ON AUSTRIAN ANALYSIS OF ENTREPRENEURSHIP AND MY OWN

All of economics recognizes the importance of entrepreneurship, but until the work of the Austrians, little was done about it. Neoclassical economics could not deal with it in its models, because formal optimization is largely irrelevant and because the entrepreneur’s innovation is, by definition, purely heterogeneous. The Austrians, with their flexibility of method, were able to break through, following Schumpeter’s great contribution. My own work on the subject solved the method problem by discussing not what activities the entrepreneurs undertake, but how their services are allocated between such things as contributions to production and rent seeking.