Price Stability and Entrepreneurship

Monetary economists tend to fall into one or both of two categories: they are proponents of either price stability or inflation. Some, like University of Chicago’s Luigi Zingales, proposes a government entity to guard us from inflation. Others, like Princeton’s Paul Krugman, seems to see only problems with price stability – but sees only good things come out of inflation.

Interestingly, there is little talk about entrepreneurship when monetary theorists talk. An exception is the 20th century economist Ludwig von Mises, an economics system builder who developed a subjective theory of money as well as connected it to the market’s structure of production, entrepreneurship, and linked them all in a theory of business cycles.

Whether or not we adopt Mises’s views, it is fascinating to adopt an entrepreneurial perspective when discussing monetary theory and policy. What is the role of entrepreneurship and how does entrepreneurship fare under or affect market prices?

Well, let’s imagine an entrepreneur is either alert to arbitrage opportunities (as in Kirzner, 1973), is an innovator that creates new combinations of resources (as in Schumpeter, 1911), or exercises superior judgment in bearing uncertainty in productive enterprises for profit (as in Knight, 1921). Then imagine that this entrepreneur acts under any conceivable monetary regime. What is the effect of entrepreneurship on market prices?

Bradbury on Bricolage

You probably heard that American author Ray Bradbury died yesterday at age 91. One of Bradbury’s most frequently quoted lines is this: “First you jump off the cliff and you build wings on the way down.” (I haven’t been able to track down a source, and versions of this quote are attributed to other writers as well; anybody know the original?) It’s a pithy summary of bricolage as that term is used in the entrepreneurship literature — the idea that entrepreneurs often make best use of the resources at hand, rather than seek to acquire the resources needed to achieve specific goals. Another Bradbury quote (again, I have no source, so it might be apocryphal) — “I don’t try to describe the future. I try to prevent it” — sounds like Alvarez and Barney’s notion of creation opportunities, as opposed to discovery opportunities. In any case, Bradbury was a great writer; may he RIP.