Transcending the Schumpeter-Kirzner Dichotomy: The Role of the Entrepreneur in Carl Menger’s Theory of Price

27 Pages Posted: 9 Mar 2021 Last revised: 3 Dec 2021

See all articles by Rosolino Candela

Rosolino Candela

George Mason University - Mercatus Center

Karras Lambert

George Mason University - Department of Economics; F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics - Mercatus Center

Date Written: November 11, 2020

Abstract

What is the role of the entrepreneur in Carl Menger’s account of the market process? Modern entrepreneurship theory is broadly divided into two types. The Schumpeterian account of entrepreneurship takes an equilibrium state of affairs as an analytic starting point from which the entrepreneur disrupts the existing equilibrium through technological innovation. The Kirznerian account of entrepreneurship begins from disequilibrium to illustrate the equilibrating role of the entrepreneur through arbitrage. While some working within the Austrian tradition have found Menger’s account to be lacking in precisely the entrepreneurial role that would become a distinctive contribution of the school, we demonstrate that Menger implicitly accounts for entrepreneurship in his theory of price formation. In doing so, we argue that Carl Menger’s account of entrepreneurship transcends the distinction between the Kirznerian and Schumpeterian entrepreneur by incorporating not only price adjusting behavior (i.e. arbitrage) but also non-price adjusting behavior (i.e. product differentiation; variations in quantity and quality; institutional innovation). To the extent that Schumpeterian and Kirznerian entrepreneurship are distinct categories in the history of economic thought, we show how both have roots in the pioneering efforts of Carl Menger, the founder of the Austrian School.

Keywords: Carl Menger; Israel Kirzner; Joseph Schumpeter; Entrepreneurship; Market Process; Price Theoryrated

JEL Classification: B31; B53; D01

Suggested Citation

Candela, Rosolino and Lambert, Karras, Transcending the Schumpeter-Kirzner Dichotomy: The Role of the Entrepreneur in Carl Menger’s Theory of Price (November 11, 2020). GMU Working Paper in Economics No. 21-38, Available at SSRN: https://ssrn.com/abstract=3728410 or http://dx.doi.org/10.2139/ssrn.3728410

Rosolino Candela (Contact Author)

George Mason University - Mercatus Center ( email )

3434 Washington Blvd., 4th Floor
Arlington, VA 22201
United States

Karras Lambert

George Mason University - Department of Economics ( email )

Fairfax, VA
United States

HOME PAGE: http://https://economics.gmu.edu/people/klamber7

F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics - Mercatus Center ( email )

Arlington, VA
United States

HOME PAGE: http://https://asp.mercatus.org/people/karras-lambert

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
56
Abstract Views
241
rank
468,379
PlumX Metrics