Edited by David B. Audretsch, Oliver Falck, Stephan Heblich and Adam Lederer
Chapter 2: Between Useful and Useless Innovation: The Entrepreneurial Role
Israel M. Kirzner For many years I have argued for a theoretical understanding of the entrepreneurial role that differs significantly, in certain respects, from that pioneered by Joseph Schumpeter in his celebrated works (e.g. Schumpeter, 1934). Schumpeter identified the entrepreneurial role with the creative and innovative element in the human make-up. So far, so good. No one need take serious issue with this identification. But Schumpeter went further. For Schumpeter, the entrepreneur’s out-of-the-box thinking disrupts the equilibrium that would otherwise tend to emerge in the market economy. The creativity that Schumpeter’s entrepreneur displays is a destructive creativity (in the sense that it disturbs pre-existing stable patterns of production and commercial relationships). At this point there is substantial scope for disagreement. Building on the work of Ludwig von Mises, I have, contrary to Schumpeter, seen the entrepreneurial role as benignly responding to perceived imbalances, to the pockets of perceived or anticipated disequilibrium being continuously revealed in markets. The entrepreneur who correctly identifies and exploits such a perceived imbalance is correcting a poorly coordinated set of decisions that would otherwise have been made. As I see it, the sequence of events set in motion by entrepreneurial discovery is a sequence to which we owe whatever equilibrating tendencies markets possess – rather than (as with Schumpeter) an extraneous (albeit possibly creative and ultimately beneficial) disruption jolting the market away from any initial equilibrium positions that might otherwise have emerged.1 Over the years I have, in response to repeated, valuable (and valued) criticisms, more than...
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