Who defines a word, anyway?

"When James Michener submitted his book `Hawaii' to Random House, the editor, Albert Erskine, objected to the word `squushy', saying it was not in the dictionary'. When Michener insisted that he would not change the word, the editor replied: `This is the third argument I've had this year about the same word. The first was with Robert Penn Warren; the second was with William Faulkner; and now you... And so we'll put `squushy' into our Random House Dictionary. He had overlooked the word in the Merriam-Webster of 1934, but even so a copy-editor had the arrogance to challenge outstanding writers like Warren, Faulkner, and Michener."
[Allan Walker Read, Approaches to Lexicography and Semantics, Current Trends in Linguistics, 1970, p. 149]