The Entrepreneur: Real and Imagined*

Ludwig von Mises, Friedrich Hayek, and Murray Rothbard were the main architects of the distinctly Austrian theory of production as it exists today. All three conceived the entrepreneurial function in the actual market economy as presupposing the ownership of property, specifically capital. Yet, many, if not most, contemporary Austrian economists conceive the entrepreneur as a pure decisionmaker possessing superior "alertness" but owning no resources. This pure entrepreneur earns profits by "discovering" and seizing objectively existing but previously unperceived opportunities to arbitrage price discrepancies between a bundle of complementary inputs and the output it yields. That this is the essence of "the" Austrian theory of the entrepreneur and profit is accepted as a matter of course by those among the broader economics profession who are sympathetic to the Austrian approach. It is the goal of this paper to demonstrate that there is in the Austrian tradition traceable back to Carl Menger, a very definite and prominent strand of thought that conceives property ownership as central to the tasks that the entrepreneur characteristically performs in the real-world market economy. The managerial function . . . can never evolve into a substitute for entrepreneurship. The fallacy to the contrary is due to the error confusing the category of entrepreneurship as it is defmed in the imaginary construction of functional distribution with conditions in a living and operating market economy. The function of the entrepreneur cannot be separated from the direction of the employment of factors of production for the accomplishment of definite tasks. The entrepreneur controls the factors of production; it is this control that brings him either entrepreneurial profit or loss. (Mises 1998, p. 302) Mr. Keynes obviously arrives at this view by an artificial separation of the function of the entrepreneurs as owners of capital and their function as entrepreneurs in the narrow sense. But these two functions cannot be absolutely separated even in theory, because the essential function of the entrepreneurs, J. T. Salerno ([8:]) Lubin School of Business, Pace University, 1 Pace Plaza, New York, NY 10038, USA e-mail: [email protected]