Driving the Market Process: 'Alertness' Versus Innovation and 'Creative Destruction'

Abstract

This paper summarizes and compares theories of entrepreneurship of Joseph A. Schumpeter and Israel M. Kirzner as presented in their major scholarly contributions to economic analysis. It is argued that Kirzner's theory of entrepreneurial action as the driving force of contributes greatly to a fundamental understanding of market process. In contrast, it is argued that Schumpeter's theory that entrepreneurship is agent of creative destruction of an ongoing state of general equilibrium is spurious. It is also argued that his view that entrepreneurship is internal force for economic development of any economy, market or non-market, reveals a seriously inadequate understanding of both market process and economics of non-market societies.