Okay, I would now like to introduce our next speaker who will present the Murray and Rothbard Memorial Lecture, which is generously sponsored by Elio Beltrao, head of the Mises Institute in Brazil. As I said, Peter Klein is our speaker. Professor Klein is associate professor of Applied Social Sciences at the University of Missouri, an executive director and Carl Manger Research Fellow at the Mises Institute. He also holds academic positions at the Norwegian School of Economics in Bergen, Norway and the University of Missouri's Truman School of Public Affairs. He is author or editor of five books and author of 90 academic articles, chapters and reviews. His most recent book, Organizing Entrepreneurial Judgment, co-authored with Nikolai Force, appeared in 2012 from Cambridge University Press. Klein is an associate editor of the Academy of Management Perspectives, an associate editor of the Independent Review and sits on the editorial boards of seven other academic journals. He is a former associate editor of the Collected Works of F.A. Hayek and a former senior economist with the Council of Economic Advisors. Ooh, he was taught at Washington University's Olin School of Business, or he has taught at the Washington University's Olin School of Business, the University of California Berkeley, the University of Georgia and the Copenhagen Business School. Klein holds a PhD in economics at the University of California Berkeley and a BA in economics from the University of North Carolina Chapel Hill. Please give, I can't read your writing here. Rowsing, welcome to my friend, Peter Klein. Welcome. It's a great honor for me to give the Murray and Rothbard Memorial lecture. Rothbard's writing and teaching have had a huge influence on my own sort of intellectual development. Certainly Rothbard is one of the most remarkable people I ever met as a thinker, as a writer and as a person. And I was fortunate to get to know him quite well in the last few years of his life. I met Murray Rothbard in 1988. And actually, before we met in person, we met by telephone. I was about to start my graduate education at the University of California and I had applied for a scholarship from a fledgling organization called the Ludwig von Mises Institute that was then six years old. And I sent in my application materials by letter for you younger folks in the audience who are watching on television. It's sort of like a hard copy of an email. And sometime later, I received a reply from the institute by letter informing me that they were interested in talking to me further and that as the next step in the interview process, I would receive a telephone call from Murray Rothbard. This was a bit like Judge Napolitano's example, waiting for the phone call from the Pope. I was at that time a highly enthusiastic, if largely uneducated, a devotee of Austrian economics. I had read quite a lot of Rothbard. I had read some Mises and Hayek. I'm sure I didn't understand a lot of what I read, but I was pretty excited to delve more into this literature and to talk to Murray Rothbard on the phone was a little bit, more than a little bit intimidating. He did call. We had a wonderful conversation. As it turns out, I was fortunate that my father was also a fast talking gentleman of Jewish descent from the New York area. So I understood Murray Rothbard's accent pretty well. And he quickly put me at ease. He was friendly, he was warm. We talked about some of my college experiences. I complained about professors I'd had and he echoed my complaints. I remember in particular complaining about how compartmentalized the discipline of economics seemed to be. I had asked one of my, I'd taken the intermediate or advanced microeconomics and I asked my professor, which course do you recommend for the macroeconomics equivalent? There's several options, which professor do you recommend? And I remember the guy said, I don't do any of that macro stuff. Go ask somebody else. And I relayed this to Rothbard and he chortled in that wonderful way that he had and told me about how it helped me to understand how integrated the Austrian school was and how while there are different subfields and specializations, he Rothbard viewed economics as an integrated whole that has to be understood sort of in its entirety. I did get to know him fairly well from then until his unfortunate passing in 1995. I saw him many times at conferences sponsored by the Mises Institute and other organizations. Talked with him on the phone and I was able to work for a few years as his assistant with the Journal of Libertarian Studies which he was then editing. And that was also a sort of a remarkable experience. I learned to appreciate even more Rothbard's tremendous erudition. I mean, he knew a lot about a lot of things. The JLS, as you know, is an interdisciplinary journal with contributions in economics, history, philosophy, political theory, sociology, psychology, any number of disciplines. And Rothbard knew pretty much all of the key writers and key ideas and debates and almost all of those fields. He was a little bit casual about the double blind refereeing process. He often made the call himself and he would write these incredible letters to the authors. He would send them to me and I would forward them onto the authors. You know, five, six, seven, eight, nine, 10 page single space letters pointing out all of the flaws in the articles and making suggestions for revisions and so on. You know, it's very different from the way most journals today do things in a very sort of mechanistic way. Rothbard really put his personality on that journal and you can see this and appreciate what a great journal it was and has been since. He did reject one of my submissions so he wasn't perfect as an editor. Let's get that out of the way. My talk this afternoon is titled The Present State of Entrepreneurship Research which some of you and some of you will recognize this as a nod to Rothbard's 1992 article, The Present State of Austrian Economics. That appears in his collection, I believe in the logic of action and maybe in a few other places as well. In that essay, Rothbard attempted to offer a reinterpretation or reconstruction of the contemporary Austrian economics literature. I want to offer a bit of a reinterpretation and reconstruction of the contemporary entrepreneurship literature, paying particular attention to Austrian economics, the influence of Austrian thinking in entrepreneurship research and I'm gonna pay particular interest, sorry, particular attention to the contributions of Murray Rothbard's colleague in contemporary, Professor Israel Kursner. You know, we're celebrating the 40th anniversary of the South Royalton Conference here at the AERC and it's already been discussed several times yesterday and today and we'll have a panel tomorrow also with reflections and reminiscences about South Royalton. Israel Kursner's landmark book, Competition and Entrepreneurship appeared the year before in 1973. It was published by the prestigious academic publisher, the University of Chicago Press. It was widely distributed among Austrian economists and other potentially sympathetic sort of, you know, free market readers. This was really big news for the Austrian school. The publication of Competition and Entrepreneurship was a landmark event in the development and dissemination of the Austrian tradition and I've spoken to many of the participants from South Royalton, I had to speak loud because they're