An Economic Theory, Second Edition
Chapter 2: Basic Concepts of the Theory
2. Basic concepts of the theory 2.1 TWO KINDS OF DEFINITION As noted in the Introduction, the deﬁnition of the entrepreneur is one of the most crucial and difﬁcult aspects of the theory. There are two main approaches to deﬁning anything: the functional approach and the indicative approach. In the context of the entrepreneur, the functional approach says quite simply that ‘an entrepreneur is what an entrepreneur does’. It speciﬁes a certain function and deems anyone who performs this function to be an entrepreneur. The indicative approach provides a description of the entrepreneur by which he may be recognized. Unlike a functional deﬁnition, which may be quite abstract, an indicative deﬁnition is very down-to-earth. It describes an entrepreneur in terms of his legal status, his contractual relations with other parties, his position in society, and so on. The term ‘entrepreneur’ seems to have been introduced into economics by Cantillon, but the entrepreneur was ﬁrst accorded prominence by Say. The word was variously translated into English as merchant, adventurer and employer, though the precise meaning is the undertaker of a project. James Stuart Mill popularized the term in England, though by the turn of the century it had almost disappeared from the theoretical literature. The static approach of the emerging neoclassical school did not readily accommodate a concept with dynamic connotations, such as the entrepreneur. Alfred Marshall, for example, laid much more stress on the routine activities of management and superintendence than he did on...
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