered theoretically, but only empirically.

Israel was an important influence on everyone of my generation of Austrian economists. But, to go back to Pete's original post, did Israel accomplish what Pete claims for him? At this point, the judgment must be: unproven.

[Troy Camplin]

A few ngrams:

http://ngrams.googlelabs.com/graph?content=entrepreneurial+discovery&year_start=1800&year_end=2000&corpus=0&smoothing=3

http://ngrams.googlelabs.com/graph?content=entrepreneur%2Centrepreneurial%2C+entrepreneurship&year_start=1800&year_end=2000&corpus=0&smoothing=3

Of course, this is only in books, and not in journals. Google scholar gives over 9600 hits for "Kirzner economy".

Overall, though, influence isn't that easy to trace. Is someone influenced by your ideas only if they read your work, or if they only read the work of someone who was influenced by you? It is possible to have a great deal of influence because you directly influenced someone else, who themselves had a great deal of influence on others, even though your direct influence on others was very little. Paul reached more people than Jesus.

[arash]

One further source of evidence: check standard micro textbooks (like the most prominent one by Mas-Colell) for references to Kirzner or directly related work. I can imagine that Kirzner's impact is quite low (even indirectly).

[Roger Koppl]

I'm a little surprised by the degree of resistance to Pete's suggestion that Kirzner played a role in transforming the mainstream. The economics profession has changed greatly since 1970 or 1980. It has moved in a decidedly Austrian direction. And mainstream economists increasingly cite Hayek or say that some argument or model builds on "Austrian" insights. Research in "entrepreneurship" within economics and beyond economics has expanded from almost nothing to a vast literature. So are we to believe that Kirzner had no significant role in those changes? Sure, there are multiple causes at work, it is hard to trace influence, and so on. But it doesn't seem very plausible to me to suggest that Israel had no significant role in effecting this *huge* transformation in social-science scholarship. I remember the how it was in 1980. Doesn't anybody else? It was a different profession back then. It is infinitely better now. Israel Kirzner helped create that transformation.

[Peter Boettke]

Roger --- that is all I was trying to say.

Arash -- of course Mas-Colell doesn't reflect that change, but how much does Mas-Colell reflect the other insights that I mentioned from the counter-revolution? Would you say James Buchanan has had no influence? How about Hayek, Coase, North, Phelps, V. Smith, and L. Ostrom? Do those Nobel Prize winners leave a big imprint as measured by references in Mas-Colell? How about non-Nobel Prize winning great economists like Alchian, Demsetz, etc.?

One thought experiment that I have done with my classes in the past was to have the students read and compare Mises, Human Action (1949) and Hayek, Individualism and Economic Order (1948) with Samuelson's Foundations and Economics. And then to compare Rothbard's Man, Economy and State, and Kirzner's Competition and Entrepreneurship with Stiglitz's Economics, and Milgrom and Roberts, Economics, Organization and Management.

The idea is the gulf between the Austrians and Samuelson is about as wide as one could imagine while still claiming to be in the same discipline, and that gap has narrowed significantly when we think about Stiglitz, and Milgrom and Roberts.

This exercise makes Roger's point about the change in the discipline that has moved in the direction of the Austrians, etc.

Mas-Colell doesn't reflect the counter-revolution in microeconomics even though it is the nuts and bolts bible of modern graduate education in formal theory. But the work of Glaeser, Shleifer, Murphy, Acemoglu, etc. reflects this shift in thinking about economics and political economy.

What does that tell you about modern economics?

[Jerry O'Driscoll]

Roger,

The discussion over multiple posts has evolved, as has Pete's claim. I go back to Mario's original comment. Mario dissented on the proposition that Kirzner's theory of the entrepreneur demonstrated how an economy moves from disequilibrium to equilibrium. I concured then, and will reiterate here that Kirzner did not accomplish that.

Fast forward to your last comment, endorsed by Pete. You are now making an entirely different claim. You point out that, at least in some repects, the wider profession and Austrian economics have moved closer. Agreed.

No one in this discussion has made the claim that "Kirzner had no significant role in those changes." The questions being debated, mostly productively I think, are (1) what was the role? (2) and how significant was it?

Again, to repeat, Israel had a great impact on Austrian economics, less so directly on mainstream economics. I don't think that in any way minimizes his importance as a scholar.

BTW, the title of this post is "Economists Used to Believe This." Take a look at what is being written and spoken by economists on "stimulus" and tell me tht we have made progress. The Fed Chairman, a distinguished porfessor at a distinguished university, believes printing money creates jobs.

