No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Nine: P31W: Enter the Entrepreneur! 208 THE ENTREPRENEUR AS APPRAISER When entrepreneurs solve problems—when crops fail, when hurricanes hit, when consumers reject a long-time favorite product and embrace a new offering—the underlying market realities and data (such as prices) change. Other entrepreneurs then need to act on these data changes by updating their own plans. The market process that acts through real time features incessant change, and each change in the data requires an entrepreneur to reassess the economic implications to their plans, especially with regard to market prices. The economist Ludwig Von Mises identified the critical function of entrepreneurship as “acting man in regard to changes occurring in the data of the market. ” Of course, these changes in data (i.e., market information) occur across time; therefore, changes in data from the present will cascade through time. As time progresses and data changes, entrepreneurs begin to imagine different future possibilities and therefore valuations of all assets will change. Entrepreneurs are called to appraise valuations and plans in light of constantly changing data, appraising valuations of the whole structure of production—especially higher order capital goods. The entrepreneur as appraiser subjectively assesses possible future realities that could come about as a result of objective market data in the present. She must consider well, imagining the future, often basing her expectations of the future from past experience. The P31W exemplifies the entrepreneur as appraiser, for: She considers a field and buys it; From her earnings she plants a vineyard. - Proverbs 31:16 The Hebrew wor d zamam is often translated as “consider,” as above, and means to plan, devise, imagine, and purpose. While often used in a negative sense (e.g., the wicked plot), it is also used to describe God’s actions, and in any case, the context here is positive. The P31W imagines the possibilities of the future, she plans for the best way to use her scarce capital, and she purposes to implement a plan. She appraises the field’s possibilities in light of changed market conditions. Her appraisal—in the full sense of zamam —allows her to assign or impute a value to the field, which she ultimately uses as the basis of her bid to purchase the field. While the text of Proverbs 31 doesn’t spell out the scope of change (i.e., what the change was that drove the P31W to consider the field and purchase it), she was reacting to some change. Perhaps it is an outcome of her earning a profit from earlier work that allows her to consider how to satisfy consumer demand for wine. Perhaps a previous owner of the field was not as industrious as she was, and therefore was unable to use it as profitably as she determined she could. Nevertheless, whatever the changing condition was, she fulfilled the economically necessary function of appraisal to implement a plan. This plan is subsequently shown to be profitable (v. 18) indicating she is satisfying consumer desires. Appraisal is an essential function in a dynamic economy; it is necessary to coordinate plans through time.