Competition and Entrepreneurship

253 Pages·1973·5.371 MB·English

by  Israel Kirzner

ISRAELM.KIRZNER
Competition and
Entrepreneurship
THE
UNIVERSITYOFCHICAGO
PRESS
CHICAGOANDLONDON
B'EzrasHaahem
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©197)byTheUnimrityofChicago
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Contents
i
ThtMarketSyttemandtheTheoryoftheMarket1:The
TaskofPriceTheory:TwoViewt3:CompetitionandEn¬
trepreneurship7:TheMarketProem9:Competitioninthe
MarketProceet11:EntrepreneurMpintheMarketProceu
13:TheProducerandtheMarketProceu17:Monopolyand
theMarketProceu19:TheEntrepreneuratMonopolist22:
TheProducerandHitChoiceofProduct23:Equilibrium
Economics,EntrepreneurMp,andCompetition26
2
TEHNIUrUNIUI
30
TheNatureofEntrepreneurship30:Decision-makingand
Economizing32:TheEntrepreneurintheMarket37:The
Producer as Entrepreneur43: EntrepreneurialProfits47:
Entrepreneurship,Ownership,andtheFirm52:Ownership,
EntrepreneurMp,andtheCorporateFirmSS:AHypotheti-
Contents
calExample57:TheCorporateFirmOnceAgain62:Entre¬
preneunhipandKnowledge65:Entreprtneunhipandthe
Et/uiMbratmgProcter69:Entrepreneunhipintheliterature
75:MisenanEntrepreneunhip64
3
88
Competition:ASituationoraProem?89:Entrepreneunhip
andCompetition94:TheMeaningofMonopoly101:The
TwoNotion»ofMonopolyCompared104:TheTheoryof
MonopolisticCompetition112:SomeRemarieontheNotion
oftheIndustry119:Schumpeter,CreatireDestruction,and
theCompetitiveProcess125:Entrepreneunhipa»aRouteto
aMonopolyPosition131:
4
SILUNCCOSTS,QUALITY,ANDOOMPCTTIION
155
OntheProductatanEconomicVariable137:Production
CostsandSellingCostsMl:SsQingCosts,ConsumerKnowl¬
edge,andEntrepreneurialAlertness146:Advertising,Con¬
sumerKnowledge,andtheEconomicsofInformation151:
Advertising,Information,andPersuasion159:Advertising,
SellingEffort,andCompetition163:Waste,ConsumerSov¬
ereignty,andAdvertising169:BuyingEffort,FactorQuality,
andEntrepreneurialSymmetry180
5
TOLONCSUNANDTHESHOET
187
TheLongandtheShortRunintheLiterature187:OnSuni
CostsandtheShortRun191:Costs,Profits,andDecisions
195:EntrepreneurialDecisions,theLongRimandtheShort
198:SomeAdditionalCasts202:FurtherObservationson
Long-runCompetitionandShort-runMonopoly205
Contint»
6
COMPETITION,WELTABE,ANDOOOED1NATION
212
TheFundamentalFlawinWelfareEcoturmia213:Knowl¬
edge,Coordination,andEntrepreneunhip225:TheCoordi¬
natingProceu218:TheRoleofProfiti222:ReeourceMii-
allocation, Trantaction Coeti,and EntrepreneurMp225:
Nirvana,TrantactionCoeti,and Coordination231:The
"Warta" of Competition234: Long-run and Short-run
Evaluation*236
243

Preface
microeconomicaspectsofeconomic«Titra».Thetheoryof
pricehasonceagainbecomethecoreofeconomicanalysis.
Forthemostpart,however,contemporarypricetheoryhas
continuedtobepresentedwithinanequilibriumframework.
Thisnotonlyhatdivertedattentionawayfromthemarket
procèsandtowardequilibrium,buthasledtovirtualeiclusion
ofdieentrepreneurialrolefromeconomictheory.
Thoughtfulcriticsofcontemporarypricetheoryhavevery
recentlybeguntodrawattentiontotheseshortcomings.Some
ofthewritingsofAbbott,Banmol,Brozen,Dewey,Lcibenstein,
McNulty,andD.McCoidWright,despitediewidedifferences
amongthem,reflectacommonconcernwiththefailureofcon¬
temporarymicroeconomicstograpplewiththemarketprocess.
Whathasbeengenerallyoverlooked,however,isdieexistence
throughoutthiscenturyofatleastonetraditionofeconomic
thoughtinwhichtheseshortcomingshaveneverbeenpermitted
toappear.WhiletheAnglo-Americantraditionderivingfrom
neoclassicalpricetheoryhasremainedfrozenwithintheequi¬
libriumframework,thewriterswhotooktheiroriginfromthe
Austrian!haveconsistentlyworkedalonglinesinwhichen-
treprenenrshipandmarketprocessesreceivedtheirproperdue.
Thisbookcanbeviewedasacritiqueofcontemporaryprice
ix
frtfaet
theoryfroman"Austrian"perspective;oritmaybeviewedas
anessayonthetheoryofentrcpreneunhip,oronthetheoryof
competition.Ibpurposeisinfacttoshowthattheseviews
coincide.Besidesibemphasisonentrcpreneunhip,thebook
offersanewperspectiveonqualitycompetition,ontellingef¬
fort,andonthefundamentalweaknessofcontemporarywel-
Amongthosewithwhomconversationorcorrespondence
hasprovedhelpfulIgratefullyrecallJ.Buchanan,R.Cook,
D.Dewey,L.I-arhmann,H.Demsetz,C.TuDock,andA.Ze-
baikes.AboveallIowewhateverunderstandingIhaveofthe
marketprocesstoalmosttwodecadesofstudyunderL.Mises,
whoseideasasexpoundedinalifetime'sworkareonlynow
beginningtobeproperlyappreciated.Iacknowledgewithgrati¬
tudethegenerousresearchsupportIreceivedfromtheNew
YorkUniversitySchoolsofBusinessResearchOfficeandfrom
theRehnFoundation.Ofcourseresponsibilityforanyinade¬
quaciesinthisbookresbwithmealone.