Journal of Economic Behavior & Organization 88 (2013) 62–77 Contents lists available at SciVerse ScienceDirect Journal of Economic Behavior & Organization j our na l ho me p age: www.elsevier.com/locate/jebo Property rights, entrepreneurship and coordination David A. Harper ∗ Department of Economics, New York University, 19 West 4th Street, New York, NY 10012, USA a r t i c l e i n f o Article history: Received 19 December 2010 Received in revised form 30 July 2011 Accepted 24 October 2011 Available online 3 November 2011 JEL classification: B52 B53 D02 D60 K11 L26 P11 P14 Keywords: Economic coordination Property rights Market process Entrepreneurship a b s t r a c t The notion of plan coordination enjoys a central place in the analysis of institutions and competitive market processes. The conventional wisdom is that institutions and policies vary in the extent to which they promote competition and how quickly and completely they bring individuals’ plans into closer coordination with one another. Kirzner has provided the most fully elaborated statement on the use of coordination as a positive analytical device for explaining market dynamics and as a normative criterion for evaluating economic policies. We identify the core propositions in his analysis that elucidate how economic coordination depends upon that most fundamental of market institutions – the system of private prop- erty rights. We also probe into Kirzner’s claims about inherent limitations in our ability to compare the coordinative potential of alternative property rights systems. We unpack the consequences of these core propositions using the economic theory of property rights. We also examine Kirzner’s assertion that dynamic competition – including Schumpeterian innovation – is necessarily coordinative in its market effects. We find that his argument rests on the implicit assumption that property rights remain constant during the process of market adjustment. We provide a case study of the advent of commercial aviation as a potential counterexample to his claims. © 2011 Elsevier B.V. All rights reserved. 1. Coordination as a central concept in economic analysis and its connection to property rights Institutions and policies vary in the extent to which they promote or inhibit competition. Competition is here understood as a type of discovery process, propelled by rivalrous entrepreneurs, that generates and disseminates new knowledge about what goods and services consumers want, how much they are willing to pay and how existing goods and services can be produced at lower cost (Hayek, 1978). Within the institutional framework of private property rights and freedom of contract, the emergence of a price structure (and the existence of price discrepancies) provides both the incentives and information for entrepreneurs to seek out and seize untapped opportunities for mutually beneficial exchange (Boettke and Prychitko, 1998). These market institutions thereby foster mutual learning that in general tends to coordinate (though never fully) the expectations and plans of participants in the system. Indeed, from this perspective, the central function of the market is interpreted as plan coordination rather than efficient resource allocation (Kirzner, 1994). The comparative success and durability of the market system are attributed to its performing this function more effectively than other competing institutions. Consequently, the notion of plan coordination has come to enjoy a central place in the structure of Hayekian economics in general and the analysis of the competitive market process in particular (O’Driscoll, 1977). Austrian economists use ∗ Tel.: +1 212 9988959; fax: +1 212 9954186. E-mail address: David.Harper@nyu.edu 0167-2681/$ – see front matter © 2011 Elsevier B.V. All rights reserved. doi:10.1016/j.jebo.2011.10.018