The role of #entrepreneurship in the market process is little understood. Even those who are well read in Ludwig von Mises's magnificent Human Action tend to get the economic function wrong, especially its implications for the structure and progression of the market process.
To Mises, entrepreneurship is 'simply' the uncertainty-bearing aspect of human action. This is his praxeological definition, which therefore offers us truths about how the structure of human action explains observable phenomena and cause-and-effect relationships in the market.
This broad definition of entrepreneurship explains why some plans and decisions are unsuccessful, why different people may make different decisions, and why actors can reconsider/change their behavior before actions are concluded. Because the data change, actors learn and adapt.
Formalizing this insight into a model of the economy makes it into an adjustment process in the face of new discoveries. But this is insufficient to understand the market process. Such a model captures only how actions respond to unforeseen changes.
The market process as 'only' an adjustment/discovery process acknowledge the dynamic market process but limits actors' imagination to second-guessing changes in the data. Their actions are future-oriented only in the sense that they include in their plans expected changes.
Granted, one can stretch the concept to encompass innovative and disruptive action as well. But doing so goes beyond and even contradicts what Mises has in mind. Entrepreneurship broadly is simply action "in regard to the changes occurring in the [market] data." No more, no less.
Mises grants that there is a more important concept, which economics cannot do without: the entrepreneur-promoter. These entrepreneurs aren't responsive to changes but cause change to and disrupt the market. They're the "driving force" of change.
It should be clear that in order to understand the progression of the market process, and the production that occurs in it, one cannot exclude the promoter. In fact, many of the changes that others respond to are caused by the innovative successes of imaginative promoters.
Unfortunately, Mises did not find a means to define the promoter praxeologically, thereby leaving it beyond what can be theorized in praxeology. But I argue this can in fact be done: qjae.scholasticahq.com/article/18212-…
In other words, Austrian economics has no reason (and no longer an excuse) to exclude promoters from their theorizing on the dynamics and progression of the market process, as is arguably the case with both Hayek and Kirzner. The market process is not obviously equilibrating.
Acknowledging the unique implications of the promoter shifts our theorizing away from what I call within-system theorizing, where actors respond to changes imposed on the system and/or observed ex post production in consumer revealed preferences.
With the promoter, the economy is disrupted and renewed, in almost Schumpeterian fashion, by actors in their roles as promoters. The possibilities and thus extents of the market shift as a result of endogenous novelty, a 'creative destruction' process if you will.
Promoters' imaginative undertakings, most of which are likely to fail, step ahead of where the market is currently at, and also what it supports, and leads the way to a new possible. Promoters are the "pacemakers" of the market process, in Mises's term, necessary for growth.
This requires some means for promoters to implement their imagined and potentially disruptive productions. Part of this is about experimentation with ideas, but the important point and function isn't to provide the promoter with the peace and quiet to improve their ideas.
The promoter's novel type of production is neither technologically nor economically efficient, but aims to be more value-creative. Promoters can and will be refine their novel production undertakings after consumers have confirmed the value through their purchasing actions.
I refer to the promoter's implementation of novel production as a firm, because it is distinct from market production, utilizes a different division of labor (the innovation), and is an all-or-nothing undertaking aimed at producing new economic value. routledge.com/The-Problem-of…
I think of the promoter as the catalyst of change and renewal, the endogenous force that pushes the market out of its "comfort zone," beyond what is already possible to establish through simple market contracting. The promoter causes value creation to take leaps forward.
It should be fairly obvious that disruptive innovation causes much of the change that non-promoter actors need to adapt to. It is also purely uncertain, since we cannot figure out what others imagine, if they pursue it, nor how consumers will react to these attempts.
Consequently, any theory of the market process, not to mention static models, that does not take into account the disruptive implications of (successful) promoters cannot provide an accurate understanding. Mises, judging from his discussion in Human Action, understood this.

