I don’t think it’s indefensible; in fact, in large part, I think Rothbard is right. It’s like the old joke: “How many libertarians does it take to change a light bulb? None, the free market will take care of it.” To remove human actors is to remove a key factor in economic inquiry.
Rothbard’s criticism is ineffective simply because he is arguing against a straw man: neither Hayek nor Kirzner (nor others, like James Buchanan) who emphasize the “market process” are removing human action from the analysis. In essence, if we accept “the market” (as Rothbard does) and add “equilibriating tendencies” (as Rothbard does), then we have a “market process.” I consider the idea of “market process” an asset to Austrians: there is no stationary equilibrium, but rather an active process of discovery, entrepreneurship, etc.
Salerno doesn’t take issue with the notion of a “market process” in that essay; indeed, as you know, “market process” is one of Salerno’s favorite terms, especially as a better alternative to “market mechanism”.
Right, but he does take issue with much of Kirzern’s concept of the entrepreneur and his broader “Hayekian” approach to market coordination, which has everything to do with Kirzner’s vision of the “market process”. It’s not just a matter of words.
Oh I see, so Rothbard has an issue with Kirzner’s particular conception of the market process, not the notion of a market process as such. That makes more sense.
But once again, I think Rothbard painted a straw man. For instance, he tries to tie down Hayek and Kirzner as only focused on information through price signals, which is simply not true.
In the same paragraph, for instance, Rothbard writes, “Misesian Man knows a lot about his part of the market—not just prices, but all the qualitative knowledge that must also go into production and into risky ventures: the sort of customers he will have, the sort of products they will want, where to buy raw materials and how to transform them, and so on—that is, all the particular knowledge that Hayek has talked about in other contexts. The free price system is vital to the entrepreneur but it is not, as in Hayek-Kirzner, his only source of knowledge” (179).
When I read it, and still now, I was baffled about how Rothbard could invoke Hayek’s emphasis on “particular knowledge,” but then claim Hayek considered the “price system” an entrepreneur’s “only source of knowledge.”
It would seem to me that uncertainty is an inalienable feature of human life, hence it cannot be avoided. Saying that entrepreneurs bear uncertainty is like saying that entrepreneurs breathe air. So, I’m with Kirzner on that one: noticing opportunities is what drives the market.
Salerno’s major argument against Hayek/Kirzner is that they see the “discovery of knowledge” as a necessary precondition for competition, while Salerno argues that for Mises/Rothbard it’s the other way around. For what it’s worth, I’m a critic of the hardline stance against Kirzner and Hayek which is expressed by Hoppe, and I’m guessing Rothbard, but I don’t really know enough to comment with any authority.
Merlin,
Yes, we all face uncertainty, which is why Mises is clear that everybody, in that sense, can be an entrepreneur.
Well, what’s the need for two definitions? What’s the issue with the entrepreneur as the guy who seeks opportunities? The market analyst is an entrepreneur, to be sure: one that sells his services.
It’s important to remember that the words ‘producer’, ‘consumer’, ‘entrepreneur’, et cetera, don’t describe people, they describe types of action. So yes, everybody does have the ability to be an entrepreneur, and everyone eventually does pursue entrepreneurial action at some point in their life (or throughout their life).
It’s not a merely semantic issue. Again, if you can reconstitute production/distribution theory with your AdrianHealyian framework, then go for it. But if you’re going to revolutionize Austrian Economics, you should probably do so in another thread.
Sure, but what I’m saying is that that entrepreneurial action is not bearing certainty (since we all do, we need not have invented the entrepreneur as an ideal type at all) but seizing opportunities.
To illustrate, a classic speculator sees that the same share is sold at different prices in two exchanges, and he immediately buys low to sell high. Risk is negligible, as is uncertainty. So, is he an entrepreneur or is he not? If he is, than he is because he seized an opportunity, while risk was very low to zero.
Well, you are actually trying to do more than you realize, and this is why…
Mises rightly stressed the importance of avoiding “terminological gymnastics”, reminding us that the whole point of economic terminology is to create useful dividing lines for the purpose of explaining market phenomena. For example, in the terminological section of Theory of Money and Credit, he did not go on and on about how his terminology is, on its immediate merits, better than competing terminologies. Instead, he rested the utility of his terminology on the explanatory power of his entire monetary theory.
Our threefold classification is not a matter of mere terminological gymnastics; the theoretical discussion of the rest of this book should demonstrate the utility of the concepts that it involves.
Similarly, the merits of Mises-Rothbardian functional distribution (in which the delimitation of the entrepreneurial function has to do with judgment, not alertness) rests not on its own grammatical structure, but on the success of the Mises-Rothbardian production/distribution theory that uses it.
People love to engage in endless logomachy, thinking they can corner the “right” way of defining words in social philosophy without diving into the theoretical structure of the science in question. But it is not mere pedantry to resist dilettantish neologizing, and to insist on the distinctions used by Mises and/or Rothbard. These men have done the work of actually constructing a theory using their terminology. And the utility of their terminology rests on the success of their theory. If you want to show that your terminology is better than theirs, you need to construct a whole theory, which uses your rival terminology, and show how your theory has more explanatory power than theirs. Only then can terminological decisions be based on scientific utility, and not semantic static.
I get your point; but I don’t think I’m making a whole new theory. I’m trying to ‘solve’ as it were the riddle between the two branches. I don’t think there is a distinction and I don’t think saying that it’s two sides of the same coin is saying that I differ from their view.
I think Rothbard, as always, was too fast to dismiss a useful concept.
For the record; I’m not denying that ‘entrepreneurship’ is bearing uncertainty. I’m just saying that ‘acting upon perceived opportunities’ implies uncertainty and therefore that there is no distinction. Opportunities are always uncertain.
That is also in line with Mises his statement that all action is entrepreneurial action in some sense.
The difference between the capitalist-entrepreneur is that he doesn’t ‘just’ risk opportunity cost, but also capital. (A worker gets his wage, a capitalist-entrepreneur get’s interest with entrepreneurial profit/loss. (insert necessary caveats as discussed by Rothbard in MES)
But let me rephraze that in a new topic. Just because it’s interesting
Sure, but what I’m saying is that that entrepreneurial action is not bearing certainty (since we all do, we need not have invented the entrepreneur as an ideal type at all) but seizing opportunities.
“Seizing opportunity”, in my opinion, is implicit in the concept of bearing uncertainty. In the same sense, the laborer who sells his labor is seizing an opportunity when selling his labor, and is also acting against uncertainty, which makes that action entrepreneurial. He may not be a capitalist in the sense of distributing capital, but that action is entrepreneurial in nature.
To illustrate, a classic speculator sees that the same share is sold at different prices in two exchanges, and he immediately buys low to sell high. Risk is negligible, as is uncertainty.
I think it’s a lot to assume that ‘risk is negligible’ (risk being no different than uncertainty, in this sense), but it’s true that there are varying degrees of uncertainty. Nevertheless, the speculator is still a risk-bearer.