[Roger Koppl]

Jerry,

You say I am now making an entirely different claim. Yep. I don't think I said anything to counter Mario's "original claim" as expressed by you now. I did not participate in that discussion and for a reason. I think Israel did show that any tendency toward equilibrium comes from entrepreneurship. That seems a logical point. But that insight does not say that equilibrating tendencies typically overwhelm disequilibrating tendencies, which would be an empirical claim. OTOH, the whole discussion seemed a bit off to me because IMHO equilibrium exists in the model and not the world. In so saying, I'm just following Machlup, btw. So I felt a bit alienated from that whole thread.

You also say "No one in this discussion has made the claim that 'Kirzner had no significant role in those changes.'" Yeah, but you and Peter K. expressed grave doubts that Kirzner was significant. That doubt is the thing that surprised me. For the reasons I gave, I should think the presumption would be that Israel did have a significant influence.

Please remember the post made recently on one of these threads. I think Israel was indeed too conservative at the time you and Mario were writing your wonderful book. He did resist it, and he should not have. You might recall that in the past I have defended your interpretation in this regard. That unfortunate fact is not inconsistent with the claim that Israel mattered for the transformation of economics. It depends on scale of observation as I said recently.

As for the recent turn in macro: It is up to us whether that turn is a blip or a long-run trend.

[Jerry O'Driscoll]

Roger,

Let's leave it at this because I don't want to come off wearing the dark hat against Israel. I also think, as usual, we're not all that far apart.

Macro is a mess and there aren't that many in the Austrian camp addressing the policy aspects. George and Larry's paper on the Fed is important, but i suspect it will have a long road to journal publication.

[Roger Koppl]

"I also think, as usual, we're not all that far apart."
Yes.

Jerry, I tend to think we in the Austrian camp have not done a good enough job of developing an empirical research program in macroeconomics. Does your last remark suggest that you would agree? I remember your attempts in the 1990's to get us interested in the Japan crisis. We should have listened.

[Peter Boettke]

Just want to point out that Larry White has about 5 students writing dissertations under his direction right now at GMU, so I think the lack of people doing macro, and in particular applied macro work, is going to be a thing of the past very shortly.

Among our current students, I would also suggest in the Austrian camp that Dan Smith has a very strong applied/policy bent and has worked with me on a few projects dealing with the financial crisis.

But yes people should have listened to Jerry in the 1990s about Japan --- btw, one of Ben Powell's dissertation chapters was on Japan.

[Richard Ebeling]

First, let me say that Pete's picture of the economics profession back in the 1960s and into the 1970s is very accurate, especially, as a student was learning it back then.

In the late 1960s and early 1970s, I was an undergraduate. Microeconomics (and the policy analysis based upon it) was built virtually on nothing but the standard "perfect competition," "monopoly," "monopolistic competition," and "oligopoly" models.

These were the benchmarks on the basis of which I, as a student, was told to evaluate the "efficiency" of markets and competition.

As the Vietnam/Great Society-era inflation was worsening, my micro- and macroeconomic professors assigned books in courses on the effectiveness and "rationality" of price and wage controls for efficiency and "equity."

They talked about "vicious circles of poverty" in underdeveloped countries that private property rights and markets caused and perpetuated. Price incentives were "unjust" and profits were the reward for the exploiting few. (Any reference that I made in class discussions to, say, Peter Bauer brought either blank stares or angry attacks that he knew nothing, and did not use any "modern" mathematical models or statistical data, and therefore was an "apologist" for industrial-world exploitation of third-world countries.) "Planning" with government set (fair) prices was the key to prosperity in those countries.

When Hayek won the Nobel Prize in the autumn of 1974, NONE of my professors (including one who had studied with Frank Knight at the University of Chicago) could understand why he had been awarded the prize. They knew nothing about his monetary and business cycle theory, other than it was known to be "wrong" because he had assumed "full employment," which made it irrelevant for "solving" the problems of depression and recession.

They were unfamiliar with any of his essays on "Economics and Knowledge," "The Use of Knowledge in Society," or "The Meaning of Competition."

Hayek were merely the polemicist who attacked socialism in "The Road to Serfdom." And that had been proven "wrong," because we lived in a "mixed economy," and there was no political dictatorship threats (other than National Guardsmen shooting students at Kent State, and fighting unjust wars in Asia).

In macroeconomics there was only Keynesian Economics, and the policy view that inflation and unemployment was a trade-off issue that government monetary and fiscal policy could manage and stabilize at a variety of desired levels. (Oh, and deficit spending? Why, we only "owe it to ourselves.")

When, for a senior thesis, I did a lengthy paper on "micro-foundations" to macroeconomics drawing upon Robert Clower and Axel Leijonhufvud and their notion of "Say's Principle," my macro-professors were bewildered and uncomfortable. (I did get an "A," but I think more from the fact that they did not know what to make of it.)

Any Austrian, or Chicago-type, economics I had to learn on my own.

