New Thinking in Political Economy series
Edited by Laura E. Grube and Virgil Henry Storr
Chapter 4: The determinants of entrepreneurial alertness and the characteristics of successful entrepreneurs
Israel Kirzner has made considerable contributions to our understanding of capital theory (Kirzner 1966), the nature and meaning of the market process (Kirzner 1992), the problems with theories of distributive justice (Kirzner 1989) and the history of economic thought, particularly the history of the Austrian school (Kirzner 1960). Most importantly, however, Kirzner (1973, 1979) has made key contributions to our understanding of the critical role that entrepreneurship plays in markets. For Kirzner, understanding the role of the entrepreneur is essential to understanding how errors get corrected in the market and understanding the role of alertness is essential to understanding how it is that entrepreneurs come to identify these errors. As he explains, in a world where knowledge is necessarily dispersed and individuals are necessarily ignorant of all changes that occur in markets, alert entrepreneurs discover profit opportunities (in other words, opportunities to buy at a low price and sell at a high price) and, thus, drive the market process toward equilibrium. Kirzner’s insights on entrepreneurship have been widely celebrated and have had considerable influence in economics, public policy and entrepreneurship studies. Although Kirzner’s work on entrepreneurship has been widely celebrated, it has been criticized on several fronts. Specifically, his theory of entrepreneurship has been criticized for abstracting from the psychological characteristics of real world entrepreneurs and the determinants of alertness.
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