Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

Additional Considerations on the Theory of the Business Cycle 4218ENTREPRENEURSHIP AND THE THEORY OF THE CYCLEThe conception of entrepreneurship developed by Ludwigvon Mises, Friedrich A. Hayek, and Israel M. Kirzner liesat the very root of a theory of entrepreneurship which wehave presented elsewhere. 22 An entrepreneur is any humanactor who performs each of his actions with shrewdness,remains alert to the opportunities for subjective profit whicharise in his environment and tries to act so as to take advantageof them. Human beings’ innate entrepreneurial capacity not onlyleads them to constantly create new information concerning theirends and means, but also spontaneously triggers a process bywhich this information tends to spread throughout society,accompanied by the spontaneous coordination of disparatehuman behaviors. The coordinating capacity of entrepreneurshipsparks the emergence, evolution and coordinated developmentof human society and civilization, as long as entrepreneurialaction is not systematically coerced (interventionismand socialism) nor are entrepreneurs obliged to act in an environmentin which traditional legal norms are not respectedbecause the government has granted privileges to certainsocial groups. When entrepreneurship cannot be incorporatedinto a framework of general legal principles or is systematicallycoerced, not only does it cease to create and transmit alarge volume of social information, but it also generates corruptand distorted information and provokes discoordinatedprice of the goods furthest from consumption had oscillated between a+30 percent increase and a –10 percent decrease, depending on the yearand the stage of the cycle; while the price of products from the intermediatestages had fluctuated between +14 percent and –1 percent,depending on the particular stage in the cycle, and the price of consumergoods vacillated between +10 percent and –2 percent, dependingon the particular stage. These results are also confirmed by V.A.Ramey’s important article, “Inventories as Factors of Production andEconomic Fluctuations,” American Economic Review (June 1989): 338–54.22 See Huerta de Soto, Socialism, Economic Calculation and Entrepreneurship,chaps. 2 and 3.