getting along in years and most of them had read, most of them had read and I had to use small words, no. Most of them had read Competition and Entrepreneurship at that time and they were very excited about it, not only because it made important points and because it offered some great ideas but also Competition and Entrepreneurship was not written as a book for Austrians, right, just as Hayek's Road to Serfdom, as we discussed in a panel yesterday, was dedicated to the socialists of all parties and was written sort of not for the already convinced but for potentially skeptical readers who could be persuaded of Hayek's argument that American and British style quasi-socialism was fundamentally similar to the dictatorships in Germany and Japan and Italy. Likewise, Kirchner's book was written really for mainstream economists to convince them that there were some problems, there were some things wrong with contemporary market theory, with contemporary price theory and that the Austrian tradition offered a viable and compelling alternative. Let's look at some of the reactions to the book among contemporary Austrian thinkers. Look at some of the book reviews that were published around the time in 73 or in 74. Henry Haslett reviewed the book in The Freeman and he said the following, by applying his Austrian concepts and analysis very thoroughly and patiently to the immense body of literature on price theory that has appeared in England and America over the last generation, he, Kirchner, has not only succeeded in exposing its central fallacies but has arrived at penetrating insights and advances in market theory. Murray Rothbard reviewed the book in the Journal of Economic Literature and described it as an outstanding contribution to the Mises Hayek analysis of microeconomics. It comes at a time of increasing dissatisfaction, this is important, increasing dissatisfaction with the positivist and behaviorist methodology and alleged value freedom of orthodox microeconomics as well as with its almost exclusive emphasis on the unrealistic model of static equilibrium. So look again at these reviews from prominent Austrians at the time, Haslett and Rothbard and notice that they describe competition and entrepreneurship as a very important work in what field? In price theory or in microeconomics? Right, there are few references in these reviews to the theory of entrepreneurship or the study of the entrepreneur. Now, entrepreneurship was part of Kirchner's story to be sure, but the book was clearly oriented as these reviewers recognized at orthodox microeconomics or price theory or market theory and Kirchner was trying to offer a reinterpretation of price theory or market theory using the entrepreneur, using entrepreneurship, entrepreneurial discovery as sort of a mechanism for illustrating some important parts of the market. The expectation among Austrians when this book was published was that it would have a significant effect in challenging the thinking of orthodox economists. It would make them think about pricing and competition and exchange and industry structure and advertising and so on in a fundamentally different way. Well, was it successful? As Rothbard noted in his review in the 1960s and 1970s, there were a number of challenges to the orthodox microeconomics of the day, this sort of Samuelsonian synthesis, neoclassical synthesis, kind of micro if you like. There was the Austrian revival, of course, and here I'm defining the Austrian revival a little bit more broadly as Joe Salerno has done to include not only the South Royalton generation, but Rothbard's works of the 1960s, man economy and state, America's Great Depression, what has government done to our money and so forth. There was also, besides the Austrian tradition, there was the Chicago UCLA property rights tradition or so-called old property rights economics associated with scholars like Armin Alchin, Harold Demsetz, Stephen Chung, Yoram Barzel, and others who also challenged some of the conventions of orthodox micro theory from a slightly different perspective. There was Oliver Williamson's transaction cost economics, which offered a different way of thinking about industry structure and behaviors like vertical integration and other kinds of contractual restrictions that didn't fit within the sort of standard general equilibrium understanding of micro and challenged, led people to think about antitrust policy in a different way. There were the early works in information economics and agency theory from people like George Akerlof and Michael Spence, even Joseph Stiglitz, which while firmly within the neoclassical economics tradition were challenging the default assumptions of complete and perfect information and costless bargaining and so on. So in the 1960s and 1970s, many economists believed that economic theory was on the cusp of some kind of, I don't know what would you guys say, if not a revolution, at least some fundamental changes. Well, what does the landscape look like today? If we look at mainstream economics, micro in particular, circa 2014, I think things did not turn out quite the way the critics anticipated 40 years prior. So pick up the standard textbooks at the advanced undergraduate level or the master's or PhD level or thumb through copies of the American Economic Review or the Journal of Political Economy or the mainstream field journals and economics. And I submit, you will find predominantly the following kinds of analysis. Lots and lots of equilibrium theory, partial equilibrium models and general equilibrium models circa 1950, 1960, 1970, the first year economic theory texts and texts in almost every graduate program from people like Hal Varian or Andrew Mascallet and his colleagues all offer fairly standard partial and general equilibrium analysis. You have agency theory and mechanism design theory and other parts of information economics that are very formal and equilibrium based and come up with some slightly different conclusions and implications than all of the standard models but are very neoclassical in their orientation. Game theory, some describe game theory as its own kind of revolution but game theoretic models also begin with assumptions about perfectly rational optimizing agents, essentially solving very complicated mathematical problems. That's the, and this is thought to give insight into how economic agents behave in the real world. You have the so-called new property rights economics associated with people like Oliver Hart, incomplete contracting theory and so forth which offer new ways to think about firms and contracting among agents and between firms, et cetera. In macroeconomics, while there is tremendous diversity and disagreement of course among new Keynesians and new classicals and other groups, not very many old monetists around and we didn't think there were many old Keynesians around until 2008, 2009, they all showed up, not in the journals by the way. So if we wanna refer to Paul Krugman as a classic Keynesian, old Keynesian or as I like to, again I think this is Bob Higgs's phrase, a vulgar Keynesian, right? Krugman is not expressing these views in the pages of the quarterly Journal of Economics but rather in the New York Times and other low-level publications. But the technical literature almost all uses sort of the same kind of modeling technique, the so-called dynamic stochastic general equilibrium approach. Look, if we survey the landscape today, I think we as Austrians or