The Austrian Theory of Entrepreneurship: Schumpeter, Kirzner, and the Entrepreneurial Market

Well, Pete and Jeff, my story here starts in the mid-20th century, right? Schubert in the early to mid-20th century and then Kirzner in the second half.

Do you guys want to add anything going back further, maybe to talk about Friedrich Wieser or other contributions, maybe even earlier in the Austrian tradition in terms of the story of how they've contributed to entrepreneurship?

Well, I think one thing to remind our listeners of is that the Austrian school is not really some monolithic set of thoughts, right? Right away in the intro here, we have Kirzner, and he's compared to Schumpeter.

But even in that era when Schumpeter was really a rising star, he was in...

Bombavwerk seminar around about the same time that Ludwig von Mises was.

And so, of course, Mises is associated with the Austrian school as well.

And they too, Mises and Schumpeter, have some different approaches that they take that do represent some different lines of thought in the Austrian school.

And so much so that there are some in the Austrian camp who aren't certain of about regarding Schumpeter as a sort of Misesian Austrian, because he breaks on a few different points.

Schumpeter breaks away from Mises on the emphasis around subjective valuation.

Schumpeter views it as useful, whereas Mises really sees it as central, and that subjective valuation of course, plays a tremendous role in the minds of the consumer that the entrepreneur is trying to create value for.

So that's an interesting juxtaposition of two guys in the Austrian school, Mises and Schumpeter.

And then we'll look at Schumpeter and Kirchner here and see how they differ.

So I think it's an important point to make that when we talk about the Austrian school, the Austrians in general, that there are factions within.

It's not a monolithic sort of school of thought.

I sometimes describe Schubert as the eccentric uncle of the Austrian School of Economics.

But, Pete, do you have anything to add in terms of either earlier stuff or other things you want to add in terms of this theory of entrepreneurship and what role it's played in kind of how Austrians have thought about the market process?

So I would start with Richard Cantillon, because Richard Cantillon, of whose effects we usually speak in the context of, you know, distortions of prices caused by where money enters the economy, that sort of thing.

Cantillon... gave the notion of the entrepreneur as the bearer of uncertainty.

They buy at known prices and keep into an uncertain future, uncertain circumstances, uncertain prices, all that sort of thing.

Because entrepreneurship is really inseparable from uncertainty.

And also Jean-Pierre Pisset, who emphasized coordination.

For him, he said essentially that entrepreneurs move resources from lower valued to higher valued uses.

And that anticipates later themes about coordination and adaptation, that sort of thing.

Wieser's contribution on the other hand, you mentioned that, but it's indirect, but it's pretty profound.

He essentially said that entrepreneurs attempt to operate by anticipating future subjective valuations, trying to forecast what consumers will value before those preferences have been expressed.