Israel M. Kirzner, a British‐born economist and theorist, is associated with the Austrian School and was a student of Ludwig von Mises. He has been an important academic representative of the Austrian School of Economics in America, holding a professorship of economics at New York University from 1957 to the present. He is the author of many books, including Competition and Entrepreneurship (1973) and The Meaning of Market Process (1992).
Kirzner received an MBA from New York University (NYU) in 1955. While pursuing that degree, he came across Ludwig von Mises’s seminar; under Mises’s influence, he decided to pursue a career in academic economics instead of accountancy as he had originally planned. In 1957, Kirzner became one of a handful of students to pursue and receive his doctorate in economics under Mises.
Kirzner taught at NYU throughout the 1960s and early 1970s without any larger Austrian presence or program at the school. By the mid‐1970s, however, with interest in Austrian theory growing—to a large degree thanks to seminars that Kirzner helped develop under the auspices of the Institute for Humane Studies—fellow Austrian School economist Ludwig Lachmann became attached to the department. Soon, with outside funding, an Austrian program developed at NYU and a series of weekly colloquia in Austrian economics held there has become a central gathering point for economists interested in the Austrian tradition. Under Kirzner’s leadership, many other Austrians have taught at NYU, although only one other besides Kirzner, Mario Rizzo, has gained tenure.
Kirzner’s first book, The Economic Point of View, was a work of intellectual history that traced the development of the concepts of economics as a human, praxeological science in the Misesian style. Kirzner also has written extensively explaining and extending Austrian capital theory. His essays, aimed at the mainstream of economic thought, tended to emphasize important differences between the Austrian tradition and the neoclassical mainstream, and how Austrian insights provided a more profound understanding of the real‐world process of markets. In an edited collection called The Crisis in Economic Thought (1982), he wrote:
[M]odern mainstream economics displays a number of related features which, for Austrians, appear as serious flaws. These features include especially: a) an excessive preoccupation with the state of equilibrium; b) an unfortunate perspective on the nature and role of competition in markets; c) grossly insufficient attention to the role (and subjective character) of knowledge, expectations, and learning in market processes; and d) a normative approach heavily dependent on questionable aggregation concepts and thus insensitive to the idea of plan coordination among market participants. Together these flaws represent very serious distortions, at best, in the understanding of market process in capitalist economies which modern neoclassical economics is able to provide.
Kirzner emphasized the market as a process, where individuals with differing knowledge pursuing their subjective values increased their knowledge and helped coordinate their plans and expectations. Much of his writing concerned the role of the entrepreneur, whom Kirzner noted was not simply a businessman, but any person trying to make the world conform to his hopes and expectations. Humans try to discover opportunities for profit, those areas where people have not yet come to realize they can buy low and sell high. New opportunities for entrepreneurs to profit by their alertness to things others have not noticed always arise. In doing so, they not only satisfy themselves but also help bring other people what they want, and they tend to move toward an equilibrium where everyone has what they want and there is no longer reason to trade. But because of the constantly shifting nature of reality and people’s knowledge and desires, this equilibrium beloved by neoclassical economists is never reached. In the Hayekian tradition, Kirzner viewed the market “as a social instrument for mobilizing all the bits of knowledge scattered throughout the economy.” The entrepreneurial role is to be alert to the relevant bit of information that will satisfy others’ needs better and move toward equilibrating everyone’s plans and expectations.
Kirzner was one of the least political of the Austrian economists, writing little on matters of public policy or political philosophy, despite having served for many years as a trustee of the libertarian educational organization, the Foundation for Economic Education, and considering himself a libertarian. But Kirzner thinks that entrepreneurial discovery gives property rights over any resultant profit in a Lockean homesteading sense—by first discovering an opportunity, you gain rightful property in it. He even extended this theory to one member of a group in a desert who is first to find a water hole—the first discoverer should have full property rights in the water, Kirzner believed.
Kirzner’s emphasis on the entrepreneur’s role in coordinating the market process and discovering relevant and useful information has its libertarian political implications. Kirzner’s entrepreneur is most effective at finding profit opportunities (which are opportunities to satisfy others) through chance, undeliberate learning in a free economy. Free markets, in Kirzner’s view, thus generate the greatest quantity of profit‐generating and market‐equilibrating entrepreneurial action.