Wednesday, February 15, 2017

QOTD: The Missing Entrepreneur

There is no place for entrepreneurship in the market model of mainstream economics. Consider Kirzner in his How Markets Work:
The theory of entrepreneurial discovery sees the explanation of market phenomena in the way entrepreneurial decisions, taken under disequilibrium conditions, bring about changes in prices and quantities. The market process so initiated consists of continual entrepreneurial competition, made possible by an institutional framework which permits unimpeded entrepreneurial entry into both new and old markets. The success which capitalist market economies display is the result of a powerful tendency for less efficient, less imaginative courses of productive action to be replaced by newly discovered ways of serving consumers -- by producing better goods and/or by taking advantage of hitherto unknown but available, sources of resource supply. The theory focuses on the concept of discovery in contrast to the notion of the individual decision in mainstream theory. (p. 31)
 The mainstream economic view of the world relies on the idea of equilibrium. Every point in the diagram of the market model, including every point on the demand and supply curves, is an equilibrium point. So, the role of entrepreneurship is missing, and if you want to know more about the real economic world, this book by Kirzner is a good one to study.

Sunday, February 12, 2017

Hayek Quote of the Day

From Hayek's "Individualism: True and False:"
The main merit of the individualism which [Adam Smith] and his contemporaries advocated is that it is a system under which bad men can do least harm. It is a social system which does not depend for its functioning on our finding good men for running it, or on all men becoming better than they now are, but which makes use of men in all their given variety and complexity, sometimes good and sometimes bad, sometimes intelligent and more often stupid. [Individualism and Economic Order, pp. 11-12]