I am the son of an immigrant who worked late almost every night and weekend to give his family a good life.
Now, as an investment banker in the U.S. middle market, I work with clients who do the same. They dream, sacrifice and sometimes succeed.
However, sweeping legislation designed to solve the current economic crisis ushers in monetary changes that may erode the entrepreneurial foundation of the business landscape. Like many, I’m concerned about the effect it will have on our economy and people such as my father and my clients who build and nurture their own enterprises.
But, I wonder, is there an alternative? Is big government really the only solution for the economic crisis? Can’t the individuality of entrepreneurship lift our economy and craft the soul of our society?
To a large degree my concerns have been alleviated by the renowned economist Israel M. Kirzner, professor emeritus at New York University. Our discussions and his writings on entrepreneurship have allowed me to envision a path of hope.
Contrary to the widespread social disdain for business accomplishment, I have faith we can move forward by reaffirming trust in American entrepreneurship. This faith is founded on an appreciation of entrepreneurship and its efficacy for the current crisis.
At first, there will be disorder and dislocation. The complex interlocking market system, what economist Friedrich Hayek called the “marvel of the market,” will undergo an economic reordering.
But entrepreneurship will bring order to market chaos.
Unlike economists who see the entrepreneur as disruptive to the status quo, Kirzner shows that the entrepreneur moves the market toward stability: “We must see how the status quo is nothing but a seething mass of unexploited maladjustments crying out for correction. Instead of seeing entrepreneurship as jerking the system out of equilibrium, we must see it fulfilling the tendencies within the system towards equilibrium.”
Kirzner’s analysis is the path of hope: Entrepreneurs will bring about order by correcting misalignments in the structure of prices, the composition of supply and the vast networks of relationships that form our markets. By contrast, state planning of any totalitarian system, always — and inevitably — fails because there are too many variables for centralized decision-making.
So, how and why will the mundane entrepreneur engender the order that defies state planners?
The answer is simple: Entrepreneurs are motivated to notice what no one else notices. Kirzner highlights the notion of entrepreneurship as discovery.
Entrepreneurs summon resources of creativity, ingenuity and competence. They deploy “an alertness to the existence of opportunities that have been overlooked — because their continued existence must mean they have been overlooked.”
If entrepreneurs are allowed to thrive, they will respond to the lack of market equilibrium by being alert to the many opportunities that will inevitably appear. They will implement solutions in response to these discoveries. They will adapt to the economic changes and reimagine their businesses.
The focus will be on new markets and alliances, forging new business strategies and developing new supplier, customer and employee structures. In short, they will do what entrepreneurs always have done and always will do.
The successful entrepreneurs will find their footing by remembering that the essential laws of business do not change. Basic human needs and nature are immutable.
Ludwig von Mises writes that these economic principles must be obeyed just as the laws of nature must be taken into account. I suggest that the genius of the entrepreneur lies in coupling these immutable economic principles with flexible innovation.
The world economies will emerge from the pandemic despite the horrific human and economic toll of the coronavirus. Initially, there will be a period of economic chaos, but it will give way to adjustment and recovery.
If regulation is tempered, this economic reordering will occur naturally, flowing organically from the wellspring of the free market system. The waters will be turbulent and full of obstacles. Order will return, however, if entrepreneurial activity remains free so individuals with vision, courage and stamina may, in time honored fashion, find and respond to opportunities.
The mystery and magic of the market will be reasserted. And our economy restored.
