Modern neoclassical economics is a theory of general equilibrium. It is based on highly unrealistic assumptions and yields a number of false predictions. The alternative model, presented in this book, uses a wider definition of technology, and emphasises the role of the entrepreneur as the primary agent of change. Because it takes time for firms to improve their technology, and to acquire the necessary finance for expansion, there are wide differences in firm sizes, and in their profitability. The competitive struggle to develop better technology raises the level of productivity of the whole economy, and leads to higher real incomes.

The supply of entrepreneurship is a crucial factor in economic growth, although it is often overlooked in modern economic theory. The main reason for this oversight is that the theory is dominated by the model of perfect competition which, by assuming perfect knowledge, excludes any role for the entrepreneur. There may be imperfect knowledge of many things, including the qualities and prices of products, the qualities and price of factors of production, and technology. Whilst economic theory has given considerable attention to the first of these forms of imperfection, economists have done little about the other two. Yet all three are important in accounting for the role of the entrepreneur.