The Journal of PRIVATE ENTERPRISE Volume XXV, Number 2 Spring 2010 Published since 1985 by The Trinity College 300 Summit Street Association Hartford, Connecticut 06106 & of Private University of Tennessee at Chattanooga Enterprise 615 McCallie Avenue Education Chattanooga, Tennessee 37304 Editor Editorial Board Edward P. Stringham William Butos, Trinity College Trinity College Nicholas Capaldi, Loyola University Christopher Coyne, West Virginia University Associate Editor Ramon P. DeGennaro, University of Tennessee Gerald Gunderson Pierre Garello, Université Aix-Marseille III Trinity College James Gwartney, Florida State University P. J. Hill , Wheaton College Managing Editor Giancarlo Ibárgüen, Universidad Francisco Marroquin J. R. Clark Calvin A. Kent, Marshall University University of Tennessee at Peter Kurrild-Klitgaard, University of Copenhagen Chattanooga Robert Lawson, Auburn University Dwight R. Lee, Southern Methodist University Assistant Editor Peter Leeson, University of Chicago Nick Curott Roger E. Meiners, University of Texas at Arlington George Mason University J. Wilson Mixon, Berry College Benjamin Powell, Suffolk University Production Manager Douglas Rasmussen, St. John’s University Linley Erin Hall Mark Schug, University of Wisconsin at Milwaukee Mountain View, California John C. Soper, John Carroll University Clifford Thies, Shenandoah University Laurence H. White, George Mason University © 2010 by The Association of Private Enterprise Education ISSN 0890-913X The Journal of Private Enterprise 25(2), 2010, 1-53 The Journal of PRIVATE ENTERPRISE is a twice annual peer reviewed journal included in ABI/Inform-Proquest, Cabell’s, Cengage/ThomsonGale, EBSCO, EconLit, the Journal of Economic Literature, Public Affairs Information Service, and Urlich’s. The Journal of Private Enterprise brings together scholars in such fields as economics, education, entrepreneurship, ethics, finance, management, marketing, and religion who have done research on topics pertaining to systems of private enterprise worldwide. Subscriptions are included as part of the membership dues of The Association of Private Enterprise Education (APEE). Dues are $70 per year and include a subscription to the Journal, reduced registration fees for the APEE International Convention, plus various other publications generated or sponsored by APEE. Those seeking more information or membership should visit www.apee.org or contact APEE, c/o J. R. Clark, Probasco Chair of Free Enterprise, University of Tennessee at Chattanooga, 615 McCallie Avenue, Chattanooga, TN 37304. This is the headquarters of APEE and should be contacted for all matters other than the Journal. Individual and library subscriptions without APEE membership can be purchased for $24 per year by contacting Gerald Gunderson, Associate Editor, Journal of Private Enterprise, Trinity College, 300 Summit Street, Hartford, CT 06106. Past issues of The Journal of Private Enterprise are available at that address for $10 per copy plus $2 postage. Articles may be submitted for $45 (plus a $70 membership fee if the submitting author is not yet an APEE member). The submission fee is waived for papers presented at the annual APEE conference. The submission fee should be mailed to Gerald Gunderson, Associate Editor, Journal of Private Enterprise, Trinity College, 300 Summit Street, Hartford, CT 06106. Submissions should be emailed as double spaced Microsoft Word attachments to the editor, Edward Stringham, at: [email protected]. (To expedite the review process, please remove author information from the Word document, including information in the file properties by clicking on Word’s File menu, select Properties, and then eliminate any author information in the Summary tab. Please include author contact information in the body of the email.) More information about the Journal, including detailed instructions for authors, is available online at: www.apee.org/journal-private-enterprise.html D. B. Klein and J. Briggeman / The Journal of Private Enterprise 25(2), 2010, 1-53 3 The Journal of PRIVATE ENTERPRISE Volume XXV, Number 2 Spring 2010 ARTICLES Israel Kirzner on Coordination and Discovery Daniel B. Klein and Jason Briggeman ................................................................... 1 The Meaning of “Economic Goodness”: Critical Comments on Klein and Briggeman Israel M. Kirzner................................................................................................ 55 Corridors, Coordination, and the Entrepreneurial Theory of the Market Process Peter J. Boettke and Daniel J. D’Amico ............................................................. 87 Kirznerian Entrepreneurship as a Misesian Solution to a Hayekian Problem Steven Horwitz ................................................................................................... 