For more than three decades, Professor Israel M. Kirzner has developed the economic theory emphasizing the importance of the entrepreneur for economic growth and the functioning of the capitalist process. In his theory building on entrepreneurship, Kirzner links the idea of the highly individual skills and knowledge of man with the entrepreneur of Ludvig von Mises, Kirzner’s teacher and mentor. He has thereby become the single most important scholar in modern Austrian economics. In the 1970s and 1980s he was instrumental in laying the foundation for a new research community in Austrian economics and the theory of the competitive market process.
Kirzner spells out a theory of the entrepreneurial market process that fills the theoretical gap in traditional price theory. The entrepreneur is posited as the prime mover in the economic system and as such s/he is alert to gaps in the market and enticed by the lure of pure profit. The gaps discovered by alert entrepreneurs are continuously closed through arbitrage. The market is depicted as an unending process of the entrepreneurial discovery of opportunities for mutual gain from exchange.
Kirzner’s contributions clarify the role of the entrepreneur in the economic system. He emphasizes that the behavior of a single entrepreneur may well be of importance for economic renewal and the functioning of markets.
Kirzner’s theory building has had great impact on the development of the entire field of entrepreneurship research, not to mention it has been applied empirically in several adjacent fields.