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Why do disequilibria exist? An ontological study of Kirznerian economics

Why do disequilibria exist? An ontological study of Kirznerian economics
Why do disequilibria exist? An ontological study of Kirznerian economics
In his influential critique of mainstream economics, Israel Kirzner rejected the notion of equilibrated economies in an attempt to develop a realistic account of the workings of entrepreneurial markets. Key to Kirznerian analysis are the arguments that 1) economies do not equilibrate because there always exist unexploited opportunities, and 2) opportunities remain unexploited until “entrepreneurially alert” individuals discover them. This paper draws from Tony Lawson’s philosophy of economics to explain that Kirznerian economics is no more realistic than mainstream. According to Lawson, it is the ontological commitment to closed systems thinking – not superficial theoretical features such as equilibrium – that makes mainstream economics unrealistic. I argue that Kirzner’s theoretical system similarly presupposes a closed system ontology. Whereas the mainstream worldview presumes the instant exploitation of opportunities, the Kirznerian worldview presumes their delayed yet unavoidable exploitation. The ontological critique of Kirznerian economics simultaneously facilitates the reorientation of entrepreneurship theory towards genuinely realistic modes of thought. This is feasible once we acknowledge the non-empirical ontology of “entrepreneurial opportunity” and concomitant fallibility of the “entrepreneurial imagination”: opportunities remain unexploited because (inter alia) their existence is known only after their actualisation. The existence of economic disequilibria does not require non-actors who are blind to opportunities, and there is no mysterious force of “entrepreneurial alertness” guaranteeing their eventual exploitation and inevitable movement towards economic equilibria.
Absence explanation, Actualisation perspective, Austrian economics, Contrast explanation, Deductivism, Discovery perspective, Entrepreneurial alertness, Entrepreneurial opportunities, Equilibrium theory, Israel Kirzner, Ontology, Tony Lawson, Uncertainty
0309-166X
833-856
Ramoglou, Stratos
f3fffbf5-0f1f-46e1-93af-a13e18945610
Ramoglou, Stratos
f3fffbf5-0f1f-46e1-93af-a13e18945610

Ramoglou, Stratos (2021) Why do disequilibria exist? An ontological study of Kirznerian economics. Cambridge Journal of Economics, 45 (4), 833-856. (doi:10.1093/cje/beab015).

Record type: Article

Abstract

In his influential critique of mainstream economics, Israel Kirzner rejected the notion of equilibrated economies in an attempt to develop a realistic account of the workings of entrepreneurial markets. Key to Kirznerian analysis are the arguments that 1) economies do not equilibrate because there always exist unexploited opportunities, and 2) opportunities remain unexploited until “entrepreneurially alert” individuals discover them. This paper draws from Tony Lawson’s philosophy of economics to explain that Kirznerian economics is no more realistic than mainstream. According to Lawson, it is the ontological commitment to closed systems thinking – not superficial theoretical features such as equilibrium – that makes mainstream economics unrealistic. I argue that Kirzner’s theoretical system similarly presupposes a closed system ontology. Whereas the mainstream worldview presumes the instant exploitation of opportunities, the Kirznerian worldview presumes their delayed yet unavoidable exploitation. The ontological critique of Kirznerian economics simultaneously facilitates the reorientation of entrepreneurship theory towards genuinely realistic modes of thought. This is feasible once we acknowledge the non-empirical ontology of “entrepreneurial opportunity” and concomitant fallibility of the “entrepreneurial imagination”: opportunities remain unexploited because (inter alia) their existence is known only after their actualisation. The existence of economic disequilibria does not require non-actors who are blind to opportunities, and there is no mysterious force of “entrepreneurial alertness” guaranteeing their eventual exploitation and inevitable movement towards economic equilibria.

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accepted version April 15 2021 - Accepted Manuscript
Restricted to Repository staff only until 15 April 2023.
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More information

Accepted/In Press date: 15 April 2021
Published date: 8 July 2021
Keywords: Absence explanation, Actualisation perspective, Austrian economics, Contrast explanation, Deductivism, Discovery perspective, Entrepreneurial alertness, Entrepreneurial opportunities, Equilibrium theory, Israel Kirzner, Ontology, Tony Lawson, Uncertainty

Identifiers

Local EPrints ID: 448396
URI: http://eprints.soton.ac.uk/id/eprint/448396
ISSN: 0309-166X
PURE UUID: 5022b206-551d-466c-ae4a-a52fbff4a704
ORCID for Stratos Ramoglou: ORCID iD orcid.org/0000-0001-5134-5525

Catalogue record

Date deposited: 21 Apr 2021 16:33
Last modified: 28 Apr 2022 02:10

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