Rothbard versus Kirzner on Entrepreneurship

Letter 1

From: M
Sent: Tuesday, October 08, 2019 3:53 PM
To: Walter E. Block <wblock@loyno.edu>
Cc: B
Subject: The Entrepreneur

Walter,

Which side are you on in the debate over the necessity of personal capital in entrepreneurial projects?

https://www.economicpolicyjournal.com/2019/10/why-israel-kirzner-should-be-awarded.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed:+economicpolicyjournal/KpwH+(EconomicPolicyJournal.com)

Warm regards, M

This is a three way conversation I had with M and B. Both of them are incisive and thoughtful Austro-libertarians. I am thankful to both of them for needling me on this subject.

Letter 2

On Oct 8, 2019, at 2:23 PM, Walter Block <wblock@loyno.edu> wrote:

Dear M:

I think Izzy is great, and I fully and enthusiastically agree with B that he should get the Nobel prize in econ. However, on this one issue, I’m on the side of Rothbard. Izzy is weak on this in that without capital, there can be no entrepreneurial losses, which seems weird to me.

Best regards,

Walter

Letter 3

From: M

Sent: Tuesday, October 08, 2019 4:34 PM

To: Walter E. Block <wblock@loyno.edu>

Cc: B

Subject: Re: The Entrepreneur

Would you call someone who has a unique business idea, funded and actualized by another person, an entrepreneur?

Warm regards, M

Letter 4

On Tue, Oct 8, 2019 at 2:40 PM Walter Block <wblock@loyno.edu> wrote:

Two answers:

No, because he can’t lose $. No losses are possible

Yes, he’s really what Murray calls a capitalist entrepreneur, because his idea is capitalized into value by this other person, the funder. And yes, he can suffer a loss, of goodwill

Letter 5

From: B

Sent: Tuesday, October 08, 2019 8:10 PM

To: Walter Block <wblock@loyno.edu>

Cc: M

Subject: Re: The Entrepreneur

Hi Walter,

What do you propose to call people who put a deal together but do not put up any on their own capital?

Letter 6

On Tue, Oct 8, 2019 at 6:19 PM Walter Block <wblock@loyno.edu> wrote:

They don’t even own good will capital? Then, I don’t call them an entrepreneur. One necessary requirement of an entrepreneur is that he can lose money, or something, in case of error. If he owns absolutely nothing, a la Kirzner, then he can’t lose anything.

Rothbard’s devastating critique of Kirzner on this:

https://mises.org/wire/entrepreneurship-kirzner-vs-mises

this is also excellent on this point:

https://hanseconomics.com/2012/08/15/from-opportunity-discovery-to-judgment/

Letter 7

From: B

Sent: Tuesday, October 08, 2019 9:11 PM

To: Walter Block <wblock@loyno.edu>

Subject: Re: The Entrepreneur

Hi Walter,

But what do you call them?

I’m with Mises on this.

Here is Mises slamming the notion that an entrepreneur needs to be a capitalist:

Let us try to think the imaginary construction of a pure entrepreneur to its ultimate logical consequences. This entrepreneur does not own any capital. The capital required for his entrepreneurial activities is lent to him by the capitalists in the form of money loans. The law, it is true, considers him the proprietor of the various means of production purchased by expanding the sums borrowed. Nevertheless he remains propertyless as the amount of his assets is balanced by his liabilities. If he succeeds, the net profit is his. If he fails, the loss must fall upon the capitalists who have lent him the funds.

Letter 8

On Wed, Oct 9, 2019 at 8:40 AM Walter Block <wblock@loyno.edu> wrote:

Dear B:

I’m not sure of what to call people who put deals together, but have absolutely nothing to lose, not even good will, if the deals fail, and they can’t suffer losses.

How about intermediaries? Introducers?  Favor dispensers?

I reserve the word entrepreneur for those who can suffer losses, including but not necessarily monetary, if their schemes fail.

Best regards,

Walter

Letter 9

From: B

Sent: Wednesday, October 09, 2019 10:50 AM

To: Walter Block <wblock@loyno.edu>

Cc: M

Subject: Re: The Entrepreneur

Hi Walter,

So then, what is the difference between an entrepreneur and a capitalist?

Letter 10

On Wed, Oct 9, 2019 at 9:01 AM Walter Block <wblock@loyno.edu> wrote:

Dear B:

A capitalist owns capital. The widow and orphan who own their shoes, or one share in a corporation, or a bicycle, are capitalists. But, they aren’t entrepreneurs.

In Murray’s view, the capitalist-entrepreneur takes risks, can suffer losses, creates new enterprises.

There of course is a continuum between the two. Prices of shoes, bikes, shares, vary.

Best regards,

Walter

Letter 11

From: B

Sent: Wednesday, October 09, 2019 1:57 PM

To: Walter Block <wblock@loyno.edu>

Cc: M

Subject: Re: The Entrepreneur

Hi Walter,

So it sounds to me as though you are making some kind of distinction between a “capitalist” and a “capitalist entrepreneur” while recognizing that there is a class of dealmakers who don’t put their own money into deals.

Why not call those who are at risk of losing capital “capitalists” and those who come up with deals “entrepreneurs”?

What does the term “capitalist entrepreneur” bring to the table other than muddying to separate functions? Or do you see the “capitalist entrepreneur” providing a function that is not part capitalist and part dealmaker?

Letter 12

From: Walter Block <wblock@loyno.edu>

Sent: Wednesday, October 09, 2019 4:38 PM

To: B

Cc: M

Subject: RE: The Entrepreneur

Dear B:

Everyone is an entrepreneur with a small e. We all engage in human action in a risky world.

I reserve Entrepreneur with a capital E for those who, yes, come up with deals, but, also have something they can lose if the deal fails. The something could be money, it usually is. But, it could also be goodwill, reputation, etc.

The problem I have with Izzy is that he says there is something called a pure Entrepreneur, who risks nothing of his own in his deals. Murray blasts away at that concept, I think very successfully. He insists, by using the phrase “capitalist entrepreneur” that the Entrepreneur must have something to lose. There are profits as well as losses in entrepreneurship. Izzy misses this.

I’m not really so much making a “distinction between a “’capitalist’ and a ‘capitalist entrepreneur’” as I am, instead, supporting Murray’s view that we all have to risk something when we act, either entrepreneurally, or Entrepreneurally, and Izzy misses this point.

I am very grateful to you for pushing me around on this, and helping me to see this issue more clearly.

Best regards,

Walter

Share

5:19 pm on October 22, 2019