Mengerian causality: the case of the entrepreneur

Modern economics is filled with models using simultaneous equations to explain economic behavior. One common model, the circular flow diagram, is found in many principles-level textbooks, and is offered as the basic way in which economies function. The entrepreneur, if included at all, is relegated to being a part of the box labeled “firms.” Carl Menger argued, however, that economic behavior is best understood using the idea of cause and effect. Further, economic behavior is temporally directional. Thus, causation and time are missing in modern analyses, leading to a superficial role for the entrepreneur. This article uses the example of the entrepreneur to highlight Menger’s method of cause and effect