The Supply of Entrepreneurship



In standard economic theory there is no significant role for the entrepreneur. At most he has the task of calculating marginal cost (or hiring someone else to do that) and equating it with price or marginal revenue. When considering investment projects, he must make estimates of future yields (or hire someone else to do that), apply a suitable discount factor, and compare the present value of the project with its cost. There is no obvious reason why there should be a shortage of people capable, under suitable instruction, of making such calculations. Consequently, in standard economic theory there is no need to consider whether entrepreneurship, like other factors, has a supply side. The implied assumption is that, provided that there is a suitable legal framework, a free market, and freedom of enterprise, there will be an ample — and virtually infinitely elastic — supply of entrepreneurs. It is sometimes said that new entrants expect to receive ‘normal profits’. But this concept is never clarified, nor made consistent with the basic assumptions of perfect competition.


Large Enterprise Marginal Revenue Normal Profit Perfect Competition Standard Economic Theory 
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  1. 1.
    M. Wiener, English Culture and the Decline of the Industrial Spirit, 1850–1980 (Cambridge University Press, 1981).Google Scholar
  2. 2.
    See Ruth Towse and Mark Blaug, ‘The current state of the British economics profession’, Economic Journal, v. 100 (March 1990), p. 290.Google Scholar
  3. 3.
    See Ronald Dore, British Factory — Japanese Factory (University of California Press, 1973). Also Richard Tanner Pascale and Anthony G. Athos, The Art of Japanese Management (Penguin Books, 1982).Google Scholar

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© Harold Lydall 1992

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