potential critics of sort of standard approaches have to be pretty disappointed. The expectations that Austrians had in 1973, 1974 around the at the cusp of the Austrian revival and inspired by Kirchner's Competition in Entrepreneurship, the expectation that economic theory would change in a way more congenial to Austrian thinking. I think those expectations have largely been frustrated. Doesn't mean they were mistaken ex-ante but ex-post. We have to admit that things haven't turned out the way we hoped. Why? What should we make of this? There's some discussion and I guess hand-ringing, you could call it, soul-searching perhaps among the Austrian, within Austrian circles and among other heterodox economists. What went wrong? Why haven't we displaced the mainstream? Professor Dolan referred this afternoon to the Thomas Kuhn's metaphor of the paradigm as he did and it's not in the introduction to the 1974 book. Why is the neoclassical paradigm still as firmly entrenched as ever? Why has it not been displaced by the Austrian or some other alternative paradigm? One line of thinking is, well, it's our own fault. We as Austrians haven't been good enough. We haven't worked hard enough. We haven't written clearly enough. We haven't been persuasive enough. It's no wonder that mainstream economists have not been persuaded by our point of view. Others have pointed out, I think quite rightly, that academia is hardly characterized by a marketplace of ideas that works like a competitive marketplace. We need to look at institutions, in particular the institution of public funding, the role of the university system, the academic publishing process and so forth, to understand that entrenched paradigms in academic disciplines can remain entrenched for a very long time. Some Austrians have tried to make a distinction between what you might call mainstream economics and mainline economics. They say, yeah, well, Austrian economics has not displaced the mainstream as sort of a sociological construct. But the Austrians are still within the broad mainline of economic orthodoxy from Adam Smith to the present. Some folks have pointed out that Austrians can be classified as part of sort of a healthy heterodoxy that includes behavioral economics, experimental economics, old institutional economics, complexity theory, computational theory, and so on. I mean, I sort of understand, I sympathize with that argument, but I think that even those movements that I just described, even though they have some prominent advocates at leading institutions, those really are fringe movements. You don't find those in the first year theory texts in graduate economics programs. So does this mean that the Austrians failed, that the Austrian message has fallen on deaf ears, and that maybe we need to try to do something completely different? I don't think so. There's another way to look at this problem to say that, well, maybe economics departments and the top economics journals and the American Economic Association and the National Bureau of Economic Research and so forth, maybe they are so firmly committed to particular points of view that it is very, very unlikely that they are going to see the light. But there may be other scholars. There may be academics, journalists, researchers, laypersons and so forth, from other kinds of intellectual traditions or with other kinds of backgrounds who might be more open to Austrian ideas. So we might look at the social science literature more broadly, not just the NBER and the top econ journals and the top econ departments. We might look in political science or sociology or law or history and look for influence of Austrian thinking in those disciplines. Or we might look to business administration. In fact, what I'm gonna do in the remainder of my time this afternoon is talk about the influence of Austrian economics in business administration, particularly the fields of strategic management and entrepreneurship. And I will claim that the contemporary entrepreneurship literature, which is large, well-established and growing very rapidly and attracting increasing interest from academic institutions and journals and research funders and so forth, has been strongly influenced by Austrian thinking and different types of Austrian thinking, sometimes in some ways, good in some ways and maybe not so good in other ways. So let me go back to, let me start with some, well, like any good Austrian, let me start with the data, right? So several, my colleague Todd Childs at the University of Missouri and some of his colleagues, including a doctoral student who presented yesterday, have been collecting data on references to Austrian economics in the management literature. Per Bieland has been working on this as well. This is a chart from Todd Childs on references to Austrian economics in the organization studies journals. And so these are the top orthodox establishment mainstream journals that focus on organization studies. These are cumulative data, so this is not annual data, it's not going up quite as fast as you might think. But still there's been a steady increase, a healthy increase in citations to Austrian economists.  The top line here is Schumpeter. So Schumpeter is by far the most heavily cited of the quote unquote Austrian economists. For purposes of this exercise, the data I'm borrowing from my colleague, Schumpeter is classified as being part of the Austrian school, though we might have reasons to doubt that classification. But the next most heavily cited Austrian economist after Schumpeter in the organization studies research literature is Kersner. Kersner is actually cited a little bit more heavily than Hayek in these journals. And certainly much more heavily cited, the ones at the bottom, this is basically everyone else, Lachman, Mises, Manger, Shackle, Rothbard, Wieser, Bumbaver. I think you have to get a magnifying glass, you could see Klein way, way down at the bottom. If you look only at references to Israel Kersner's work in a slightly broader set of management journals, again you see a steady increase and the citations to Kersner are sort of increasing at an increasing rate if you look at the slope of this cumulative curve. So there's a lot of interest in Kersner's work in the management literature. I did a little bit of bibliographic work myself. I did not use Wikipedia, someone mentioned that yesterday as the source of all human knowledge, but I did something almost as good, I used mostly Google Scholar. Competition and Entrepreneurship, Kersner's 1973 book has 5,359 citations in Google Scholar. That is a lot, that is a huge number of citations. Now one of the things that you can do in Google Scholar is you can look at subsequently published books and articles that refer back to the book or article you're interested in. So I looked at forward citations to Competition and Entrepreneurship to see who was citing Kersner, right? So let's look first at books. So in Descending Order, the most popular or heavily cited themselves books that cite Kersner are the following. The most cited work on Google Scholar that also cites Kersner in 1973 is Anarchy, State, and Utopia. Next is a book by the distinguished sociologist Ronald Burt called Structural Holes, some of you probably know. Oliver Williamson's Economic Institutions of Capitalism comes next. There's a practitioner-oriented book on business networks that comes after that. We have Mark Cassin's important 1982 book on the entrepreneur. Scott Shane's