Experiment on entrepreneurial discovery: an attempt to demonstrate the conjecture of Hayek and Kirzner

Friedrich Hayek conjectured that the free enterprise system is most effective in making discoveries. Israel Kirzner refines the conjecture as follows: the availability of profit opportunities tends to evoke entrepreneurial discovery. 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). (C) 2003 Elsevier Science B.V. All rights reserved.