object to economic planning on the grounds that the problemis solved by price movements can be answered by pointingout that there is planning within our economic systemwhich is quite different from the individual planningmentioned above and which is akin to what is normallycalled economic planning. The example given above istypical of a large sphere in our modern economic system.
course, this fact has not been ignored by economists.Marshall introduces organisation as a fourth factor ofproduction
Clark gives the co-ordinating functionto the entrepreneur
Professor Knight introduces managerswho co-ordinate.
Robertson points out, we findislands of conscious power in this ocean of unconsciousco-operation like lumps
butter coagulating in a pail
buttermilk.”l But in view of the fact that it is usuallyargued that co-ordination will be done by the price mechanism,why is such organisation necessary
Why are there these
slands of conscious power
Outside the firm, pricemovements direct production, which is co-ordinated througha series of exchange transactions on the market. Withina firm, these market transactions are eliminated and inplace of the complicated market structure with exchangetransactions is substituted the
who directs production.2
is clear that these are alternativemethods of co-ordinating production. Yet, having regardto the fact that if production is regulated by price movements,production could be carried on without any organisationat all, well might we ask, why is there any organisation
course, the degree to which the price mechanism
superseded varies greatly. In a department store, theallocation
the different sections to the various locationsin the building may be done by the controlling authorityor
may be the result of competitive price bidding forspace. In the Lancashire cotton industry, a weaver canrent power and shop-room and can obtain looms and yarnon credit.3 This co-ordination
the various factors
production is, however, normally carried out without theintervention of the price mechanism.
is evident, theamount of
integration, involving as it does
In the rest
shall use the term entrepreneur to refer to the person
persons who, in a compehti;e system, take the place
the-price mechanism in &direction