I am a bit late (Peter Boettke, “McCloskey’s Transition to Austrian Economics“; Don Boudreaux, “Quotation of the Day…“), but I would like to reiterate the suggestions to read Deidre McCloskey’s recently published piece, “A Kirznerian Economic History of the Modern World” (The Annual Proceedings of the Wealth and Well-Being of Nations, vol. 3).
McCloskey’s “Austrianism” may come under dispute, but my purpose here is not to fuel this debate. Rather, I ask of you to put aside your differences with McCloskey and instead focus on absorbing the better arguments of her essay. McCloskey’s recent contributions to economic history, most notably her book Bourgeois Dignity: Why Economics Can’t Explain the Modern World, are tinged with a crucial taste of Austrianism which manages to bring out of obscurity Austrian contributions on the role of the entrepreneur. Her method of integrating the entrepreneur into her story of how Western society propelled itself into modernity is fascinating, because you realize that it necessarily contributes to the Austrian vision of the entrepreneur’s role.
What I would take away from her piece is that economic theory has the unfortunate quality of tending to mechanize the reality it is trying to explain. Different theories mechanize to different degrees, and Austrians hold the distinction of being blessed with a theoretical corpus that has been elaborated in such a way that it has managed to remain attached to reality. This does not mean that Austrians are completely innocent of mechanization. The relevant example here is the simplified Austrian “model” — more accurately, explanation — of economic growth: capital accumulation → investment → production. No Austrian would ever leave out the entrepreneur, but the simplified approach to explaining growth seems to leave out the human element.
The entrepreneurial action of investment of accumulated capital is not an automated function, and this is what McCloskey reminds us to consider. Entrepreneurship is a story of innovation and creativity. One may disagree with the exact terminology (i.e. “discovery”), but the essential point to take away is that entrepreneurship is not a given. It is an act of creation; production is a function of both the physical input of accumulated producers’ goods and human creativity, which is unique to the individual. In Hayekian terms, if we imagine wealth as it exists today as a mass of “known” knowledge, it is the entrepreneur’s role to essentially jump into the sphere of the “unknown.” It is not just about “discovering” what has been as of yet undiscovered, but about adding to the body of knowledge (whether known or unknown).
Her understanding of “radical subjectivism”, as applied to the entrepreneur, alone make McCloskey’s work worth reading and understanding. McCloskey’s integration of the entrepreneur — differences between the “Kirznerian entrepreneur” and the “Rothbardian entrepreneur” aside — into what a widely recognized book also has the positive side effect of feeding dosages of Austrianism to a world that sorely needs them.