A question about the entrepreneur

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    I was reading an interview with George Gilder and while he praised Austrian Economics for talking about the entrepreneur he also had criticism which I hope could be clarified:

    “It is enterprise that causes free markets, not free markets that summon enterprise. Adam Smith was wrong in his assertion that the extent of the division of labor is determined by the extent of the market. It is the other way around. The extent of the division of labor – the creativity of entrepreneurs – determines the extent of the market.”

    “As I have said, there can be no free markets without free entrepreneurs. Entrepreneurs are not tools of the market, they are creators of new tools. The entrepreneur precedes the market. Without him, there is no market.”

    “I always preferred the Austrians for their stress on entrepreneurial creativity, but even the Austrians, beyond Von Mises, fell for the temptation of seeing entrepreneurs as products of “the free market” rather than its creator.”


    I know there is a splitt within the Austrian camp when it comes to the entrepreneur so I gues there might be two answers here unless Prof. Herbner has a preference for one theory over the other.


    It seems to me that Gilder’s view of the entrepreneur has more affiliation with the view of Schumpeter than either that of Mises or Kirzner.

    I agree with Mises that the entrepreneur’s creativity is constrained in a market economy by what other people will make profitable. Of course, entrepreneurs make production decision and offer the goods they produce for sale, but what they produce must be salable to other people otherwise, they fail as entrepreneurs. The market economy is concerted effort on the part of people to better satisfy their ends. So I don’t see that Gilder is making a useful distinction when he contrasts the entrepreneur with the market.

    Take a look at Peter Klein’s book, The Capitalist and the Entrepreneur.



    Thanks for the answer Prof. Herbener

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