An Economic Theory, Second Edition
Chapter 6: Making a Market
6. Making a market 6.1 INTRODUCTION It is appropriate at this point to take stock of the development of the theory. The analysis so far has been based upon a rejection of the simple neoclassical view that everyone has access to the same information. It has been shown that the relaxation of this assumption provides an economic rationale for the entrepreneur. Essentially, the rationale is that the entrepreneur has better – or at least more relevant – information than other people. It must be admitted, however, that in modelling the entrepreneur’s behaviour certain assumptions have been made which in themselves are decidedly neoclassical. In particular, it has been assumed that, while other people are disadvantaged in terms of access to information, the entrepreneur has all the information that he requires to set up a transaction. Because information about the market is freely available to the entrepreneur, the opportunity cost to him of setting up a trade is zero. It is this assumption of zero opportunity cost that makes the preceding analysis of the entrepreneur so neoclassical. In neoclassical theory no-one incurs any costs in setting up a trade. In the theory of entrepreneurship developed above, everyone except the entrepreneur encounters prohibitive costs of setting up a trade. The entrepreneur encounters costs which are not only lower, but are actually zero. That is why the entrepreneur’s behaviour is so neoclassical. Other people’s costs make for a non-neoclassical environment, but the absence of costs for the entrepreneur make his response to that environment thoroughly...
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