Posts tagged with: specialization

Israel M. Kirzner

While reading economist (and rabbi) Israel M. Kirzner’s Competition & Entrepreneurship (1973), it occurred to me that his description of what the “pure entrepreneur” does could also be applied to what a good interdisciplinary scholar, such as someone who studies faith and economics, does (or at least aspires to do).

In our world of imperfect knowledge, Kirzner writes,

there are likely to exist, at any given time, a multitude of opportunities that have not yet been taken advantage of. Sellers my have sold for prices lower than the prices which were in fact obtainable…. Buyers may have bought for prices higher than the lowest prices needed to secure what they are buying…. The existence of these opportunities opens up a scope for decision-making that does not depend, in principle, upon Robbinsian [means-end] economizing at all. What our decision maker without means needs to arrive at the best decision is simply to know where these unexploited opportunities exist. All he needs is to discover where buyers have been paying too much and where sellers have been receiving too little and to bridge the gap by offering to buy for a little more and to sell for a little less. To discover these unexploited opportunities requires alertness. Calculation will not help, and economizing and optimizing will not of themselves yield this knowledge.

To simplify, for Kirzner the entrepreneur is an equilibrating force in the market, a contrast of emphasis from the conception of Joseph Schumpeter, where the entrepreneur is a disequilibrating force through creative destruction. Rather, for Kirzner, the entrepreneur is the person who sees the opportunity to buy low and sell high. And I think that is what interdisciplinary scholars do at their best as well. (more…)

wmartIn light of the ongoing discussion over fast-food wages, I recently wrote that prices are not play things, urging that we reach beyond the type of minimum mindedness that orients our imaginations around artificial tweaking at the bottom instead of authentic value creation toward the top. Prices don’t equip us the whole story, but they do tell us something valuable about the needs of others and how we might maximize our service to society.

But though I have a hearty appreciation for the role that low-wage employers like McDonald’s play — due in large part to my 5-year stint working for The Ronald — I’m also grateful that other companies like Costco are able to provide higher wages to many low-skilled workers.

When we observe such differences — one prosperous company paying $7 per hour while another pays $12 — it can be easy to get worked up, pointing our fingers at greedy executives, idols of efficiency, unwise allocation of company funds, etc. Yet while any assortment of these drivers may indeed contribute to how wages are set, and though executives bear heavy moral responsibility on such matters, it’s helpful to remember that (1) we’re greatly limited in understanding the books of the companies we critique, and (2) executives aren’t the only ones influencing prices.

Over at Bloomberg, Megan McCardle does a marvelous deep-dive on this very sort of thing, starting with a comparison of Costco and Walmart wherein she ponders why the former offers higher wages than the latter.

A summary: