The Online Library of Liberty

A project of Liberty Fund, Inc.

• Associate Editors
• Editorial
• Bibliographical Essay: Ellen Frankel Paul, Laissez Faire In Nineteenth-century Britain: Fact Or Myth?
• I: Legal Philosophy
• The Minos: What Is Law?
• Obedience to Law
• Moral and Legal Justification
• Early First Amendment Theory
• The First Amendment & Freedom of Expression
• The First Amendment and Religion
• The First Amendment Vs. the Cpi
• The Economics of Strict Liability
• The Rule of Law In American Politics
• II: Political Analysis
• Society, State, and Right In Proudhon
• Human Rights and Political Change
• Carter's Human Rights Policy
• Locke's Tolerance: Prudence Or Right?
• Political Intolerance
• Hayek: Reason, Relativism, and Liberty
• Hayek On Coercion and Freedom
• “advanced Liberalism” As Managed Capitalism
• Common Good & Public Interest
• Uncrowding the “commons”
• Milgram: Obedience, Authority, & Legitimacy
• Syndicalism & “the Servile State”
• The Parisian League
• Conservatism In Spain
• Soviet Intellectual Orthodoxy
• The Clergy & the American Revolution
• Russian & American Defenses of Servitude
• Croce's Hegemony: How to Win Minds
• III: War and the State
• Just War and Rights
• Just Wars Vs. No Wars
• Walzer & Just War
• Wartime Propaganda Tactics
• Iran, Oil, and the Cold War
• The State and Oil Policy
• San Francisco & the Military Complex
• Protectionist Assaults On Developing Countries
• Government Military Behavior
• IV: Political Economy and Theory
• Three Kinds of “capitalism”
• Adam Smith: Economic Utilitarian
• Roepke: Laissez Faire and Social Order
• Government-induced Boom & Bust
• Austrian Vs. Neoclassical Methodology
• Professor Friedman's Instrumentalism
• Milton Friedman's Critics
• Entrepreneurship and Justice
• Externalities & Government Intervention

Entrepreneurship and Justice

Israel M. Kirzner

• New York University

“Entrepreneurship, Entitlement, and Economic Justice.” In Perception, Opportunity, and Profit (Chicago: University of Chicago Press, 1979):200–229.

Professor Kirzner seeks to supplement or reformulate Nozick's Entitlement theory of justice and argues that Nozick does not solve all the questions concerning the justice of market processes. He suggests that his version of the “finders-keepers” ethic answers these questions and, moreover, accords with the moral intuition of defenders of the market.

Kirzner reminds us that Nozick's defense of market entitlements is predicated on justice both in acquisition and in transfer. Though he points out that Nozick never specifies the details of justice in transfer, Kirzner suggests that justice results if and only if transactions are voluntary. The voluntariness of market transactions is viewed as sufficient to prove their justice only if “serious” error is not an essential part of the transaction. Fraud is theft and hence excluded by definition from the class of voluntary market transactions. Kirzner wishes to highlight, however, another type of error, one endemic to market transactions and one which render them unjust.

Building on his theory of entrepreneurship, Kirzner notes that markets are always in disequilibrium and thus always offer profit opportunities. Entrepreneurial profit-seeking is the driving force of the market process and this competitive process of profit-seeking would seem to depend on error or a kind of deception. Entrepreneurs buy low from sellers who would not sell if they knew that they could sell at a higher price; in turn, entrepreneurs sell to buyers who would not buy if they knew that they could buy at a lower price. Entrepreneurial activity thus depends on ignorance and error on the part of sellers and buyers. Entrepreneurs trade on this ignorance.

Kirzner notes the relation of this critique of entrepreneurs to the doctrine of the just price. He also observes that modern scholars recognize that the Scholastics concluded that whatever the market price settles at is the just price. Nonetheless he is concerned that modern critics might develop a new critique along the lines that he suggests; he is further convinced that Nozick's theory offers no answer to such a critique.

Kirzner's solution is as follows. A hitherto unknown use for a good in effect does not exist as far as market participants are concerned. Entrepreneurs who discover these uses are creating value. He argues that creators of value are entitled to receive that value. This defense rests crucially on the assumption that all others are free to seek profits (i.e., hitherto unknown uses for resources) and thus equally free to create appropriate value.

It is not entirely clear that the relationship of Kirzner's theory is to Nozick's. Kirzner accepts that already known resources can be acquired justly from nature only along the lines suggested by Nozick. He even describes Nozick's theory as “a crucial framework” for his own. To the extent that Kirzner's theory differs from Nozick's, questions arise. For one, subjectivist economics concludes that value is created by the evaluating agent, i.e., the consumer. It is not clear in what sense the entrepreneur can be said to have created value. Heretofore, Kirzner has only credited the entrepreneur with discovery of unnoticed opportunities. If discovery equals creation, then the consumer's importance in subjectivist economics is vastly diminished.