Working Paper No. 127. Israel Kirzner on Coordination and Discovery

Abstract

Israel Kirzner has been one of the leaders in fashioning an Austrian school of economics. In his rendering of the Austrian school, one finds a marriage between Friedrich Hayek’s discourse with Ludwig von Mises’s deductive, praxeological image of science — a marriage that seems to us somewhat forced. The Misesian image of science stakes its claims to scientific status on purported axioms and categorical, 100-percent deductive truths, as well as the supposed avoidance of any looseness in evaluative judgments. In keeping with the praxeological style of discourse, Kirzner claims that his notion of coordination can be used as a clear-cut criterion of economic goodness. Kirzner wishes to claim that gainful entrepreneurial action in the market is always coordinative. We contend that Kirzner’s efforts to be categorical and to avoid looseness are unsuccessful. We argue that looseness inheres in the economic discussion of the most important things, and associate that viewpoint with Adam Smith. We suggest that Hayek is much closer to Smith than to Mises, and that Kirzner’s invocations of Hayek’s discussions of coordination are spurious. In denying looseness and trying to cope with the brittleness of categorical claims, Kirzner becomes abstruse. His discourse erupts with problems. Kirzner has erred in rejecting the understanding of coordination held by Hayek, Ronald Coase, and their contemporaries in the field at large. Kirzner’s refraining from the looser Smithian perspective stems from his devotion to Misesianism. Beyond all the criticism, however, we affirm the basic thrust of what Kirzner says about economic processes. Once we give up the claim that voluntary profitable activity is always or necessarily coordinative, and once we make peace with the aesthetic aspect of the idea of concatenate coordination, the basic claims of Kirzner can be salvaged: Voluntary profitable activity is usually coordinative, and government intervention is usually discoordinative. But the Misesian image of science must be dropped.