Experiment on Entrepreneurial Discovery : An Attempt to Demonstrate the Conjecture of Hayek and Kirzner

Friedrich Hayek and Israel Kirzner have suggested that the availability of profit opportunities tends to evoke entrepreneurial discovery. But many have downplayed the conjecture because the Hayekians have not been able to demonstrate the validity of the conjecture. In fact, Hayekians discuss why demonstration is inherently elusive, yet insist that just because an idea cannot be empirically demonstrated in a clear-cut way does not mean that it is true and important. In this study we hoped to demonstrate the conjecture in an outdoor experiment. We asked subjects to transfer water from one bucket to another. There were two methods of doing so, an obvious method and a nonobvious and much superior method. We varied the payment schedules to see if higher potential rewards would more readily evoke discovery of the superior method. The hoped for demonstration was not achieved. The investigation holds several lessons for those who would attempt to demonstrate the entrepreneurship conjecture. Investigators must make the opportunity discoverable but not obvious, operationalize motivation (not merely vary monetary rewards), and separate entrepreneurial discovery from other types of discovery (such as that had by deliberate problem solving). All in all, the effort did help to demonstrate that the Hayek/Kirzner conjecture is inherently hard to demonstrate in a cut-and-dried way