An Economic Theory, Second Edition
Chapter 12: The Market for Entrepreneurs
12.1 INTRODUCTION The market for entrepreneurs allocates judgmental decisions to entrepreneurs. It has, in fact, four main functions: 1. 2. 3. 4. to identify decisions which are judgmental, to identify entrepreneurs whose judgment is likely to be correct, to match entrepreneurs to judgmental decisions so that wherever possible the right decision is made, and to distribute rewards to the entrepreneurs. It is sometimes denied that a market for entrepreneurs can exist. This is incorrect. It must be admitted, however, that the market for entrepreneurs has some unusual features which mean that it operates in a different way from most other markets. 12.2 IDENTIFYING JUDGMENTAL DECISIONS One of the idiosyncrasies of the market for entrepreneurs is indicated by the ﬁrst of the functions identiﬁed above. It is extremely difﬁcult to determine precisely which decisions are judgmental. As a result it is difﬁcult for anyone to identify a precise source of demand for an entrepreneur. Consider the demand for entrepreneurs within the economy as a whole, and consider too a single period, prior to which the economy has been in operation for some considerable time. A system of property rights has been evolved; decision-making power is conferred by ownership of general rights – typically rights to determine the use of multi-purpose goods (see Chapter 7). Many of these rights are vested in institutions such as ﬁrms. Each institution has an organization comprising a set of posts ﬁlled by delegate decision makers. Delegate decision makers within the same organization coordinate their...
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