In this environment, Kirzner's "Competition and Entrepreneurship" in 1973 was like a truly breathe of fresh air to everything I had been learning in my classes -- and a "modern" voice complementing all the older Menger/Bohm-Bawerk/Mises/Hayek/Lachmann literature I had been reading on my own (besides Rothbard's "Man, Economy, and State").

And when the next year, I was among those fortunate few to be invited and attend that first Austrian Economics conference in South Royalton, Vermont in June of 1974, it was as if I had died and "gone to heaven."

Kirzner stood out as a shining example. First, as the "ideal type" of the serious, thoughtful, learned scholar -- the "economist's economist, so to speak. The perfect, courteous thinker, always taking the other economist's ideas seriously and politely, yet insightfully demonstrating limits, problems, and omissions in solving the problems of understanding the market process.

Second, he showed (beyond a shadow of a doubt) how and why the mainstream micro-approach failed to incorporate and utilize any real conception of the entrepreneur. "Alertness," "discovery," "coordinating tendencies," "open-ended" competitive processes -- these were things never mentioned in the mainstream literature I was assigned or had been reading on my own in the journals.

(The only thing as thrilling and as "challenging" was Lachmann's questioning of equilibrating tendencies from what he considered to be an equally "Austrian" outlook; and his "insistence" that one had to read Shackle's "Epistemic and Economics." After that read, there was nothing left of the Neo-Classical perspective, at least in my mind.)

As the years went by, and to the extent that my own interests kept me reading mainstream literature on micro-economic themes, there did emerge a new interest in entrepreneurship. But to be frank, and with due respect for Pete's argument, I found few references to or statements of influence from Kirzner's work.

One was more likely to find authors giving credit to having been "inspired" by, say, Schumpeter (if by any of the older writers), never by Mises or the on-going contributions at that time by Kirzner. Peter Klein has made a part of this literature his specialization, and I fear that he is right when he says that Kirzner has been a rather limited force in this area of mainstream market theory in more recent decades.

Kirzner deserves all the praise and respect that Pete properly wishes to give me -- and much more. But, to the profession's misfortune, I fear that he has not had the recognition and influence that Pete suggests.

Richard Ebeling

[Rafael Guthmann]

In a course of Marx (yes, my university had an entire semester course on Marx) in my undergraduate course in Brazil, the professor mentioned that Marx concept of competition was different than the neoclassical concept, that it was more like that of the "neo-austrians". That was about the only indirect reference to Kirzner in my undergraduate days.

In other courses, the references to process oriented concepts of competition, prices, profits, were to other scholars, like Schumpeter, and only on history of thought courses. The micro courses had zero reference to anything done by austrians after Wieser and Böhn-Bawerk.

I think that Kirzner's view of the market will only enter the walls (at the present, it is only making some small cracks) of the mainstream edifice when it becomes formalized in a complex math model. If it is impossible to do that, then only when the modern paradigm collapses and a new one emerges that absorbs his contributions.

[Richard Ebeling]

Oh, a correction in the first sentence of the last paragraph of my comment, above.

It should read:
"Kirzner deserves all the praise and respect that Pete properly wishes to give HIM == and much more."

I deserve little praise or respect -- my wife will be delighted to explain all the reasons! (My dog, Ludwig, would probably want to chime in, too.)

Richard Ebeling

[Jerry O'Driscoll]

Yes, to Roger's point about empirical macro. I'm glad that Larry is doing his job at GMU (no surprise).

I want to credit David Boaz on Japan. He got me on that topic. I was busy as Policy Director at Citigroup at the time. Then with the Index of Economic Freedom at Heritage.

As usual, Richard has framed the debate. I will heartily agree with his characterization of Israel as scholar and teacher. I'm happy to hear that his wife and Ludwig are keeping him in line.

Things were a bit better at Fordham for me as an undergraduate. Friedman had lectured there in 1959 and his lectures became A Program for Monetary Stability. He left an impression and we read the book in monetary economics. Macro was hopless as Mario will attest. Our prof. was bemused by Mario and me, and always teated us well. At least we actually read Keynes.

And, of course, the UCLA graduate school experience was utterly different from what was going on almost anywhere else (Virginia being an exception).

[Jerry O'Driscoll]

Economists Used to Believe This. And still do.

Janet Yellen gave a speech at the AEA defending QE2. Printing money will produce 700,000 jobs. Low interest artes will drive investors into risky assets and depreciate the currency.

Make your own assessment.

