Thanks to Chris, Pete, Pete, and Fred for adding me to the roster. As regulars around here know, I've been in the comments from time to time and am now happy to be "up top" as a full-time contributor. Pete B. and I have known each other for more than 20 years, most of which I've spent trying to keep him from completely going off the rails, and it's a particular pleasure for me to be part of this endeavor with him.
On to business... In a recent post over at "Organizations and Markets," Peter Klein offers some musings about the absence of a theory of entrepreneurship in Hayek. He rightly notes that:
Kirzner’s theory of entrepreneurial discovery builds directly on Hayek’s notion of an economy characterized by dispersed, tacit knowledge, an economy in which “competition” is a process of coordination and equilibration, rather than a set of conditions (as in Walrasian competitive general equilibrium). However, Hayek did not develop a theory of the entrepreneur per se.
He also notes that Hayek used the term "entrepreneur" in the writings on socialist calculation but Klein argues it was more a loose synonym for "businessman" and did not have the analytical precision of Kirzner (then again, who among us does?). Klein also claims "Certainly the Kirznerian metaphor of the “pure entrepreneur,” performing a discovery function independent of ownership and investment, does not appear in Hayek’s writings."
I think Peter is right (and, I might ask, how did Austrian economics get its current surplus of Peters - Boettke, Leeson, Lewin, and Klein?) about the lack of a real theory of the entrepreneur, but Hayek does recognize the discovery function that the entrepreneur must play. There is the famous passage from the 1940 paper about how
the method which under given conditions is the cheapest is a thing which has to be discovered, and to be discovered anew, sometimes almost from day to day, by the entrepreneur, and that, in spit of the strong inducement, it is by no means regularly the established entrepreneur, the man in charge of the existing plant, who will discover what is the best method. (Ind. and Econ. Order p. 196)
The word "discovery" appears elsewhere in that general area of the paper, as does the word "entrpreneur."
Hayek had the ingredients for a Kirznerian theory of the entrepreneur but did not put them all together in the way Kirzner eventually did. It is worth noting, in contrast to arguments sometimes made by the "de-homogenizers," that Hayek clearly has a theory of individual action here and that markets are not somehow mysteriously coordinated by prices without the involvement of intentional human action. In my SDAE presidential address (RAE 2004), I tried to make this point against the de-homogenizers while also still recognizing that Hayekians have sometimes left the impression that "it's all about prices" in a way that opened them up to this criticism.
I would also add that I think the best way to understand Kirzner's theory of entrepreneurship is as a "Misesian answer to a Hayekian question." In "Economics and Knowledge" in 1937, Hayek defined the economic problem as explaining the process behind the empirical observation that prices tended toward costs. He further argued that the explanation would have to be in terms of knowledge, specifically the increasingly dovetailed expectations of market participants. How was it that market participants learned both about the objective state of the world and the expectations of other market participants? He offered no detailed answer to this question.
Kirzner's entrepreneur, who is in most ways Mises's entrepreneur, is the answer to that Hayekian question. One way of viewing Kirzner's whole project is that he brought Mises's entrepreneur into Hayek's epistemic conception of the market process. It is the enterpreneur who drives the social learning that characterizes the discovery process of the market. We cannot understand spontaneous order without entrepreneurship and monetary calculation, and a focus only on intentional human action misses the ways in which such action produces the unintended but orderly outcomes that are the benefits produced by markets. Kirzner's genius is not just in producing a very precise theory of the entrepreneur but one that, again, provides a Misesian answer to a Hayekian question and, in so doing, reminds us that Austrian economics needs both individual entrepreneurship and spontaneous order to be a complete approach.
Peter Klein ends his entry with a nice quote from David Harper that makes a similar point about the contrasting but complementary emphases of Mises and Hayek. Noting the absence of a theory of entrepreneurship in Hayek should only remind us that we need Mises and Kirzner (and plenty of others) to get the holistic understanding of market processes that Austrian economics promises.