A MAJOR SHORTCOMING of current neo-classical theory is the absence of the entrepreneur as the element which spontaneously originates decisions and change in the economy. Thus, William J. Baumol (1968) observed that currently 'the theoretical firm is entrepreneurless -the Prince of Denmark has been expunged from the discussion of Hamlet ' (p. 66, it. orig.), and further that 'the [neo-classical model of the firm] is essentially an instrument of optimality analysis of well-defined problems, arid it is precisely such (very important) problems which need no entrepreneur for their solution .... In all these models, automaton maximizers the businessmen are and automaton maximizers they remain' (ibid., pp. 67-68). The Austrian-inclined economists, from von Mises (1949) onwards, have tried to incorporate a spontaneously originative entrepreneur into economic analysis, but it was G. L. S. 1970 and 1979 a, b) who showed a possible path of the entrepreneurial decision-making process. However, he did not pursue this to incorporate the entrepreneur into the body of economic theory. In this paper,*(2) building mainly upon Shackle's work, we develop the argument that the entrepreneur is not a factor of production, and that he must be clearly differentiated from the manager, who is a factor. To establish this differentiation it is necessary to understand the manner in which entrepreneurial action is generated. For this purpose, an analysis of entrepreneurial expectations is carried out. In consequence we show how the entrepreneur as a non-factor is fitted into the theory of the firm.
Shackle (particularly in
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