[Jerry O'Driscoll]

I apologize. I forgot to supply the link to the WSJ story on the speech.

http://online.wsj.com/article/SB10001424052748704030704576070252237355950.html?mod=WSJ_hp_LEFTWhatsNewsCollection

[Mario Rizzo]

I remember when reading Kirzner's Competition and Entrepreneurship in 1974 or therabouts, I was struck at how close this was to the work of Yale Brozen and to that of Harold Demsetz in the Industrial Organization area. (In fact, Demsetz was responsible for getting Kirzner's book accepted by the University of Chicago Press.)

I recall that as I went through this period Kirzner was definitely not a major player in the decline of traditional S-C-P Industrial Organization. It may seem to those who are constructing the history ex post that he had a significant role, but that would be wrong. The *empirical* work of many of those in the Chicago school was vital in changing the debate.

I think where Pete goes wrong is that he underestimates the importance of the alternative (non Walrasian) strains of neoclassical microeconomics. There were more than just the Arrow-Samuelson and Stiglerian camps as the work of Brozen and Demsetz made clear. The Hayek approach was not very well-known at the time. And Kirzner's work was not well-developed until *after* the decline of the S-C-P paradigm.

[Troy Camplin]

Do an ngram of phrases coined by Kirzner and see what happens.

[Mario Rizzo]

One of the problems with blogs is that the discussion "evolves" away from the initial post. If Pete is simply claiming that *we* can better *appreciate* Kirzner's ideas in the context of Samuelson/Arrow and other "Walrasian" and formalist neoclassical microeconomists, I agree completely.

I would just suggest that there were alternative neoclassical strains (Brozen, Demsetz) that need to be considered as well. I think they were more influential in shaping the debate among Industrial Organization economists, in particular. (And even before all this there was the earlier twentieth-century tradition that stressed processes.)

My overall point goes to the uniqueness of Kirzner's contributions and the need to see the Austrian process analysis as part of a larger strain of thought.

[Jerry O'Driscoll]

Mario and I have been saying much the same thing from the beginning.

I was in graduate school 1969-73 (note the dates), and we learned Alchian on pricing and property rights; Demsetz on S-C-P Industrial Organization and property rights; Coase on the firm, transaction costs and property rights; and Clower-Leijonhufvud on macro/money. Hayek was on reading lists, but no other Austrian. (Rothbard did present a paper while I was there.)

The empirical work of the Chicago School changed the profession's mind. The profession was already beginning to swing around to the Chicago view before Competition & Entrepreneurship was out.

Kirzner provided a Misesian intellectual framework for the Chicago/UCLA research. That was very important at NYU and its Austrian program. And also at Virginia, GMU, etc.

There was probably some feedback on Chicago/UCLA (though Friedman reportedly had no use for C&E). I was gone from UCLA by the time C&E came out. Larry would be the one to address that.

I question whether any of this penetrated what Lachmann called the neoclassical top brass. When I was at NYU, we had little impact on our colleagues.

Andy Schotter and I interacted because he was a game theorist and Morgenstern student. Also Roman Frydman took note because he was interested in expectations. Frydman, Schotter and I actually wrote a macro/game theory article together that appeared in the SEJ. Through Frydman, there was feedback to Ned Phelps and Columbia.

Mario worked on L&E. None of this was directly about Israel's work.

I note there is a field in entrepreneurship in the SPP at GMU. What are the texts?

[Mario Rizzo]

All of this discussion makes me wonder if Brozen and Demsetz ever credited any particular strain of thought in micro for their views of competition. Clearly, Stigler was not on their page(s). In fact, I know from Brozen that Stigler did not much like Brozen's work.

There is a lost tradition in Chicago price theory. It would be good to learn more about it.

[Jerry O'Driscoll]

David Meiselman has written about Friedman's price theory. That might be a start. I think classical economics, certainly Marshall, was an influence.

I also think Mises influenced some. Henry Manne for sure. I also strongly suspect Alchian and Demsetz.

[Peter G. Klein]

Kirzner has had a huge influence on the entrepreneurship literature, which is dominated by what it calls the "opportunity-identification" view. However, this literature has little interest in resource allocation, but focuses on the personal characteristics of individuals (personality, education, experience) that make them particularly "alert" to opportunities. Kirzner himself is quite flummoxed by this, as seen in his 2009 paper in Small Business Economics, where he complains that the entrepreneurship literature has misunderstood his purely logical, analytical concept of alertness. See the link and some remarks here:

http://organizationsandmarkets.com/2009/01/14/kirzner-on-kirzner/

[Peter Boettke]

Isn't it found in Simon's Syllabus and then in aspects (not all for sure) of Knight's work? There is a Knight that Buchanan represents and a Knight that Stigler represents. I would suggest that the Knight that Buchanan was influenced by, is the Knight that led to Simon's Syllabus, and which in turn focused on exchange, market adjustment guided by relative prices, and the competitive order. This was the Chicago economics that Director promoted at the law school, and which I believe also influenced guys like Buchanan, Tullock Manne, and of course Brozen, Demsetz, etc. See Demsetz's recent paper on Coase and transaction cost economics --- it harks back to Knight's paper on social cost.

