The Role of the Entrepreneur



Given their reliance on the model of perfect competition, it is not surprising that few economists have devoted much attention to the role of the entrepreneur. Many textbooks of microeconomics, or price theory, do not even mention entrepreneurship. General textbooks of economics, which are more eclectic, usually say something about the entrepreneur; but only to provide summaries of alternative views about his role. Entrepreneurship is a subject that is never integrated into the body of neoclassical theory, since it is, of course, logically impossible to do so. But a few well-known economists have addressed themselves to the subject; and we shall consider their views below. First, however, it is necessary to focus on the nature of the problem that needs to be explained.


Capital Stock Technical Progress Socialist Country Imperfect Knowledge Perfect Competition 
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  1. 1.
    See A. Maddison, ‘Long run dynamics of productivity growth’, Banca Nazionale del Lavoro Quarterly Review, no. 128, March 1979. The extension to 1990 has been made from data on changes in real gross domestic product and population (as a proxy for manhours of employment) from 1977 to 1989 published in OECD Main Economic Indicators, with an extrapolation to 1990.Google Scholar
  2. 2.
    Edward F. Denison, The Sources of Economic Growth in the United States, Committee for Economic Development, New York, 1962, and Accounting for United States Economic Growth 1929–1969 (The Brookings Institution, Washington, 1974).Google Scholar
  3. 3.
    Edward F. Denison (assisted by Jean-Pierre Poullier), Why Growth Rates Differ (The Brookings Institution, Washington, 1967), Table 15–5.Google Scholar
  4. 4.
    References in this section are to A. Marshall, Principles of Economics, eighth edition (Macmillan, 1920).Google Scholar
  5. 5.
    References in this section are to Frank H. Knight, Risk, Uncertainty and Profit (Houghton Mifflin Company: Boston and New York, 1921), available also as a London School of Economics reprint.Google Scholar
  6. 6.
    The English edition of the first book, originally published in German in 1911, is Joseph A. Schumpeter, The Theory of Economic Development (Harvard University Press, 1934) and the second is Joseph A. Schumpeter, Capitalism, Socialism, and Democracy, first published in the United States in 1942, fourth edition (George Allen & Unwin, 1954).Google Scholar
  7. 7.
    Kirzner has published several books and articles on this subject but, since his essential ideas are contained in Israel M. Kirzner, Competition and Entrepreneurship (University of Chicago Press, 1973); references in this section will be made only to that work.Google Scholar
  8. 8.
    The tendency for paid managers to assume the entrepreneurial function in such cases has been pointed out by Kirzner in his Perception, Opportunity, and Profit (University of Chicago Press, 1979), p. 104.Google Scholar
  9. 9.
    See F. A. Hayek, Individualism and the Economic Order (Routledge & Kegan Paul, 1949).Google Scholar

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© Harold Lydall 1992

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