Economic essays

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Monograph

Identifikator:: 1753623200

URN:: urn:nbn:de:zbw-retromon-136107

Document type:: Monograph

Title:: Economic essays

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1927

Scope:: viii, 368 S.; Ill., graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Document type:: Monograph

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Title:: A functional theory of economic profit / Charles A. Tuttle

Collection:: Economics Books

A FUNCTIONAL THEORY OF ECONOMIC PROFIT 325 bution operates according to a natural economic law, and 1s, therefore, true distribution; while bargaining and contract, on the other hand, are the practical mode of effecting distribution in the work-a-day world. Economic distribution, therefore, sets the standards; while the ethical quality of contract distribution can be determined only by comparison with these standards. The profit-residual theory has no place in economic distribution; while in contract distribution the actual income of the business man has all the appearance of a residuum,—the immediate result of superior bargaining. Professor Carver enumerates the “several sets of circumstances which enable the business man to bargain so as to have a surplus left after paying for the other factors of production” as follows:’ The first is his superior knowledge of the actual conditions of the market and of the inside workings of his business which enables him to tell better than the members of any other class what the marginal productivity of the various factors really is at any one time. The second is the deception which is frequently practised in order to out- bargain the consumer; the third is the method of terrorism; ? the fourth is the uncertainty and risk normally attending an independent business which makes the average man willing to accept a stipulated sum as wages, rent, or interest, even when that sum is slightly less than he might be expected in the long run to earn. And finally, there is the business man’s superior ability in guessing on the probable ductuations of the market, which enables him to reduce his risk slightly below that which others less skillful in this respect would have to face. It would accordingly appear that Professor Carver, finding no legitimate place for economic profit under the “marginal produc- tivity principle’’ of distribution, ascribes the employer’s actual income to superior bargaining, deception, and exploitation, which superior knowledge, and possibly a low moral sense, make possi- ble under unstable conditions of industry, and finally to superior ability in assuming risks. It is significant that in Professor Clark’s profit-residual theory bargaining, deception, and exploitation find no place. It is, rather, Professor Clark’s avowed aim to show the fallacy of the socialist indictment ‘‘that workmen are regularly robbed of what * The Distribution of Wealth, p. 286. * Professor Carver here refers to ‘‘various underhanded and unscrupulous methods of driving competitors out,”’ which were ““uniformly adopted by trusts’’ and constituted ‘‘the chief purpose of their organization, ’’

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