May, 2022

Transcending the Schumpeter-Kirzner Dichotomy

The Role of the Entrepreneur in Carl Menger’s Theory of Price Formation
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Carl Menger established in his pathbreaking 1871 work Grundsätze der Volkswirtschaftslehre (Principles of Economics) the theoretical foundations from which all future developments in the tradition of the Austrian School of economics can arguably be traced. However, some followers working in that same intellectual tradition have found Menger’s treatment of entrepreneurship lacking with respect to its systematic integration with Menger’s overriding aim to connect the subjective valuations of market participants with the prices that emerge in markets. Furthermore, an apparent dichotomy has been identified in past entrepreneurship literature between the theoretical work of Joseph Schumpeter and Israel Kirzner concerning the role of the entrepreneur in driving the market from or towards equilibrium, respectively. In this paper, we demonstrate how the entrepreneurial role as identified by Menger in his Principles is in fact systematically integrated with his conception of the market process as a whole. Furthermore, the more systematic understanding of the Mengerian entrepreneur also serves to clarify and overcome at least part of the apparent dichotomy between Schumpeterian and Kirznerian entrepreneurship. In doing so, we position the Mengerian entrepreneur as a potentially unifying conception from which those working within the two divergent strands may find common roots.