My history my not be right, so I suggest reading Ross Emmett and Steve Medema --- both of whom are doing excellent history of thought work on the Chicago price theory tradition.

On Buchanan and how his approach emerges from the Knight/Simons tradition see my paper ... http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1661513

[Greg Ransom]

Hayek was a big influence on Alchian, if Alchian is to be believed.

[Mario Rizzo]

Pete,

Simons's syllabus? Is it included somewhere? I would not have thought you could get process out of Simons because he thought competition required breaking firms up and trying to replicate perfect competition.

[Peter Boettke]

He emphasizes the markets work through dynamic adjustment to change guided by relative prices. Look at the paper I attached on Buchanan, etc.

[Mario Rizzo]

You can see most of Simons's Syllabus if you look up Ross Emmett, "Chicago Trad Econ 1892-1945" volume 8 on Google Books.

[Mario Rizzo]

I agree with you on Buchanan's philosophy of economics but I do not see how he get a process formulation of economic theory out of *Knight*. Knight obviously triggered something in Buchanan but I think it was on a psychological level. I do not see it in Knight's explicit ideas.

[Jerry O'Driscoll]

Three comments.

(1) Perhaps of relevance is an article by Geoffrey T. F. Brooke, "Uncertainty, Profit and Entrepreneurial Action: Frank Knight's Contribution Reconsidered." I only have a summary, but evidently there was an "Austrian" Knight on entrepreneurship in a 1942 article. Brooke's piece appears in the Journal of the History of Economic Thought (2010).

(2) Hayek defended Simons as a true liberal, and felt his death was a huge blow to the liberal cause. Hayek must have seen something there.

(3) I hope Greg Ransom will flesh out his comment on Alchian, perhaps with a reference.

[Greg Ransom]

"ALCHIAN: Two things you [Hayek] wrote that had a personal influence on me, after your Prices and Production, were 'Individualism and Economic Order' [sic -- Alchian certainly has in mind Hayek's 'Economics and Knowledge'] and 'The Use of Knowledge in Society.' These I would regard as your two best articles, best in terms of their influence on me. HAYEK: 'Economics and Knowledge' -- the '37 one -- which is reprinted in the volume, is the one which marks the new look at things in my way. ALCHIAN: It was new to you, too, then? Was it a change in your own thinking?

HAYEK: Yes, it was really the beginning of my looking at things in a new light . .. I was aware that I was putting down things which were fairly well known in a new form, and perhaps it was the most exciting moment in my career when I saw it [i.e. 'Economics and Knowledge'] in print.

ALCHIAN: Well, I'm delighted to hear you say that, because I had that copy typed up to mimeograph for my students in the first course I gave here [i.e. UCLA]. And Allan Wallace . . came through town one day, and I said, 'Allan, I've got a great article!" He looked at it, started to laugh, and said, "I've seen it too; it's just phenomenal!' I'm just delighted to hear you say that it was exciting, because it was to me, too . . that was a very influential article, I must say .. ".

From the 1978 UCLA interviews with Hayek.

I believe Alchian's famous 1950 paper references Hayek.

[Greg Ransom]

Knight's 1921 book has lots on the role of the entrepreneur and the significance of genuine uncertainty, etc.

Hayek took Knight's book to be the standard of "textbook" economics which was understood to be the central touchstone of modern economic thinking at the LSE in the mid 1930s, so Hayek says in the 1978 UCLA interviews.

[Mario Rizzo]

The first part of Knight's book is a summary and systematic presentation of the theory of perfect competition. This is what Hayek meant by "textbook" economics. The rest of the book (uncertainty) was considered a footnote to the first, at least at Chicago (according to Stigler).

Even if Simons had been a true "liberal" by the standards of depleted liberalism of the 1930s/40s, it stll doesn't tell us much about the origins the more dynamic view of competition
in the work of later Chicagoans like Demsetz and Brozen. (My original question was "Where did that come from?)

Looking over the Simons Syllabus on Google Books, I see a statement to the effect that price theory is about the *equilibrium* adjustments in prices to changes (my emphasis but the whole sentence is in italics in the Syllabus.) The idea seems to have been that focusing on the equilibrium adjustment gives us an unambiguous prediction about the real world.

I think the puzzle remains.

