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ABSTRACT
This paper examines Kirzner's contribution to the study of the equilibrating tendency in economics. By analyzing his interpretation of Jevons’ law of indifference, we participate in the debate on Kirzner association with neoclassicals when discussing the equilibrating tendency. A reconstruction of Kirzner’s use of Jevons’ law is conducted, considering his argumentative strategy when presenting the Austrian economics ideas to other professionals in the field. We conclude that Kirzner drew close to neoclassical economics to emphasize the relevance and uniqueness of Austrian economics. By doing so, we highlight the main differences between the two currents of economic thought.
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Notes
1 In Kirzner's theory, the entrepreneur is the one who acts speculatively from the state of alert for pure profit opportunities, gains in exchange for nothing - that is, which are positive after covering all costs, including opportunity costs. There is a debate about Kirzner's theory being or not a thesis about the entrepreneur or the results of his actions, but this discussion is outside the scope of this article, since Kirzner points out that, applied to the real world, his theory sees everyone as entrepreneurs insofar as they operate in the condition of uncertainty (as will be seen in section two).
2 As seen in Casonato (Citation2023), Kirzner's theory seeks to overcome the hydraulic notion that neoclassical economics has of market competition, and it does so by attributing to it a dynamic that results from two factors: (i) the genuinely uncertain environment, in which actions may not reach the expected results when making a decision; and (ii) the notion of a competitive process that is maintained while entrepreneurs take actions in pursuit of market profits. With this contribution, Kirzner was able to offer a theory of the market process to rival the neoclassical theory of competition.
3 Kirzner (Citation1992a), answering Ricketts’s (Citation1992) critiques, further clarified the difference between alertness and luck. According to him, pure entrepreneurial profit is a result of the discovery of an opportunity. This discovery requires identification by alertness and exploitation by entrepreneur. That opportunity would never be identified only by luck, remaining unknown to economic agents and, therefore, unexplored.
4 In Kirzner the equilibrating tendency involves a ceteris paribus hypothesis, in a way that it does not ignore that in the real world the subjacent variables are always changing. This is why one should not expect to verify empirically the existence of such tendency, despite the fact that, in Kirzner’s thinking (e.g. Citation1992a [1990]), the role of the entrepreneur is to bring induced variables (prices, quantities, etc.) closer to underlying variables (preferences, technology, etc.).
5 An example of this argumentative differentiation between the two audiences is shown by Casonato and Angeli (Citation2021b). The authors observe how Kirzner approached the subject differently between the 1970s, 1980s and 1990s. According to them, these different approaches can be understood if one considers the different audiences Kirzner wanted to influence in these exhibitions. Taking the 1970s and 1980s, admittedly the periods in which Kirzner tried to influence Neoclassicals and Austrians, respectively, the authors show that he selected terms common to his audiences to better dialogue with them. As a general illustration, in the debate with Neoclassical Economics, concepts used to contrast the Kirznerian approach with that of the Economics of Information that emerged in the period, such as demand curve, competition and monopoly, are present. But in the debate with the Austrians, Kirzner used concepts that could reaffirm the role of the entrepreneur in producing a tendency towards market equilibrium.
6 For a broader discussion of the implications and meaning of alertness, see Sautet (Citation2022).
7 The freedom to reconsider Jevons' proposal seems to be from the thought expressed by Kirzner (Citation1984, p. 6) that the basis for the law of indifference is the existence of a tendency for the prices of the same product to converge to a single value, not the indifference between two identical goods.
8 Kirzner has continued to support this position in more recent works (e.g. Citation2017; Citation2018c; Citation2019).
9 In this same article, Kirzner (2018) brings a provocative discussion that part of the problem lies in the belief of economists that there is no such thing as a “free lunch”, which is in line with the equilibrium worldview of traditional theory. However, in the logic of Kirznerian theory, there are opportunities for pure profit to be perceived and explored, and these configure possibilities of “free lunch” – gains in exchange for nothing.
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Notes on contributors
Lucas Casonato
Lucas Casonato is a professor at the Department of Economics at the Universidade Federal do Paraná (UFPR) and at the Pontifícia Universidade Católica do Paraná (PUCPR). He has a Ph.D. in Economic Development from the Universidade Federal do Paraná (UFPR). His research areas are the History of Economic Thought, Behavioral Economics, and Economic Methodology.
Eduardo Angeli
Eduardo Angeli is an associate professor in the Department of Economics at the Universidade Federal do Paraná (UFPR). He earned his Ph.D. in Economics from the Universidade Estadual de Campinas (UNICAMP). His research focuses on the history of economic thought, particularly the history of modern Austrian Economics and the ideas of F.A. Hayek. Additionally, he has written works on James Buchanan and Brazilian economic thought.