Entrepreneurship Treatise, it's called A General Theory of Entrepreneurship, another important recent book by Amar Bide called The Origin and Evolution of New Businesses. I stopped here just in the interest of font size, but if we kept on going, we would see a number of other important books that share something in common with the books that you see on this list. What is it? None of them are economic theory texts. Okay, in fact, with the exception of Williamson's book, none is really an economics book at all. These are books, Nozick is sort of a special case, but these are books in social science or business or entrepreneurship in sort of a general sense. So these are not economics textbooks. These are not first year graduate texts. These are not books in industrial organization either. These are books primarily in management and entrepreneurship. If we do the same exercise looking at articles, so let's look at the most heavily cited articles that cite competition and entrepreneurship. They are the following, very well-known paper by Shane and Thank You, Terriman from the Academy of Management Review, another paper by Shane. There's a paper by Evans and Javanovic from the JPE, which I'll come back to in a second, on entrepreneurial choice. There's an article by David Teese on dynamic capabilities. Kirschner's 1997 Journal of Economic Literature paper comes next, Maskelen-Malmberg on localized learning. This is a paper in economic geography. Again, I could go on down the list and what you would find, you have to get down, I don't know, into the 20s or 30s in the ranking here before you find any sort of, any articles in mainstream micro, any articles in price theory or micro theory or industrial organization. The JPE article by Evans and Javanovic, I mean, I guess that's a mainstream economics article, but that's an article on, it's an exercise in labor economics trying to predict self-selection into self-employment versus paid employment as a function of various demographic characteristics. It's not about the market, it's not about the price mechanism. It's about who decides to become self-employed. So that's an article about entrepreneurship. These are all articles about management or entrepreneurship or economies of economic geography and localization and so forth. Again, nothing on the theory of competition. Okay, you might say, well, Google Scholar is a little too easy. I also looked at the Social Sciences Citation Index. This is actually as of February 2013, 740 sites in SSCI for competition and entrepreneurship. That's also a big number. I went through and tracked which journals have the most citations to Kirchner's book. So these are the top journals that, in which articles appeared that cited competition and entrepreneurship. Let's look at the list. Journal of Business Venturing, it's an entrepreneurship journal. Spalled Business Economics, that's an entrepreneurship journal. Strategic Management Journal, management. Entrepreneurship Theory and Practice, entrepreneurship. Journal of Management Studies and so forth. We have a development journal. We have Cato Journal. We have a History of Economic Thought Journal. More Management and Entrepreneurship Journals. Jibo Journal of Economic Behavior and Organization. Maybe that's more like an economics journal. But again, what do you not see? Journal of Political Economy, American Economic Review, Quarterly Journal of Economics, Rand Journal of Economics, Journal of Industrial Economics, Review of Industrial Organization, Review of Economics and Statistics. The mainstream economics journals are not publishing articles that cite competition and entrepreneurship. That's not a bad thing, right? But it makes us realize where is Kershner's influence going and it's going towards the management and entrepreneurship fields, the entrepreneurship field in particular. I would say that within the management and entrepreneurship literature, Kershner is probably the, I haven't done a very detailed analysis, but I think Kershner is probably the third most heavily cited economic theorist in the management and entrepreneurship literature after Schumpeter and Williamson. But ahead of Ronald Koos, ahead of Hayek, ahead of Alshen, ahead of Will Baumall, I mean, the sort of top economic theorists whose work might be relevant to management scholars or entrepreneurship scholars, Kershner is right up there near the top of the list. What is this entrepreneurship research field that is citing Kershner? What's it all about? Who's in this field? What's it up to? What are they trying to do? Well, I mean, of course, as many of you know, and this was even discussed in a session earlier this afternoon, economists were entrepreneurship scholars by and large until, oh, I don't know, until around the middle of the 20th century. I'll call it until the Samuelson era. Samuelson's advanced textbook from the 1940s and then his principal's textbook from the 1950s, late 40s. In sort of the post-war Samuelsonian era, economists lost their interest in entrepreneurship. But prior to that, right, going back to Kentillon in the 1730s or 1750s, right on through the great proto-Austrians in Europe and in France, even some of the British classical economists and J.B. Sey and Carl Manger, of course, was also discussed today, Manger's views on entrepreneurship, the American Austrians, Federer, Wichstead, Davenport and so forth, and of course, Mises, Rothbard and so forth. So the entrepreneur was an important figure in the economic analysis of the market and in competition until the increasing emphasis around World War II on formal equilibrium modeling. It's very difficult to incorporate entrepreneurship into a mathematical model. Entrepreneurship correctly understood. The centrality of the model of perfectly competitive general equilibrium, again, sort of began to squeeze the entrepreneur out. I mean, there's nothing for an entrepreneur to do in an economy that is characterized as a perfectly competitive general equilibrium. So the concept dropped out and of course the word dropped out too.  You can major in economics at a college or university. For heaven's sake, you can get a PhD in economics. You could probably become a full professor in economics without ever hearing the word entrepreneur or entrepreneurship in any of the scientific literature. Now, having said that, there has been for a number of decades, an entrepreneurship research field that is separate from the field of economics. Faculty members in business schools, typically in departments of management or marketing, sometimes in standalone departments of entrepreneurship, I have been very interested in thinking about the entrepreneur, think about entrepreneurship, what entrepreneurship is and what does it do and how do you get more of it and so on. But I like to characterize this entrepreneurship field as having like many other movements, an old guard in sort of young Turks and the old guard going back, at least in the 1970s, 1980s was pretty self-contained and they had their own journals like small business economics and entrepreneurship theory and practice and so on, their own conferences, their own societies were not very closely integrated into the rest of the social science edifice, but within the last 10 to 15 years, there's been a surge of interest in entrepreneurship research and entrepreneurship teaching, primarily though not exclusively in business schools and this younger generation of scholars has been doing work that is not mainly doing case studies but doing more sort of rigorous social science research, more based in economics, sometimes in psychology, sociology and other fields. To an Austrian, some of this literature is misguided, okay? Much of the mainstream contemporary entrepreneurship literature defines entrepreneurship pretty narrowly, right? For example, as self-employment.  