Israel Kirzner's Use of Narratives to Illuminate the Limitations of Neoclassical Economics and the Austrian Alternative

Abstract

Abstract This article investigates how Israel Kirzner approached mainstream economists with his view of the Austrian theory. It discusses the role of narrative elements in Kirzner's theory in his use of stories to illuminate ideas in entrepreneurship, the theory of the firm, and the knowledge problem. This article argues that the use of narrative made Kirzner's theory more open to dialogue without tying him to the scientific demarcation criteria used in mainstream economics. The scientific narratives in Kirzner's work allow him to (i) emphasize the logical order of economic phenomena, (ii) highlight causal mechanisms in economic theory, (iii) make some generalizations but without perfect predictions with economics, (iv) explore different scenarios from contingent events in the economy, and (v) illustrate economic ideas with fictional but plausible cases. The article concludes that these narrative aspects help Kirzner illuminate the limitations of neoclassical economics and offer an alternative perspective based on the entrepreneurial state of “alertness” from an Austrian point of view.