It's Nobel Prize season again! You know what that means: It's time for nerds to obsessively speculate and model predictions of which leading scientists will be awarded the coveted Swedish honor. This year, I am pleased to see that Thomson Reuters includes Israel Kirzner on the short list for the economic science prize, due to his paradigm-shifting contributions to the study of entrepreneurship. Whether he wins or not, the prospect gives us an opportunity to talk about his scholarship. If you have heard of Kirzner, it is likely through his association with the modern "Austrian" school of economics and tutelage under another great Nobel-winning economist, F.A. Hayek.
But these Austrians are no ordinary free market guys. Believe it or not, some of their core methodological assumptions are closer to Nobel-winner (and famous free market critic) Paul Krugman than to the "markets-always-tend-to-equilibrium" approach of neoclassical economics that predated John Maynard Keynes' one-man revolution. In his post-recession reverie, "How Did Economists Get It So Wrong?" Krugman diagnoses that "economists were seduced by the vision of a perfect, frictionless market system." Exactly. In fact, his contention is downright Kirznerian, and it echoes the Austrian insight that frictions, imperfections, and disequilibrium do exist in the real world.