[Peter G. Klein]

Jerry: "evidently there was an "Austrian" Knight on entrepreneurship in a 1942 article." Well, some of us think there was an Austrian Knight in his 1921 book! Or, put differently, Mises's theory of entrepreneurship is very close to Knight's. Your comment presumes that Kirzner's theory is "the" Austrian theory of entrepreneurship. Not at all! Kirzner's alertness/equilibration stuff is quite different from the bulk of the prior Austrian literature on entrepreneurship (Hayek being the main exception). Look at chapter 6 of Lachmann 1956 for example. The last section deals with the entrepreneur as a resource-owning, uncertainty-bearing, judgmental decision maker -- basically the same view found in Cantillon, Menger, Knight, and Mises. Kirzner's entrepreneurship theory may be good or bad -- I personally find it unhelpful -- but there's nothing uniquely Austrian about it!

Mario notes that the first part (actually Part II) of Risk, Uncertainty, and Profit, dealing with perfect competition, was influential at Chicago, while the part dealing with uncertainty and change (Part III) was ignored. I think a better reading is that the perfect-competition part serves as an analytical foil for the uncertainty part. Incidentally, I sat across the dinner table from Bob Lucas three nights ago and asked him about Knight's influence at Chicago. He said he got his opinion from Stigler, who told him Knight did good work in economics for just a handful of years before going off the deep end. Certainly Knight is not a revered figure in Hyde Park nowadays.

[Jerry O'Driscoll]

@Greg,

Thanks for the reference. Interesting that Alchian also mentions Prices and Production. As I said, when I went to UCLA various Hayek essays were on reading lists. Leijonhufvud suggested a reconsideration of Hayek's theory in Prices and Production as a class paper.

@Mario,

Brooke agrees. But he says that in "Profit and Entrepreneurial Functions" (1942), is more Austrian and Schumpeterian. Again, I have only a summary of the Brooke article. Kight's 1942 piece might be worth tracking down.

[Current]

> Economists Used to Believe This. And still do.
>
> Janet Yellen gave a speech at the AEA defending
> QE2. Printing money will produce 700,000 jobs.
> Low interest artes will drive investors into
> risky assets and depreciate the currency.

At the risk of sounding like Daniel Kuehn, I'm not sure the subject can be treated so directly.

To us maybe Austrian Macro theory follows directly from the microeconomic theory. But, we're used to it now. I remember talking to a friend of mine about his PhD "it was trivial" he said "or at least by the end of it it seemed trivial to me".

[Jerry O'Driscoll]

@ Current,

I am repeating a WSJ report of what she said. If accurately reported, her view is at odds with 50 years of macroeconomic development. The view espoused is a throwback to macro before the monetarist revolution. My comment was not "Austrian." To paraphrase C.S. Lewis, call it mere economics.

Perhaps someone who was at the AEA meetings would like to comment. I'm sure her speech will be on the SF Fed website.

[Richard Ebeling]

Frank H. Knight's article on "Profits and Entrepreneurial Function," appeared in the December 1942 issue of "The Journal of Economic History, pp. 126-132.

It can be accessed on JSTOR.

Richard Ebeling

[Peter Boettke]

I am going to post on this, as this conversation as well as some prodding by my good friend and colleague Bryan Caplan, has led me to think that much of our miscommunication is due to my failure to persuade people about the importance of the distinction between (what Nelson and Winter call) appreciative theory and formal theory, and more importantly the advances that can be made when the appreciative theory (which can outdistance formal theory) is explicitly brought into the formal theory discussion.

I have insisted from the very first post that Kirzner is not solely responsible for the change in economics from 1960 to today, I just suggested that he was part of a larger movement that was responsible. He represented the least influential of that group of ideas as the empirical, the conceptual and the public choice far outdistanced the influence of the entrepreneurial. But he did play a role and a role that many of us believe should have been even more if our appreciative theory of the market is correct.

As an issue of history of thought, Kirzner has argued that Hayek's 1967 essay "Competition of Discovery Procedure" was very influential on his own development. The basic ideas in that essay can also been seen in earlier Hayek writings (Kirzner often denies this), e.g., "The Competitive Solution". I do recommend the readers to look at both Kirzner's essay on what the socialist calculation debate taught the Austrians, and Lavoie's Rivalry and Central Planning, for a discussion of how the entrepreneurial theory of the competitive market process emerged in the self-consciousness of the Austrian economists in the 1940-1960 period.

Anyway, Nelson and Winter published their book in 1981, since that time the appreciative theory of the market I would argue has become more and more part of our formal understanding of the market --- BUT NOT COMPLETELY. There is still a lot of work to be done, and that work to be done includes a more thorough understanding of the microeconomics of entrepreneurship (see, e.g., Baumol's latest book).

[Greg Ransom]

My sense is that it was more than a bit of shock to Hayek as he slowely realized that other economists were beginning to consider 1/2 of Knight's book to be a "footnote" -- a realization which inspired Hayek's most significant essay, his 1936 "Economics and Knowledge", exactly on this topic.