We can try to predict who will select into self-employment based on the parent's occupation and education and gender and age and other sorts of demographic characteristics. To an Austrian economist, a self-employed person is certainly a kind of entrepreneur and certainly does act entrepreneurially but entrepreneurship is hardly restricted to the domain of self-employment. Entrepreneurship to an Austrian is also not a kind of firm. Some of the contemporary entrepreneurship literature defines entrepreneurship as startup companies. Small firms, new firms, maybe high growth firms. Again, entrepreneurship is manifest in those firms but not exclusively there. Large firms can be entrepreneurial. Older firms can be entrepreneurial and so forth. And entrepreneurship is not a personality type.  Rather, entrepreneurship to an Austrian economist, at least to this Austrian economist and I think to most of the classic writers in the Austrian tradition is an economic function. Right, just as the provision of labor is an economic function in the economy. An abstract function that can be performed by different kinds of individuals at different points in time. Entrepreneurship is a function that is performed in the market system, not a job category or a firm type or a personality type. Let me go back to Kersner for just a moment. Until recently, I say and I'll explain why in just a second, the dominant perspective in mainstream entrepreneurship research and teaching, the sort of the young Turks movement within entrepreneurship research and teaching is what is often called the opportunity discovery perspective. The opportunity discovery or opportunity recognition perspective. It is very explicitly Kersnerian. It treats Kersner as the patron saint of entrepreneurship theory. Of course it's an aside that does not mean that all of the writers working in this tradition have bothered to read anything written by Israel Kersner but nonetheless Kersner is recognized as sort of a pioneering and innovative thinker whose work on opportunities and on alertness to opportunities and the discovery of opportunities helped to provide a framework, an intellectual framework for what previously had been a fairly fragmented and sort of ad hoc set of case studies and personality tests and so on. Probably the leading figure in this movement is Scott Shane who I mentioned before. Shane's influential 2003 book is called A General Theory of Entrepreneurship, The Individual Opportunity Nexus and Shane takes the opportunity, the profit opportunity as kind of the core construct for entrepreneurship research. The central organizing principle of entrepreneurship research according to this interpretation is the profit opportunity and so entrepreneurship research according to Shane can be described as follows. The academic field of entrepreneurship explains why, when and how entrepreneurial opportunities exist and also includes the sources of those opportunities, the forms they take, the processes of opportunity discovery and evaluation, the acquisition of resources for exploitation of opportunities, the act of exploitation, who exploits, what strategies are used to pursue opportunities and so on. So the field of entrepreneurship as an academic field in this perspective can be understood as all about what opportunities are, who discovers opportunities, how opportunities are discovered and what people subsequently do once they discover an opportunity. So this opportunity discovery approach or perspective really helped the entrepreneurship field, I think, to coalesce into something more than just an ad hoc collection of potentially interesting insights and many folks in the field believed that the entrepreneurship research area was sort of on the verge of more legitimacy and more coherence and would finally take its place along with, say, strategic management and marketing and finance and accounting as sort of one of the core business disciplines. I think in the last decade or so things took a different turn, however. There have been a number of very important challenges to the opportunity discovery perspective. Now one challenge that has not really been made in the contemporary entrepreneurship literature but would be offered and in fact has been offered by Israel Kershner himself is that the literature has made a mistake in kind of reifying the construct of the opportunity. Kershner himself has pointed out that entrepreneurship is not the study of opportunities because opportunity is a metaphor. Opportunity is kind of an explanatory device for understanding the market process, that's what Kershner would say. There's an interesting remark from Kershner in an interview that he did in the Austrian economics newsletter, I think it's 97. Kershner says, in response to a question about this idea that if people are sort of discovering exogenously given opportunities, does that mean the future is already predetermined? And it's just a matter of time until somebody discovers things. Kershner says, he says, I do not mean to convey the idea that the future is a rolled up tapestry. Okay, that's the best rolled up tapestry I could find on Google Images. I'm sorry it looks like paper towels. I do not mean to convey the future as a rolled up tapestry and that we need only to be patient as this picture progressively unrolls itself before our eyes. Kershner says, ex post, we have to recognize that when an innovator has discovered something new, that something was metaphorically waiting to be discovered. I think that's a very interesting phrase. Kershner says, I did not mean that economic profit is sitting out there somewhere waiting to be discovered like lost luggage at the airport waiting for its owner to come along and grasp it. Rather, he says, profit opportunities are metaphorically waiting to be discovered. In other words, when we see an entrepreneur who has successfully generated economic profit, we say, gee, why didn't I think of that? If I had only had the foresight, if I had only realized that people would pay a lot of money for a tablet, for electronic tablets with touch screens that you could watch movies on and do email on and so forth and update your Facebook status, I would have created an iPad before Steve Jobs and his team figured it out. All of the money earned by Apple in this understanding, it's like it was just out there waiting for somebody to find it. So, the idea of building a research program sort of computing opportunities and characterizing opportunities and looking at the processes that generate opportunities is sort of looking at things in the wrong way. There are no processes that generate opportunities if Kershner is, I think, correctly interpreted, rather ex-post, it looks as if there were opportunities waiting to be discovered. However, I think there are even more fundamental problems with the opportunity discovery construct even if understood correctly the way that Israel Kershner, I think, intends it, intended and intends it to be understood. So a number of these critiques have been offered in management and entrepreneurship journals along, among