26 Pages Posted: 19 May 2003

Date Written: February 2003

Abstract

The concept of sheer ignorance states that the main obstacle to grasping hitherto unnoticed profit opportunities is the decision makers' unawareness of their ignorance about the existence of discrepancies in prices that could be eliminated through profitable arbitrage operations. The paper argues that the logical justification of such unawareness is not fully consistent with the understanding of entrepreneurial discoveries in terms of price arbitrage. It also argues that, contrary to Kirzner's theory, the logic of entrepreneurial discoveries is compatible with strategies of deliberate search and the creation of new opportunities which, in their own turn, play the important role in shaping uncertainty. The paper's approach allows to further articulate the uniqueness of Austrian research program: To focus on the generation of new knowledge by entrepreneurs, as well as on their skillful use of probabilistic and interpretive subjective judgments.