Imagine if human anatomists had, for a century and a half, for the most part, neglected an entire crucial anatomical function: let’s say respiration. That would be analogous to the very real neglect economics is guilty of, regarding a keystone of the market economy: the entrepreneur. As Doug French points out in the Foreword to a very important new book,
“most schools of economic thought are silent on the subject. Even the work that has been done is incomplete and contradictory. Economists can’t even agree on what entrepreneurship is or what exactly entrepreneurs [...] do. And the apparatus that facilitates the manifestation of the entrepreneurial vision—the ﬁrm—is but a “black box” where inputs enter and outputs emerge, like so much magic.
But like so many market phenomena that modern economics chooses to ignore or get wrong, an Austrian economist has entered the black box, examining its contents for a better understanding of not only what entrepreneurs are, but what they do and why they do it.”
That Austrian economist is Peter G. Klein, and the above-mentioned important new book is The Capitalist and the Entrepreneur: Essays on Organizations and Markets.
In the Forward, French also tells the inspiring story of Ewing Kauffman,
“[a] man who as a child was bedridden for a year with a heart ailment but used the time to read 40 books per month.”
(As an avid reader myself, this part of the story is inspiring enough on its own, and almost makes me wish for a heart ailment!)
Kauffman started out as a crackerjack pharmaceuticals salesman at Lincoln Laboratories…
“A natural salesman and hard worker, Kauﬀman in just his second year earned more in commissions than the company president did in salary. In response, the president cut Kauﬀman’s commissions. Despite the reduction, Kauﬀman still out-earned the Lincoln head man the following year, so “he took away some of my territory, which was the same as taking away some of my income,” Kauﬀman related later. ‘So, I quit and I started Marion Laboratories in the basement of my home.’”
In 40 years Kauffman turned a $5,000 investment into a company with $930 million in revenues.
An entrepreneur like Marion Kauffman operates in a very different head-space from your average tenure-coddled academic economist, which perhaps explains the latter’s reluctance to really try to come to understand the former. But Peter Klein, in the grand tradition of Austrian economists rolling up their sleeves and grappling with the market economy as it really operates, has taken on the enterprise of understanding the entrepreneur and the firm. It will be my pleasure to blog each chapter of that enterprise (next, I’ll blog about Klein’s Introduction to his book).
Of course to really comprehend the entirety of Klein’s analysis, it would be paramount to study the book itself (available for purchase and as a free PDF download). And what better way to study the book, than under the direct tutelage of the author himself? Well that opportunity is before you, because Peter Klein will be teaching an all-online Mises Academy course centered around his new book (click here for details). The course starts June 7, so sign up today!