An Economic Theory, Second Edition
Chapter 3: The Entrepreneur as Intermediator
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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