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More from @PerBylund

9 Aug
I really hate these modern fakester "fact checkers," who provide almost no guidance on what to think of things. Take this telling example from @TheAtlantic. The claim: cases may spike after first dose. The "rebuttal": research shows 90% effective two weeks after the *second* dose
A rebuttal must address the actual claim, not something else. The fact is that, by what's in the article, it may well be that both are correct: a possible spike after the first dose *and* effective protection after the second. (Maybe there's a reason 2 doses are recommended?)
Note also that the article doesn't quote (or link to) Berenson. (We have only the fact-checker's summary.) Isn't that a little odd if you're fact-checking? Even more so when claiming it is a "theme," which means there should be plenty of material to choose a juicy quote from.
Read 6 tweets
11 Jul
Public Health Agency of Sweden recommends rapid antigen tests over PCR for screening: "The PCR technology used in tests to detect viruses cannot distinguish between viruses capable of infecting cells and viruses that have been neutralized by the immune system and therefore...
these tests cannot be used to determine whether someone is contagious or not. RNA from the virus can often be detected for weeks (sometimes months) after the illness but does not mean that you are still contagious. There are also several scientific studies that suggest that
the covid-19 infectivity is greatest at the beginning of the disease period." Translation by Google Translate. Source: folkhalsomyndigheten.se/publicerat-mat…
Read 4 tweets
24 May
Since the days of Aristotle, voluntary has been a prerequisite for the morality of actions. Someone's action cannot be judged morally unless it was voluntarily chosen. But the meaning of voluntary has shifted. Here follow a couple of thoughts on what voluntary means.
The formal definition of voluntary means the action or choice is made of free will. It must be without coercion, i.e. the use or threat of physical violence. Choosing with a gun to one's head is not a voluntary choice.
In everyday language we say there's "no choice" if one option appears much better than the other ones. This is, strictly speaking, incorrect, since there *is* a choice. It only appears obvious due to one's valuation of the alternatives. This applies whether it's voluntary or not.
Read 16 tweets
26 Apr
#Intellectualproperty--patents, copyrights, and other government-granted and -enforced monopoly privileges--gets a lot of knee-jerk support. While people invent plenty of arguments in favor, they are, unfortunately, often based in economic misunderstanding. Let's talk about #IP.
First, arguments in favor tend to rely on a cost-based theory of value. But something is not of value because it was expensive to make, but is expensive to make because it is expected to be of great value: it is the expected value that justifies taking on the (production) cost.
It's a flawed argument to ask "who would take on the great cost" to come up with new inventions if they can't get paid. Nobody has a right to get paid based on their cost or effort. You don't earn a high grade because of your effort, but put in the effort to earn a high grade.
Read 17 tweets
18 Apr
An endless source of miscommunication and misunderstanding is the use of ambiguous terms and, worse, reliance on definitions that aren't clarifying but rather the opposite. One such term is the #State. We all "know" what it is but very few have attempted to define it clearly.
For everyday purposes, we don't need to clarify the term because our intersubjective understanding of it, and how we use it (the context), makes it clear enough. But not so when we debate or try to uncover why we have different opinions about it and, especially, its nature.
The State is an organization but not like any other. It has a distinct nature, characteristics that make it different from firms, HOAs, and sports clubs. It's also not, simply but vaguely, an abstraction of some conception of "us," as many prefer to see it. So, what is the State?
Read 16 tweets
21 Mar
If we truly want to change things for the better and contribute to a better community and society, then we should judge charitable acts based on their outcomes (the good expected or brought about), not the personal sacrifice of carrying out the act (what the doer gives up).
Many would consider a highly paid, and therefore also productive, individual spending a full day laboring in a soup kitchen a greater charity than if they had donated the money they would have earned. This conclusion requires focusing on the sacrifice, not the good brought about.
Say this individual would have earned $1,500 in their day job ($390k/year) had s/he not worked in the soup kitchen. This income is the sacrifice (cost). But the sacrifice says nothing about the good brought about by laboring in the soup kitchen.
Read 10 tweets

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