Mario writes,

"The first part of Knight's book is a summary and systematic presentation of the theory of perfect competition. This is what Hayek meant by "textbook" economics. The rest of the book (uncertainty) was considered a footnote to the first, at least at Chicago (according to Stigler)."

[Mario Rizzo]

Peter Klein,

Stigler was so damn self-satisfied.

[Richard Ebeling]

Stigler was extremely degree snobbish, also.

I am very willing to point out all the limits, short-comings, and "problems" with much of the arguments that Henry Simons presented in his articles on the nature of the market economy and his defense of government regulation.

But his scholarly seriousness and sometimes originality cannot be questioned. He was clearly a great asset as a member of the economics faculty at the University of Chicago.

But in his autobiography, George Stigler criticizes Frank Knight "pushing" to have Simons hired, when "clearly" (in his, Stigler's, mind) Simons never should have been hired because he did not have a PhD.

(I suppose that should have meant no Ronald Coase at Chicago, either. He, too, never earned a PhD.)

Richard Ebeling

[Jerry O'Driscoll]

Peter Klein raises issues that were a constant source of debate among Austrians after C&E came out. As I recall, Murray Rothbard was particularly critical of Kirzner's approach. In this discussion, I'd forgotten those debates.

[David Andersson]

Interesting comments here, especially by Peter Klein. I had a conversion experiens when I read Kirzner, but now I think that Knightian uncertainty, Hayekian knowledge problems, Lachmannian capital structure and property rights theory as developed by Alchia, Demsetz, and Barzel offers a more comprehensive understanding of entrepreneurship than thin Kirznerian theory (and variations on this theme have been pursued by Langlois, Peter Klein, and Foss, in my interpretation). Not so sure whether Mises is really necessary for this, though (I find Mises's conception of the entrepreneur-promoter rather vague).

[Current]

Jerry,

I agree with you that the view that Janet Yellen gives is Dinosaur Keynesianism. But my point is that it's not directly related to what we're discussing here which is much more about macro.

[Current]

> is much more about macro

I mean micro.

[Mario Rizzo]

David Andersson,

Re: "thin Kirznerian theory." It is my view, perhaps not shared by some other Austrians, that Kirzner made a mistake in resisting and discouraging efforts to link his concept of alertness with psychological work in the area. So linking would have put more meat on the bones, so to speak.

But you should look at David Harper's book "The Foundations of Entrepreneurship and Economic Development."

http://www.amazon.com/Foundations-Entrepreneurship-Economic-Development-Economy/dp/0415459206/ref=sr_1_1?ie=UTF8&s=books&qid=1294856437&sr=1-1

Harper puts meat on the entrepreneurial bones from psychology, law, and other disciplines. His work has not been appreciated for the great advance it makes in this area.

Kirzner once explained the difference between his work and Harper's in this way: David Harper is interested in the factors conducive to entrepreneurship while I (Kirzner) am interested in the market implications of the FACT of entrepreneurship. The Kirzner position accepts the traditional separation between economics and other disciplines.

The problem, however, is that there is no brute fact of entrepreneurship! The content of entrepreneurship depends on the "meat" that is, the empirical (psychological, institutional)characteristics. And the specific content is vital to undestanding the market effects of entrepreneurship.

[Peter G. Klein]

Just for the record, I appreciate Mario's position but my disagreement with Kirzner is different from Mario's. I accept the "brute fact" of entrepreneurship and, like Kirzner, think entrepreneurship can be treated as a purely formal and analytical construct. It is Kirzner's particular conception of that construct -- alertness to profit opportunities, the seizure of which leads to equilibration in a Walrasian setting -- that I find problematic. In this sense, while I admire David Harper's work, I see it as putting meat on the wrong bones.

The Cantillon-Knight-Mises conception of entrepreneurship as judgment, which I prefer, is also purely formal and logical, though Knight himself wrote a bit about its cognitive underpinnings and I'm enthusiastic about further work on the psychological aspects of judgment.

[Greg Ransom]

Rival judgments, rival understandings, judgments and understandings which evolve, are crucial to linking "subjectivism" to objective causal explanation involving overlapping and interacting judgments.

This holds true in the phil. of science as well -- In Kuhn scientists can have rival and overlapping understanding of the same world.

[Greg Ransom]

re Klein,

The thing is "judgments" aren't givens or variables plugged into a logical or math construct.

Which makes room for rivalry and learning and causation -- i.e. change and growth in understanding with elements of both rivalry and coordination (in both the domain of the economic and the scientific).

[Greg Ransom]

The refutation of "givens" in a formalism as a program for modeling knowledge and learning is the key link between Hayek's "Sensory Order" work and his economic work:

Both Haye's SO work and his economic work detonated the classic picture of "knowledge" as a mechanical relationship which can be modeled as relations in a formal construct.