other places. There's an influential series of papers by Sharon Alvarez and Jay Barney on the distinction between opportunity discovery and opportunity creation. Alvarez and Barney say it's wrong to think of opportunities or at least to think of all opportunities as sort of existing objectively and exogenously waiting for somebody to come along and discover them. Rather, opportunities are created indogenously as entrepreneurs think creatively as they make decisions, as they experiment, and so forth. Call that an ontological critique about the nature of the opportunity. There's another strand of literature that emphasizes more sort of cognitive and behavioral and maybe experimental perspectives building heavily on people like Herbert Simon, for example, arguing that it's not right to think of entrepreneurs perceiving an opportunity off in the distance and grasping it or acquiring the resources necessary to grasp it. Rather, entrepreneurs sort of start with the resources they have at hand and they make the best out of what they currently have. It's the so-called brick-a-lage approach to entrepreneurship. Brick-a-lage is like in the visual arts. Small children in school in art class, you give them a piece of string and a button and some cardboard and glue, make a work of art out of these things. So just as you could make art out of the materials you have at hand, you could likewise think of entrepreneurs making the best product or service that they can with the resources they happen to have at hand and they don't really know what eventually their business is going to do. They sort of try things incrementally. They learn from their mistakes. They eventually sort of go in a particular direction they couldn't have anticipated ahead of time. In the words of, to use the term from Sarah Saraswathy, leader in this particular school of thought, entrepreneurs rely on effectual thinking rather than sort of optimizing rationality. I myself have taken a slightly different tack in my own critique of the opportunity discovery construct and the opportunity discovery literature. I'll call it a methodological critique for the following reason that I don't think the concept or the construct of the profit opportunity or the business opportunity is actually necessary at all to understand what entrepreneurship is and what entrepreneurs do. I have tried to lay out this perspective in a number of articles and books including the book graciously mentioned by Joe called Organizing Entrepreneurial Judgment that appeared in 2012 by myself and Nikolai Foss. We argue that one can describe or analyze or if you like model entrepreneurial behavior with only the following elements, what entrepreneurs believe, what actions entrepreneurs take, the results of entrepreneurial action and the adjustments that are made after the results are revealed. With just that kind, with just that set of concepts one can sort of analyze or explain anything that you would want to study about the entrepreneur. The concept of opportunity we claim is redundant at best and potentially misleading at worst. Let me illustrate this model with a little diagram. So this is my diagram of my sort of analytical model of entrepreneurship and on another slide I'll have all the first derivatives and so on. So start with the objective conditions of reality which include past prices, scientific and technical knowledge call that objective quote unquote but those things are only relevant as they are interpreted subjectively by entrepreneurs. So the real starting point of our analysis is the subjective attributes of the entrepreneur, the entrepreneur's preferences from a Misesi and Rothbardian point of view, how the entrepreneur ranks alternative outcomes. The entrepreneur's beliefs about the future or expectations about the future or the imagined future and how the entrepreneur interprets the past and present data that are available. So given these characteristics of the entrepreneur the entrepreneur imagines a potential future state of the world. In other words, if I purchase plastic and silicon and rubber and gorilla glass or whatever you call it and hire labor and acquire certain other kinds of complimentary resources and assemble them into a tablet kind of a thing I can sell it at these prices, I'm gonna have this much you know the market is going to be consumers will be willing to pay this much for my device I'll be able to ship this many this is how much money I'll make. That all happens in the future, right? But I have sort of a vision, a set of expectations I can imagine what that future state of affairs will be like and I believe that my actions can bring about that state of affairs. Based on those beliefs, I act. I acquire the resources I need. I purchase these factors of production. Unique heterogeneous resources understood in the Austrian way, right? I assemble them into different combinations. Maybe I have to do some engage in some trial and error. I hire labor and so on. And then we see what happens. Right, so after I've acted, now I have iPads and I bring them to market and I try to sell them and we see what happens, right? So the actual future is what happens when I bring my products and services to market and notice that the outcomes, how much profit I earn or how much loss I have to bear. This actual future may be different from the future as I imagined it, right? So in Steve Jobs's case, they were, I don't know exactly what was in Steve Jobs's head when they started out, but I imagine he was pretty pleased when the iPad became a best seller and Apple had record revenues and profits and the share price went through the roof, okay? Now that doesn't mean that, I mean, if you wanna call that, if you wanna say that those profits were there waiting for somebody to discover them, then how do you explain the Newton? Any of you old-timers remember the Newton? That was Apple's attempt to make a handheld touchscreen device in the early 1990s when the Palm Pilot was the dominant. Device was a complete failure. Jobs's next computer company was a failure and so like any successful person, Steve Jobs had as many failures as he had successes. So in the case of the iPad, the, you know, what Steve Jobs anticipated the future would be like, he was correct in his anticipations and he had more money left over, he had money left over after he had paid out all of his factors of production, he had profit. If the entrepreneur's expectations are incorrect, are sort of falsified by reality, then the entrepreneur may end up with an economic loss, okay, so reality bats last as we sometimes say and shows us whether our imagined future was realistic or not. And so entrepreneurs learn, right? They learn from their mistakes and they go back and try it again. Sometimes they're not afforded the ability to learn. If they lose all their capital after one failure or a certain number of failures, then they may be selected out of the market and they may not, they may be unable to be entrepreneurs in the future. So I claim that the entrepreneurial process can completely be understood with this kind of a framework and I put it to you, where are opportunities here? What is an opportunity? Why do we need the construct of opportunity? Now some people have said to me, oh well, but, but, but, but, why not just say the entrepreneur perceives an opportunity and acts on it? Okay, well then, how do you explain the Newton? If you wanna say, well, the vision the entrepreneur had is an