Thomson Reuters has been predicting Nobel Prizes for the last dozen years, with modest success, and this year names Israel Kirzner as a potential economics winner, in a hypothetical joint prize with William Baumol for research in entrepreneurship. (This is one of three scenarios imagined by Thomson Reuters, the others being Philippe Aghion and Peter Howitt for growth theory and Mark Granovetter for economic sociology.)
Like most Austrians, I will be delighted if Kirzner wins the prize, not only as recognition of Kirzner’s work and the general field of entrepreneurship, but also for the attention it would bring to the Austrian school itself. Kirzner’s accomplishments are many, not only in entrepreneurship theory but also in economic methodology, capital theory, and the history of economic thought. I will also be surprised — as I have argued (e.g., here and here), Kirzner’s influence on the specialized field of entrepreneurship is vast, but his influence on economic theory has been modest. Kirzner’s theory of entrepreneurship is not, after all, a theory of entrepreneurship per se, but a theory of what he calls the entrepreneurial market process. “My work has explored, not the nature of the talents needed for entrepreneurial success, not any guidelines to be followed by would-be successful entrepreneurs, but, instead, the nature of the market process set in motion by the entrepreneurial decisions.” As I put it in a 2008 article: “Kirzner’s aim is not to characterize entrepreneurship per se, but to explain the tendency for markets to clear. In the Kirznerian system, opportunities are (exogenous) arbitrage opportunities and nothing more.Entrepreneurship itself serves a purely instrumental function; it is the means by which Kirzner explains market clearing.”
The irony is that while management scholars interested in entrepreneurship and innovation have embraced Kirzner’s concept of entrepreneurial opportunities, neoclassical economists have continued to embrace Walrasian equilibrium, with little interest in the processes of adjustment and coordination highlighted in Kirzner’s work. (The influence of Kirzner’s work on both groups of scholars is easily demonstrated with citation data, which I provide in the links above.) This is not a criticism of Kirzner, of course, but a comment on the state of neoclassical economics. To be sure, the Nobel committee has previously recognized economists whose contributions have not been fully incorporated into the mainstream (Simon, Coase, North, Schelling, Williamson, Ostrom, and of course Hayek). And Baumol’s contributions, which focus on the economics of innovation and technical change, are far more “mainstream” than Kirzner’s. Still, I will be pleasantly surprised if Kirzner gets the early morning phone call!