5. The essential contribution of Kirzner to the field of Ethics.

Kirzner’s great contribution consists, precisely, of having shown that a large part of the considerations on distributive justice that have constituted the majority position to date and have formed the “ethical foundation” of important political and social movements (of the socialists and social democrats) have their origin and fundaments in the erroneous static conception of economics.(8) The neoclassical paradigm is based on considering that information is objective and given (either in certain or probabilistic terms) and, therefore, it is possible to make cost-benefit analyses on the basis thereof. If this is the case, it seems logical that utility maximization considerations are completely independent of moral aspects and that these two factors can be combined in different proportions. Furthermore, the static conception inexorably leads to the assumption that, in a certain sense, the resources are given and known, meaning that the economic problem of their distribution is different and separate from the problem posed by their production. If the resources are given, how both the means of production and the result of the different productive processes are to be distributed among the different human beings acquires an exceptional importance.

All these ideas have been made obsolete by the dynamic conception of market processes developed by the Austrian School of Economics in general and specifically by the analysis of entrepreneurship and its ethical implications carried out by Israel M. Kirzner. For Kirzner, entrepreneurship consists of the innate capacity of all human beings to appreciate or discover the opportunities for gain that arise in their surroundings and act in consequence in order to take advantage of them. Entrepreneurship consists, therefore, of the typically human capacity to continually create and discover new ends and means. Under this conception, the resources are not given, but rather both the ends and the means are continually thought up and conceived ex novo by the entrepreneurs, who are always anxious to attain new goals which they discover to have a higher value. And if the ends, the means and the resources are not given, but are continually being created by the entrepreneurship of human beings, it is clear that the fundamental ethical approach is no longer how to distribute “what exists” on an equitable basis, but should rather be conceived as the way to stimulate creativity most adapted to human nature. It is here where Kirzner’s contribution to social ethics reaches its full force: the conception of the human being as a creative actor makes it inevitable to accept, as an axiom, that all human beings have a natural right to the fruits of their own entrepreneurial creativity. This is not only because, if it were not the case, such fruits would not act as an incentive capable of stimulating the entrepreneurial and creative alertness of the human being, but also because it is a universal principle which may be applied to all human beings under all conceivable circumstances.

The ethical principle we have just explained also has other significant advantages. Firstly, its great intuitive attraction should be highlighted: it seems evident that if somebody creates something, he has the right to appropriate it, since nobody is prejudiced (before it was created, what was created did not exist and, therefore, its creation does not prejudice anyone and, at least, benefits the creative actor as may well also benefit many other human beings). In the second place, it is a universally valid ethical principle closely related to the principle of Roman Law concerning the original appropriation of resources that do not belong to anyone (ocupatio rei nullius), also allowing the resolution of the paradoxical problem posed by what is known as “Locke’s proviso”, according to which the limit on the original appropriation of resources is based on leaving a “sufficient” number thereof for other human beings. As Kirzner rightly shows in what is perhaps one of the most original contributions of his work on social ethics, his principle based on creativity resolves the existence of “Locke’s proviso” and makes it unnecessary, since any result of human creativity did not exist before it was discovered or created entrepreneurially and, therefore, the appropriation thereof cannot prejudice anyone. Locke’s conception only makes sense in a static environment in which it is presupposed that the resources already exist (or are “given”) and are fixed, and that they should be distributed among a predetermined number of human beings.

Kirzner also shows us, in the third place, how most of the alternative theories on justice, particularly the theory developed by John Rawls, are implicitly based on the neoclassical paradigm of full information which assumes a static environment of pre-existing or given resources. Although Rawls considers a “veil of ignorance” in his analysis, he reaches the conclusion that the most just system is the one in which, without knowing the exact place that anyone will occupy in the social scale, each human being may nevertheless be sure that, if the most unfavourable situation corresponds to him, he will have a maximum of resources (9). It is clear that, if society is considered as a dynamic entrepreneurial process, the ethical principle has to be very different: the most just society will be the society that most forcefully promotes the entrepreneurial creativity of all the human beings who compose it. In order to do this, it is indispensable for each human being to be certain, a priori, that he will be able to appropriate the results of his entrepreneurial creativity (which by definition does not exist in the social body before being discovered or created by each individual actor) and that nobody will expropriate them.

In the fourth place, another advantage of Kirzner’s analysis is that it makes the immoral nature of socialism, understood as any system of institutional aggression carried out by the State against the free practice of human action or entrepreneurship, obvious. In fact, coercion against the actor prevents him from developing what is the most typical characteristic of his nature, that is, his innate capacity to create and conceive new ends and means and to act in consequence to attain them. To the extent that State coercion prevents entrepreneurial human action, the human being’s creative capacity will be restricted and neither the information nor the knowledge necessary to coordinate society will emerge. Precisely for this reason, socialism is an intellectual error, since it makes it impossible for human beings to generate the information required by the governing body in order to coordinate society through coercive commands. Furthermore, Kirzner’s analysis has the potentiality of demonstrating that the socialist system is immoral because it is based on preventing, by force, human beings from appropriating the results of their own entrepreneurial creativity. Thus, socialism is not only seen as something that is theoretically erroneous or economically impossible (i.e. inefficient), but also, simultaneously, as an essentially immoral system, since it violates the most intimate entrepreneurial nature of the human being and prevents him from freely appropriating the results of his entrepreneurial creativity.(10)


Jesús Huerta de Soto
Professor of Political Economy
King Juan Carlos University of Madrid, Spain

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(8).The ideas of Kirzner, a man of profound religious convictions, on social ethics began to be forged in section 4 (chapters 11-13) of his book Perception, Opportunity and Profit concerning “Entrepreneurship, Justice and Freedom” (1979), were even more clearly profiled in his article “Some Ethical Implications for Capitalism of the Socialist Calculation Debate” (1989b), and culminate in his book Discovery, Capitalism and Distributive Justice (1989a)

(9).See Rawls 1972.

(10).This impetus and entrepreneurial creativity also appears in the field of aid to the needy and the prior search for and systematic detection of situations of need. Thus, State coercion or State intervention through the mechanisms of the Welfare State neutralizes and, to a great extent, makes impossible the entrepreneurial search for urgent human need and the possibility of aid to fellow men in difficulties, thus stifling the natural aspirations of solidarity and collaboration which are so important to most human beings. This idea has been well understood by John Paul II, who has recently said that “by intervening directly and depriving Society of its responsibility, the Social Assistance State leads to a loss of human energies and an inordinate increase of public agencies, which are dominated more by bureaucratic ways of thinking than be concern for serving their clients, and which are accompanied by an enormous increase in spending. In fact, it would appear that those needs are best understood and satisfied by people who are closest to them and who act as neighbours to those in need” (1991, 36, Chap. IV, heading 48).