The Entrepreneur

The Entrepreneur

An Economic Theory, Second Edition

Mark Casson

This thoroughly revised and updated new edition of Mark Casson’s modern classic The Entrepreneur presents a novel synthesis of the ideas of Joseph Schumpeter, Frank Knight and Friedrich Hayek, according to which the defining characteristic of the entrepreneur is the exercise of judgement in business decisions.

Chapter 3: The Entrepreneur as Intermediator

Mark Casson

Subjects: business and management, entrepreneurship, economics and finance, economics of entrepreneurship


3.1 INTRODUCTION The entrepreneur has been defined as someone whose judgment differs from that of other people. He believes that, without his intervention, a wrong decision would be made. The decision may be wrong because it is made passively, with the appropriate policy not even being given active consideration. Or it may be wrong because the appropriate policy has been considered and dismissed because of misinformation or faulty logic. Because of this wrong decision, resources will not be allocated as efficiently as they might be. Thus an opportunity for coordination exists. The entrepreneur intervenes in order to exploit his superior judgment. There are several ways in which the entrepreneur could intervene, and these are considered in detail later (see Chapter 8). For the moment it is assumed that the entrepreneur intervenes by buying up the resources that would have been misallocated. By becoming the owner of the resources he can ensure that they are put to better use. It cannot be too strongly emphasized that this motive for acquiring ownership of resources is quite different from the motive usually assumed in economics. The usual reason given for the acquisition of resources is the desire to consume them. When everyone’s judgment is the same, the desire to consume is the ultimate reason for owning resources. When judgments differ, a second – and probably more powerful – reason for the acquisition of resources comes into play. Change of ownership is the first stage in the reallocation of a resource to an alternative...

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