opportunity, you can call that an opportunity if you want. You can call it a banana if you want, but the dictionary definition of opportunity, right, refers to objective configurations of circumstances that permit certain things to happen. The Mises Institute staff was kind enough to put a glass of water up here on the podium, which gives me the opportunity to take a refreshing drink and have a break. That's not my imagination, right? I mean, there really is a glass of water here. Opportunities in the common language sense refer not to subjective perceptions of things in the future, but objective configurations of circumstances. So rather than say entrepreneurs discover opportunities, why not say entrepreneurs invest resources in anticipation of expected future returns? Does creation help us here? Well, kind of. I mean, entrepreneurs clearly create things, but I claim what entrepreneurs create are not opportunities. They create machines and devices and they create firms. In other words, they create things. They don't create opportunities. Opportunity is a metaphor. And I think it is a misleading metaphor in the case of the entrepreneur, because it misleads us into thinking that entrepreneurship has something to do with getting these objective configurations of future circumstances right. I would not say because of what the entrepreneur imagines, there is therefore an opportunity to do X, Y, and Z. Again, you can call it that if you like, but you might as well call it a banana because it's not an opportunity in the dictionary sense of opportunity. Again, my challenge to my colleagues in entrepreneurship is to please present me with a phenomenon or an important case or some kind of entrepreneurial outcome or behavior that cannot be explained without using the word opportunity. And I suppose like Warren Buffett offering, what is he offering, a million dollars to somebody who can correctly fill out their NCAA bracket 100%. I'll offer a million dollars for somebody who can present me, who can meet that challenge so far nobody has done it. Okay, what do I offer instead? In my own work, I've offered and articulated something that might be called the judgment-based approach or judgment-based view of entrepreneurship. Of course, it's hardly original to me as some of you know who were in the earlier session on entrepreneurship, I think it was before lunch. This view comes straight out of Cantillon and it was articulated in great detail by Frank Knight in Risk Uncertainty and Profit in 1921. And I claim this is also the view of the entrepreneur that for the most part was held by Mises and by Rothbard and other Austrians as well. So you can think of judgment as this act of perceiving or to use Joe Salerno's preferred term appraising the uncertain future. So when I referred in my diagram to the entrepreneur having this imagined thinking about this imagined future, the process by which the entrepreneur comes up with these beliefs or expectations or conjectures about the future can be described in terms of entrepreneurial judgment. Judgment is how the entrepreneur thinks about potential future circumstances. So think about the entrepreneurial function from this point of view. In the discovery approach as popularized as sort of building on Kersner, right? The entrepreneurial function is discovering and exploiting gaps in the existing structure of prices and existing could also include the future prices that are with certainty going to come about, right? So whether it's interspatial gaps or intertemporal gaps, metaphorically, the future is predetermined and the entrepreneur's job is to buy low and sell high and seek out and take advantage of these gaps which constitute profit opportunities. In the judgment approach, the entrepreneurial function is the deployment of resources, heterogeneous productive resources in the present, in anticipation of expected but uncertain profits generated by future prices. So the emphasis here is not on some existing constellation of prices that are not in their equilibrium positions, thus leaving gaps to be exploited, but rather this perception of the uncertain future. It's the entrepreneur's ability to judge the uncertain future that determines the entrepreneur's success in generating profits and avoiding losses. How does the entrepreneur do it? Well, as Knight emphasized in his famous distinction between insurable risk and uninsurable uncertainty, you can think of judgment as decision making about the future that cannot be modeled as a set of formal decision rules, a formula or a recipe or a decision tree, if one could analyze the future using a formal model, then in principle, anybody who has access to that model would appraise the future in the same way, right? Rather, judgment for Knight and also for Mises. You can think of it, you can call it intuition if you like or forstain if we want to use an authentically German term. You can call it gut feel or gut instinct. What Knight has in mind, of course, is not coin flipping, but it's not just blind luck, right? It's something in between blind luck and rational decision making according to a set of fixed rules, right? So the entrepreneur doesn't just take a stab in the dark. The entrepreneur has some confidence that his or her expectations about the future will be realized, but is still bearing uncertainty and is sort of the residual claimant of getting to reap those profits or absorb those losses. This is how Mises puts it in a typically Misesian English phrase. The entrepreneur relies on a specific, anticipative understanding of the conditions of the uncertain future, which defies any rules and systematization. And Mises goes on, by the way, to say that this understanding can be neither learned nor taught, which has some interesting implications for entrepreneurship education and entrepreneurship courses. I mean, what I interpret Mises to be saying there is not that we shouldn't have courses in entrepreneurship, but rather what we teach in those courses is not how to exercise judgment correctly, because if that were teachable, then we would be able to write it down in a formula and it wouldn't be judgment, right? But there are important aspects of the entrepreneurial process and there are tricks and tools and heuristics and so forth that could be useful to people attempting to exercise good judgment that can be taught. And of course we can study the great entrepreneurial decision makers of the past and look at the actions that they took and the procedures they used and the successes and failures that they achieved. Certainly those things can be taught. Notice that the judgment-based approach to entrepreneurship fits in very nicely with Austrian capital theory, right? So the Austrians are distinct among economists in their appreciation of capital, the heterogeneity of capital, the complexity of capital, the uniqueness of different capital combinations and so I think this fits in very well with the judgment-based approach to entrepreneurship. Mises says in his essay, Profit and Loss, there is a simple rule of thumb to tell entrepreneurs from non-entrepreneurs. The entrepreneurs are those on whom the incidence of losses on the capital employed falls. In other words, the entrepreneurs are the residual claimants and ultimate decision makers who reap the benefits and bear the costs of the value of capital, right? So entrepreneurs are those agents in the economy who are responsible for allocating capital across alternative uses and