Kayek, Kuhn and Popper denoted the associationist / Hume / Carnap / Comte / phenomenalist/ positivist / picture of science by showing that learning and "scientific knowledge" couldn't be mapped out as a formal relationship between "givens" mapped in a logic.

Hayek and Mises did the same in economics -- entrepreneurial learning lies out side of the "givens" of the "perfect competition" construct.

Schumpeter and Samuelson and others attempted to vindicate the formalist conception of economic explanation / science by appeal to the formalist / phenomenalist model of Comte / Carnap.

Hayek (Popper/Kuhn) and Hayek (Mises) has been vindicated over Comte / Carnap and Schumpeter / Samuelson in both the domain of science / mind/ learning and in the domain of economic science.

[Jerry O'Driscoll]

Kirzner supervised a Ph.D dissertation by Benny Gilad on the relationship between economics and psychology. Israel asked my opinion and I encouraged the effort. I don't know what became of Benny, but he was very bright.

[David Andersson]

Mario:

I have read the book by David Harper, and also his earlier book entitled "Entrepreneurship and the Market Process," where he uses a Popperian rather than Kirznerian conception of entrepreneurship (and which was supported by Loasby somewhere; I can't remember where). I wonder why he reverted to Kirznerianism in his second book. Nevertheless, I do like David Harper's attempt to add institutions and psychological factors to Kirznerian theory, but still think that linking entrepreneurship with judgment and Knightian uncertainty is even more persuasive (as has been done by Peter Klein and others).

[Greg Ransom]

Add or substitute Mach for Comte in my remarks above.

[Jerry O'Driscoll]

The Monetarists succeeded because they had a story line they all supported. And they had empirics.

At first the model was suprisingly simple. Brunner/Meltzer and others elaborated. The story line appeared to stay the same even when it deviated in important respects.

If this band of happy warriors can't stop arguing over every detail, including comma placement, it will get nowhere. More facts, less debate would be very helpful.

[Troy Camplin]

True, but don't we have to get the story right? One discovers truth through dialogue.

[Jerry O'Driscoll]

Troy,

Mario's post at TM on Ronald Coase addresses your point. http://thinkmarkets.wordpress.com/

[Henry Manne]

I am delighted to have come across this fascinating discussion and dismayed to learn how much I failed to include in my article on compensation for entrepreneurs which will appear in the QJAE in April. A sequel may be indicated. In any event I do have some, I hope, interesting minutiae to add to the thread.

When I was writing my book on insider trading in 1966 Knight's discussion of the entrepreneur was about the only thing (other than Schumpeter) I could find which I thought allowed me to integrate what I wanted to say with the existing literature. Little did I understand how totally unorthodox those views were or how fads in subject matter may determine careers. After reading this discuussion I understand better than I ever did why my book was met largely with silence by the mainstream academic economics world; they simply were not interested in entrepreneurship and, a fortiori, not in arcane arguments of how to compensate entrepreneurs. One of the few letters of praise that I received was from Israel Kirzner, who clearly did understand the importance of the compensation issue in the then just-beginning new literature about entrepreneurship. Alas, that particular focus is still largely ignored, as indicated by the absence of a discussion of compensation in the work of Peter Klein and Fosse or by Sautet in his otherwise excellent work on the subject of entrepreneurs and corporations. That is unfortunate, as I think a focus on the very real world problem of how to compensate for this function aids greatly in understanding what the function actually is.

On another part of this duscussion, Armen Alchian's connections with Austrian economics, I also have some trivia. I first met Armen at a small conference in 1958 at which he presented a first draft of what became the seminal "Some Economics of Property Rights." He began his lecture with a lengthy quote from Mises' Human Action. Many years later I asked him how he had become acquainted with Mises' work. He told me that he took his PhD at Stanford under Alan Wallis, a doctoral classmate of Milton Friedman and George Stigler, and that Wallis had recommended the work to him. (Wallis later, largely on the basis of his own reading of my insider trading book brought me to a chaired position at the University of Rochester.) Certainly there was no hint of a schism then between what came to be known as Chicago Economics and Austrian Economics. Had this schism not been aggrevated by now almost insignificant differences (mainly I suspect a matter of personalities, like Stigler, Rothbard and Friedman who would frequently come almost to blows at Mont Pelerin Society meetings), I suspect that entrepreneurship would have become a serious vein of work at Chicago instead of being relegated for years to the backwater of Austrian Economics. This lack of mainstream interest in entrepreneurs clearly cost me dearly in the academic battles, and I for one am just delighted to have lived long enough to see the topic emerging with the priority of importance that it deserves and, along with that, the rapidly growing respectability of major tenets of Austrian Economics.

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