What are the implications for economics of recognizing entrepreneurship? They are vast. Modern/mainstream economics is, to a great extent, the outcome of expunging the entrepreneur and forcing an entrepreneurless, mechanistic view onto the economy. This facilitates the use of mathematical analysis and quantitative predictions, but these will always be wrong to the extent that there is entrepreneurship. In a sense, mainstream economics is the science of a planned or plannable economy. And the basic models even assume that there is perfect information.
When we recognize that there is entrepreneurship, meaning the uncertainty-bearing pursuit of (new) value creation, the economy must be understood as a process whose content continuously evolves. But it evolves according to specific principles, which we often call “economic laws” (such as diminishing marginal utility, the laws of supply and demand, etc.). Economic theory cannot predict the content, but can explain the drivers and causalities behind observable outcomes.
But an economy with entrepreneurship is a much more radical take than simply introducing some dynamism or a largely independent error term to the model of perfect competition. Entrepreneurship fundamentally changes what we know and can know about the economy. As I show in my 2025 book, Entrepreneurship and Evolutionary Economics, by recognizing entrepreneurship we do not only get a process, often depicted as progressive or equilibrating, but one in which the causal direction is reversed. It is the expected (entrepreneurial) value outcome that drives pricing of factors and, thereby, directs the economy’s production apparatus in toto.
In this sense, evolutionary economics as well as Joseph Schumpeter’s work on which it claims to be based, got it wrong. It’s not that the status quo is disrupted by innovations, but that the pursuit of innovations makes the status quo into a disequilibrium that is (often hopelessly) maladjusted to the future that is being created. This does not thereby make Israel Kirzner’s theory of equilibrating entrepreneurship accurate. It is just as wrong because it too assumes the wrong causal direction as entrepreneurs are assumed to react and respond to what is rather than pull the economy with them toward what they are about to create. Kirzner’s (and Hayek’s) entrepreneur deals with knowledge, not uncertainty, as I explain in my article “Austrian Economics and Knowledge” (QJAE, 2026).
Simply put, both Schumpeter and Kirzner misunderstand in a quite fundamental way the implications of recognizing entrepreneurship in the market economy.
The closest I have found to understanding how the uncertainty-bearing of entrepreneurs characterizes the market economy is in Ludwig von Mises’s works (perhaps primarily in his Human Action). But Mises unfortunately did not elaborate on the “promoter” function of entrepreneurship, but erroneously concluded that it lies beyond what can be defined and understood using praxeology. I have addressed this in my article “Finding the Entrepreneur-Promoter: A Praxeological Inquiry” (QJAE, 2020), which shows that the promoter—the “driving force” in the market process—has a place in economic theory. Indeed, economic theory probably cannot be properly understood without it.
Adding the promoter does not actually change Mises’s conclusions about the market economy, but only makes the claim that an economy cannot do without calculation even stronger. This suggests, at least to me, that Mises in fact recognized, albeit it is only implicit in his works, the fundamentally entrepreneurial nature of the market economy. Because, without such recognition, how could Mises possibly have come up with the proper arguments and formulate an economic theory that, as far as I can tell, never contradicts the implications of the promoter-entrepreneur—and the causal direction that it implies but that most economists do not recognize.
Granted, Mises is not alone. Much of this is also implied in the works by Carl Menger, although the extent to which the entrepreneur, in the uncertainty-bearing sense (which Menger did not accept), does not stand out until one considers the expanded framework of Mises and others (in particular, economic calculation).
I have of course only scratched the surface thus far in my works. Much more needs to be done, but I think it should already be clear that mainstream economics (and many heterodox schools) is not only severely defunct but also that Austrian economics deviates much more—and fundamentally—from what is taught in economics courses and textbooks than is visible on the surface. There is a proper and sound economics, which must understand the market economy from the perspective of entrepreneurship. And there is a mechanistic view of the economy that claims the same label but that is fundamentally flawed and gives false promises of being able to quantitatively predict outcomes and thus facilitating, by providing the tools for, central planning.