most Austrian economists recognize this even if they don't develop this line of reasoning explicitly. If you just look at Austrian business cycle theory, right? When Celerno or Garrison or one of these other distinguished Austrian macroeconomists talks about interest rates being held below their natural rates and a lengthening of the structure of production as capital is reallocated from less roundabout to more roundabout production processes. If they're not careful in what they say or if you listen carefully, they might say, entrepreneurs respond to conditions in the market by reallocating capital and adjusting the structure of production and so on. The Hayekian triangle to use that metaphor doesn't just change shape by itself, right? It's entrepreneurs who are responsible for establishing and configuring and reconfiguring the structure of production in an advanced industrial economy. I've always appreciated a line from Ludwig Lachman from his great book on capital theory, Capital and its Structure from 1956. Lachman says, quote, we are living in a world of unexpected change. Hence, capital combinations will be ever-changing, will be dissolved and reformed. In this activity, we find the real function of the entrepreneur. So the real function of the entrepreneur, according to Lachman, is this continual configuration and reconfiguration of the capital structure in the economy. Notice, of course, some of you have already noticed the close connection between the entrepreneur and resource ownership, which is another distinction between the approach that I take and in my interpretation, the approach that Mises takes, and Kirsner's notion of the pure entrepreneur who does not own any capital. Before I conclude, let me just mention that what I'm calling the judgment-based view is a pretty healthy and robust stream of research. I just threw up some examples. This is just a few of many examples I could have used of papers published or in draft form of forthcoming, just in the last 10 years or so, that explicitly adopt this judgment-based perspective, some of my own work, of course, but also a number of papers by younger scholars that are in draft or are forthcoming from a variety of different perspectives, some explicitly grounded in Austrian economics, others coming from other intellectual traditions. But I want to give you the idea that Foss and I are not voices of one or two crying in the wilderness, but rather there's sort of a burgeoning movement to think about entrepreneurship as judgment and to understand the manifestations of judgment and the foundations of judgment and the implications of judgment and the institutional environment in which judgment is most effectively organized. That is thoroughly Austrian that is consistent with the great contributions to entrepreneurship theory from scholars of the past that takes advantage of latest thinking in various social science disciplines and is different from the opportunity discovery perspective. So in some sense, the modern entrepreneurship literature is less coherent than it was 10 years ago because 10 years ago, everyone was starting to coalesce around the opportunity construct. Now there is a new wave, there are other new waves too, that are challenging the opportunity discovery perspective and I think offering a robust and healthy alternative that should be taken very seriously. So just to conclude, Austrian price theory or market theory, and here I mean primarily Kirstenarian price theory and market theory as outlined in competition and entrepreneurship and subsequent works by many Austrians working in these fields, have not been very influential in microeconomics. I mean again, I hardly mean that as a pejorative. Okay, it could be entirely the fault of Orthodox microeconomists that they are too dense, too thick, or paid off to appreciate a Kirstenarian micro. But for whatever reason, Austrian price theory as explicated by Kirstener and his colleagues and students really hasn't had the impact that it was expected to have 40 years ago. But there's always a silver lining, right? Or we can make some lemonade out of that potential lemon by pointing out that Kirstener's approach is very influential in contemporary entrepreneurship research and that Austrian economics itself from a variety of perspectives is influential here and having just said we should not use the construct of opportunity, I'll use it here but I'll put it in scare quotes which makes it okay. And say that I think there are tremendous opportunities for Austrian scholars, especially you younger folks out there trying to find a niche, trying to find a home for your research. In the managerial sciences, not just in business schools but in the management field and in particular in the entrepreneurship field, there is a great appreciation for the insights not only of Kirstener but of Mises and Hayek and Lachman and even Rothbard in those traditions. The journals in those fields are open to research contributions that build on Austrian insights. I think this is an area that Austrian economics needs to take very seriously. Now there is a potential danger, I guess, of what we might call sort of a superficial Austrianism. I have half jokingly referred earlier to papers in the entrepreneurship literature that cite Kirstener without reading Kirstener. There is the danger and you see it in some of the published work of people sort of picking up a buzzword here or there, subjectivism or market process and sort of even praxeology and sprinkling it through an article to make the article seem more learned without actually building on the concepts and that's something that we would want to watch for very carefully but that's not a reason to discourage people without a solid training in Austrian economics to become better informed about the Austrian tradition. And finally, it's worth pointing out and I think this exercise that we've gone through this afternoon helps us realize that despite what many outsiders think, the Austrian tradition is very diverse. There are a number of different strands approaches, emphases among Austrian economists and among groups of Austrian economists. Now of course there are certain fundamental assumptions that anyone working in the Austrian tradition will tend to share but there isn't one single perspective or one single paradigm on entrepreneurship or anything else. Many of you like me sometimes get frustrated when people will ask your non-Austrian friends will say, what's the Austrian view on quantitative easing or what's the Austrian perspective on this or that? I said, I don't know, I need to check with the Austrian guru to find out, let me call Joe Salerno and see what's the, I mean there is no the Austrian perspective on anything, but particularly within entrepreneurship. Kersner's work has been extremely influential in the entrepreneurship literature but the Kersnerian approach is not the Austrian approach to entrepreneurship. I think the judgment-based approach is equally Austrian. If you include Schumpeter you could say Schumpeterian innovation is Austrian as well. This is not a bad thing, this is a good thing. Right at the sign of a healthy, vibrant, robust and growing intellectual movement is that we have many different perspectives and different ways of trying to get at similar phenomena and we study alternatives, we think about them, we all come to our own conclusions. That's the kind of intellectual movement that I wanna be a part of. Thank you.