Competition and Entrepreneurship

Rating:
Summary: An incisive look into the competitive markets.
Review: A thorough economics ('Austrian') perspective on how a free market performs - with competition and the role of the entrepreneur in it. For the non-economics reader, I would recommend Peter Drucker's Innovation and Entrepreneurship.

Rating:
Summary: A brilliant dynamic theory of the firm.
Review: Kirzner offers an alternative to both the neoclassical theory of the firm and to the Schumpeterian "creative destruction" perspective of the theory of the firm. Although Kirzner belongs to the school of Austrian economics, he is independent to the Schumpeterian perspective.

Rating:
Summary: Superhuman entrepreneurs?
Review: There is a tendency for many people to underestimate or ignore the role of entrepreneurs in the market process; of them, the most notable are neoclassical economists and those involved in macroeconomic decision making on the national and international level. However, through common sense and observation of the market, there are few people who would claim that entrepreneurs serve no important role. After all, the entrepreneur is the actor who organizes and assumes the risk for any business venture. Israel Kirzner presents an in-depth analysis of the Entrepreneur, developing an Austrian perspective independent of (but very similar to nonetheless) the Schumpeterian perspective.

Israel Kirzner suggests that the entrepreneur drives the entire market process by acting upon previously unnoticed profit opportunities. Herein lies the problem of "sheer ignorance" that seems to be formulated totally independently of neoclassical search theory, as if it did not exist. What is this "sheer ignorance" and how could anyone possibly come to the conclusion that only entrepreneurs have this special "gift" that the rest of us are left without? While neoclassical models are not perfect, to say they are precisely irrelevant (as some Austrians do) can be dangerous. Kirzner seems to suggest that entrepreneurs are some sort of superhuman animal that mystically bring buyers to their products.

Randy Holcombe and David Harper have both expanded on this in Austrian Economics journals and have included the importance of institutions and endogenous sources of growth. A discussion of institutional environments would have been helpful to Kirzner's analysis. Without institutions and rules that provide incentives for entrepreneurs, the discussion of their importance is futile. Better incentives for entrepeneurship will cause more people to invest more time in searching for new entrepreneurial ideas.

Mainstream economics has a lot to learn from contemporory Austrian work, but for that work to completely discount neoclassical economics is a mistake. This book, while rightly drawing attention to the importance of the entrepreneur, ultimately falls short and represents many of the problems in Austrian economics.