Discovering the Gains from Trade: Alertness and the Extent of the Market

Economic development is an economic problem, one that can only be "solved" by a genuinely Smithian process. Robust long-run development involves coordinating a continuously differentiating division of knowledge, an insight that should be obvious when economists cease modeling economies as production functions. But the important insights of the Ricardian vision-those that arise from its application to individual behavior, rather than its misapplication to entire economies-should not be discarded. Israel Kirzner's signature concepts of entrepreneurial alertness and discovery allow us to break out of the Ricardian insights. In this as in many other economic and social puzzles the usefulness of Kirzner's ideas reaches far beyond the tasks to which he put them. Economists wishing to discover new insights would do well to hone their alertness to his work.

Find the article at Beloit.