97 A Comment on Klein/Briggeman and Kirzner Gene Callahan..................................................................................................105 Coordination: A Critique of Daniel Klein Robert P. Murphy.............................................................................................117 Israel Kirzner on Coordination and Discovery: A Comment Martin Ricketts ................................................................................................129 Alertness, Action, and the Antecedents of Entrepreneurship Nicolai J. Foss and Peter G. Klein....................................................................145 4 D. B. Klein and J. Briggeman / The Journal of Private Enterprise 25(2), 2010, 1-53 Including U.S. State Government Regulation in the Economic Freedom of North America Index Noel D. Campbell, Alex Fayman, and Kirk C. Heriot....................................165 EDUCATIONAL NOTE Teaching the Ethical Foundations of Economics: Assessing a Curriculum for Middle and High School Students Scott Niederjohn, William Wood, and Kimberly Nygard...................................189 The Journal of Private Enterprise 25(2), 2010, 1-53 Israel Kirzner on Coordination and Discovery Daniel B. Klein and Jason Briggeman* George Mason University Abstract Israel Kirzner has been a leader in fashioning an Austrian school of economics. In his rendering of the Austrian school, one finds a marriage between Friedrich Hayek’s discourse with Ludwig von Mises’s deductive, praxeological image of science – a marriage that seems to us somewhat forced. The Misesian image of science stakes its claims to scientific status on purported axioms and categorical, 100 percent deductive truths, as well as the supposed avoidance of any looseness in evaluative judgments. In keeping with the praxeological style of discourse, Kirzner claims that his notion of coordination can be used as a clear-cut criterion of economic goodness. Kirzner wishes to claim that gainful entrepreneurial action in the market is always coordinative. We contend that Kirzner’s efforts to be categorical and to avoid looseness are unsuccessful. We argue that looseness is inherent in the economic discussion of the most important things, and associate that viewpoint with Adam Smith. We suggest that Hayek is much closer to Smith than to Mises, and that Kirzner’s invocations of Hayek’s discussions of coordination are spurious. In denying looseness and trying to cope with the brittleness of categorical claims, Kirzner becomes abstruse. His discourse erupts with problems. Kirzner has erred in rejecting the understanding of coordination held by Hayek, Ronald Coase, and their contemporaries in the field at large. Kirzner’s refraining from the looser Smithian perspective stems from his devotion to Misesianism. Beyond all the criticism, however, we affirm the basic thrust of what Kirzner says about economic processes. Once we give up the claim that voluntary profitable activity is always or necessarily coordinative, and once we make peace with the aesthetic aspect of the idea of concatenate coordination, the basic claims of Kirzner can be salvaged: Voluntary profitable activity is usually coordinative, and government intervention is usually discoordinative. But the Misesian image of science must be dropped. JEL Codes: A10, B00, C7, D2 Keywords: Coordination; Concatenation; Discovery; Entrepreneurship * We thank Niclas Berggren, Gene Callahan, Peter Klein, Frederic Sautet, George Selgin, and Ed Stringham for valuable comments. Jason Briggeman thanks the Mercatus Center at George Mason University for a summer fellowship to complete this study. 1 2 D. B. Klein and J. Briggeman / The Journal of Private Enterprise 25(2), 2010, 1-53 I. Introduction Israel Kirzner is best known for his work on the role of discovery and entrepreneurship in economic affairs. He sees entrepreneurial alertness as the vital human faculty to apprehend opportunities for one’s betterment. Entrepreneurial discovery entails interpretive shifts and awakenings. It goes beyond the deliberate search for or mechanical response to new information. Kirzner’s insights about discovery are in contrast to the kind of economics that regards human beings as interpretively flat and fixed – that is, working within an unchanging understanding of their own ends and means. Game theory typically assumes common knowledge – interpretational symmetry throughout the “game.” Knowledge is flattened down to information: There is no heterogeneity of interpretations and no role for judgment over interpretations. If economists confine their thinking to stories of final and symmetric interpretation, they will under-appreciate the role of discovery