Skip to main content

Entrepreneurship, and the entrepreneurial market process: Israel M. Kirzner and the two levels of analysis in spontaneous order studies


The science of economics is born out of the puzzle that the coordination of economic activities presents to our imagination. The solution to that puzzle is the entrepreneurial market process. Israel Kirzner has argued that the market economy operates with ruthless efficiency to coordinate economic activities and realize the gains from social cooperation under the division of labor because of the institutional framework within which it operates, namely private property rights. Kirzner, however, is suspicious of economic analysis that doesn't limit its analysis to an examination of processes within that framework, but instead attempts to apply that analysis to the evolution of the framework itself. These are the two-levels of analysis in spontaneous order studies. This paper presents Kirzner's arguments for maintaining a strict dichotomy between the levels of analysis, and then challenges his argument with a discussion of the positive political economy of endogenous rule formation.

This is a preview of subscription content, access via your institution.


  1. What constitutes the framework is of course a critical question and not as easily answered as one may think given the ‘nested’ nature of institutions and policy choices. For example, it seems non-controversial to say “legal institutions” are part of the framework. However, would the “monetary system” be part of the framework or subject to economic analysis as in the evolution of indirect exchange out of system of barter? As I will explain, in Kirzner’s analysis explicitly does not deny long-run social evolution. His criticism of some variants of spontaneous order study are limited to the efficiency claims made on behalf of those long run social evolutionary processes.

  2. We are primarily limited in our discussion to the positive analysis of the market process and spontaneous order studies rather than the normative implications for political economy, but it is important to stress that the positive understanding of market forces does put parameters on utopian aspirations. As Simons (1983, 3) put it: “Academic economics is primarily useful, both to the student and to the political leader, as a prophylactic against popular fallacies.” To see Kirzner’s nuanced discussion of the relationship between positive economic analysis of the market economy and policy advice see his essays “The Anatomy of Economic Advice”. (2006a, 2006b, 2006c)

  3. In Living Economics, I argue that the embracing of this intellectual heritage is the defining characteristic of “mainline” economics. (see Boettke 2012, xv–xx; 383–388)

  4. See Boettke (1990, 1993, 2001).

  5. Peter Leeson and I published a paper under that title (see Boettke and Leeson 2003) and we also examine similar issues in our work on two-tiered entrepreneurship (Leeson and Boettke 2009), also see my overview papers on the topic (see Boettke 2011).

  6. For an appreciation of the central insights of Buchanan and Kirzner to the intellectual tradition of “mainline” economics see my discussion of their work in Living Economics (Boettke 2012, 42–65; 213–225; 241–261).

  7. For a praxeological analysis of the US led military effort to export democracy and the free market to failed and weak states after conflict see Coyne (2007), and on the limits of humanitarian aid in times of crisis see Coyne (2013).

  8. On the Ostroms’ contributions to political economy of self-governance see Boettke (2012, 139–158; 159–171).

  9. See, e.g., Kirzner (1997) for an example of his subtle, yet straightforward, presentation of how the entrepreneurial market process works to bring about a peaceful and prosperous order.


  • Boettke, P. (1990). The political economy of soviet socialism: The formative years, 1918-1928. Boston, MA: Kluwer Academic Publishers.

    Google Scholar 

  • Boettke, P. (1993). Why perestroika failed. New York, NY: Routledge.

    Book  Google Scholar 

  • Boettke, P. (2001). Calculation and coordination. New York, NY: Routledge.

    Book  Google Scholar 

  • Boettke, P. (2011). Anarchism and Austrian economics. New Perspectives in Political Economy, 7(1), 125–140.

    Google Scholar 

  • Boettke, P. (2012). Living economics: Yesterday, today, tomorrow. Oakland, CA: Independent Institute.

    Google Scholar 

  • Boettke, P., & Leeson, P. (2003). Is the transition to the market too important to be left to the market? Economic Affairs, 23(1), 33–39.

    Article  Google Scholar 

  • Buchanan, J. (1977). Freedom in constitutional contract. College Station, TX: Texas A&M University Press.

