388 ECONOMICA [NOVEMBER object to economic planning on the grounds that the problem is solved by price movements can be answered by pointing out that there is planning within our economic system which is quite different from the individual planning mentioned above and which is akin to what is normally called economic planning.The example given above is typical of a large sphere in our modern economic system. Of course,this fact has not been ignored by economists Marshall introduces organisation as a fourth factor of production;J.B.Clark gives the co-ordinating function to the entrepreneur;Professor Knight introduces managers who co-ordinate.As D.H.Robertson points out,we find "islands of conscious power in this ocean of unconscious co-operation like lumps of butter coagulating in a pail of buttermilk."But in view of the fact that it is usually argued that co-ordination will be done by the price mechanism, why is such organisation necessary Why are there these "islands of conscious power"?Outside the firm,price movements direct production,which is co-ordinated through a series of exchange transactions on the market.Within a firm,these market transactions are eliminated and in place of the complicated market structure with exchange transactions is substituted the entrepreneur-co-ordinator, who directs production.?It is clear that these are alternative methods of co-ordinating production.Yet,having regard to the fact that if production is regulated by price movements, production could be carried on without any organisation at all,well might we ask,why is there any organisation Of course,the degree to which the price mechanism is superseded varies greatly.In a department store,the allocation of the different sections to the various locations in the building may.be done by the controlling authority or it may be the result of competitive price bidding for space.In the Lancashire cotton industry,a weaver can rent power and shop-room and can obtain looms and yarn on credit.This co-ordination of the various factors of production is,however,normally carried out without the intervention of the price mechanism.As is evident,the amount of "vertical"integration,involving as it does 1 Op.cit..p.85. In che rest of this paper I shall use the temmi entrepreneur to refer to the person or persons who,in a competitive ystem,take the place of theprice mechanism in the direction af花ources线. Surey of Temtile Indusriet,p.26