Rethinking Kirzner's Critique of Walras: Competition, Entrepreneurship, and Justice
This study aims to reconsider Kirzner's criticism of the Walrasian model to clarify the differences between his economic thought and Walras's from a different perspective. It is well known that Kirzner criticized Walrasian equilibrium approaches, especially its concept of the entrepreneur. Kirzner established his own theory of entrepreneurship, which was developed by rejecting the neoclassical concept of perfect competition and emphasizing the analysis of market process in accordance with the Austrian School tradition. This development is of great significance not only in the history of economics, but also in the fields of economic theory and business administration. However, it is imperative to acknowledge that Kirzner's critique is directed at the Walrasian model, or the neoclassical model, which have their origins in Walras's general equilibrium model, rather than being directed at Walras's own economic theories. This study will, therefore, center on the discrepancy between Walras's general equilibrium model and the neoclassical model. Moreover, Walras's discussion of general equilibrium as an ideal model stands in contrast to his engagement with real-world competition and entrepreneurship in the fields of applied and social economics, which represents a definitive rupture from so-called Walrasian economics. The competition discussed in these fields is a more realistic form of competition that differs from the concept of perfect competition. The discussion of entrepreneurship in the real economy is also approached from the perspectives of economic advantages and justice. It is noteworthy that Kirzner and those who engage with the conflict between the Neo Austrian School and the neoclassical school have overlooked this fact. Walras's unrealistic zero-profit entrepreneur assumption, which Kirzner harshly criticized, provides the basis for discussing his theory of the state-entrepreneur. The aim of this theory is to prevent the unjust appropriation of monopoly profits in the real economy. Furthermore, Walras advanced a doctrine of nationalization of land. The foundation of this doctrine was his belief that those who possess natural resources should not benefit from the value derived from their scarcity in a progressive society. A detailed comparison of Walras's arguments and Kirzner's theory of entrepreneurship and the ownership of natural resources illuminates their divergent views on social justice. This study thus reveals a definitive rupture between Walras and Kirzner that cannot be seen from the existing textbook interpretations of neoclassical versus Austrian economics.
Area: History of Economic Thought - 20th century
Keywords: Kirzner, Walras, Walrasian, neoclassical, entrepreneur, competition, justice, state
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