    Google Scholar 

  • Buchanan, J. (1987). The constitution of economic policy. American Economic Review, 77(3), 243–250.

    Google Scholar 

  • Cornuelle, R. (1965). Reclaiming the American dream: The role of private individuals and voluntary associations. New Brunswick, NJ: Transaction Publishers, 1993.

    Google Scholar 

  • Cornuelle, R. (1983). Healing America: What can be done about the continuing economic crisis. New York, NY: Putnam.

    Google Scholar 

  • Coyne, C. (2007). After war: The political economy of exporting democracy. Palo Alto, CA: Stanford University Press.

    Google Scholar 

  • Coyne, C. (2013). Doing bad by doing good. Palo Alto, CA: Stanford University Press.

    Google Scholar 

  • Kirzner, I. (1960). The economic point of view. Indianapolis, IN: Liberty Fund, 2009.

    Google Scholar 

  • Kirzner, I. (1963). Market theory and the price system. Indianapolis, IN: Liberty Fund, 2011.

    Google Scholar 

  • Kirzner, I. (1973). Competition and entrepreneurship. Chicago, IL: University of Chicago Press.

    Google Scholar 

  • Kirzner, I. (1979). Perception, opportunity, and profit. Chicago, IL: University of Chicago Press.

    Google Scholar 

  • Kirzner, I. (1987). Spontaneous order and the case for the free market society. In Ideas on Liberty: Essays in honor of Paul Poirot (pp. 45–50). Irvington-on-Hudson, NY: Foundation for Economic Education.

    Google Scholar 

  • Kirzner, I. (1992). The meaning of market process. New York, NY: Routledge.

    Book  Google Scholar 

  • Kirzner, I. (1997). How markets work. London, UK: Institute for Economic Affairs.

    Google Scholar 

  • Kirzner, I. (2000). The driving force of the market. New York, NY: Routledge.

    Book  Google Scholar 

  • Kirzner, I. (2006a). “The Anatomy of Economic Advice: Part 1”, The Freeman (July/August): 28–33.

  • Kirzner, I. (2006b). “The Anatomy of Economic Advice: Part 2”, The Freeman (September): 14–19.

  • Kirzner, I. (2006c). “The Anatomy of Economic Advice: Part 3”, The Freeman (October): 17–22.

  • Leeson, P. (2010). How much order can spontaneous order create? In P. J. Boettke (Ed.), Handbook on contemporary Austrian economics (pp. 136–153). Cheltenham, UK: Edward Elgar Publishing.

    Google Scholar 

  • Leeson, P., & Boettke, P. (2009). Two-tiered entrepreneurship and development. International Review of Law and Economics, 29(3), 252–259.

    Article  Google Scholar 

  • Mises, L. (1957). Theory and history. New Haven, CT: Yale University Press.

    Google Scholar 

  • Mises, L. (1966). Human action: A treatise in economics. Chicago, IL: Henry Regnery.

    Google Scholar 

  • Rajan, R. (2004). “Assume Anarchy?”, Finance & Development (September): 56–57.

  • Simons, H. (1983). In G. Tullock (Ed.), Simons’ syllabus. Fairfax, VA: Center for the Study of Public Choice.

    Google Scholar 

  • Wicksteed, P. (1910). The common sense of political economy. London, UK: Routledge, 1935.

    Google Scholar 

Download references

Author information

Authors and Affiliations


Corresponding author

Correspondence to Peter J. Boettke.

Additional information

Paper prepared for the Fund for the Study of Spontaneous Order Lifetime Achievement Award to Israel M. Kirzner. February 7, 2013.

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Boettke, P.J. Entrepreneurship, and the entrepreneurial market process: Israel M. Kirzner and the two levels of analysis in spontaneous order studies. Rev Austrian Econ 27, 233–247 (2014).

Download citation

  • Published:

  • Issue Date:

  • DOI:


  • Market process
  • Entrepreneur
  • Spontaneous order

JEL classifications

  • B31
  • B53