Prices and knowledge: A market-process perspective

18 Prices and knowledgeproduce, better technologies to use, more efficient organizationalforms to adopt, and so on. The individuals who, spurred by the profitopportunities, discover and adopt the better courses of action themodern Austrians term the entrepreneurs. 11The term ‘entrepreneur’ refers to those individuals who are, to useKirzner’s terminology, ‘alert’ to the existence of previously unknownprofit opportunities. (‘Entrepreneurs’ are, of course, an abstraction ofeconomic theory, such as ‘resource owners’ and ‘consumers’. Strictlyspeaking, all individuals are entrepreneurial to some extent.)Entrepreneurship is, according to Mises, understanding ‘there is adiscrepancy between what is done and what could be done’(1949:336), being ‘shrewd’, quick of apprehension and far-sighted(328). To say that they possess this ability is not to say that these agentshave perfect knowledge: their advantage is only a relative one. Theyearn profit not because they are clever in performing their tasks, butbecause they are more clever or less clumsy than other people are.They are not infallible and often blunder.(1974:114)The Austrian entrepreneur may be said to include the Robbinsianmaximizer, but the former agent also has the ability to perceive theends-means framework, and to revise it when his plans aredisappointed. In this view, this perceptive ability constitutes theentrepreneurial component of the agent’s action. Given he has(correctly or incorrectly) perceived the facts of the market, this agentalso optimizes. 12 But the act of perception is crucial; the remainder ismerely a problem of mechanical computation (in the sense that, inprinciple, a computer could solve it).It should be noticed that the Robbinsian approach does not makethe entrepreneurial task unnecessary. Instead, it presupposes implicitlythat it has been done elsewhere, and that it has been done perfectly,allowing the agent to optimize with respect to correct information.Finally, it is worth pointing out that the entrepreneur may bedifficult to incorporate into standard economic theory as it iscurrently conceived because, whereas Robbinsian maximizing lendsitself to being formalized mathematically, entrepreneurial behaviourseems much less deterministic and is much less understood. In fact, itmay never be amenable to such a representation, except under veryrestrictive simplifications. 13 These difficulties may help explain therelative neglect of entrepreneurship by standard theory.