THE ENTREPRENEUR AND THE SUPPLY OF CAPITAL 
George E. Barnett 
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ED 
In the development of the theory of profits in English and 
American economics, attention has been directed chiefly to the 
function of the entrepreneur; that is, to the nature of the services 
rendered. The present paper is devoted to the task of bringing 
together such evidence as is available to indicate that the evo- 
lution in the theory of profits has not been due in reality so much 
to the better appreciation of the nature of entrepreneurial func- 
tion as to changes in the dominant forms of capitalism and in 
the mechanism for supplying capital to industry. The effect of 
these changes, it will be contended, has been to produce shifts 
in that factor of production to which profits attach themselves. 
A real change in distribution has been the underlying factor in 
much of the controversy as to function. 
If we begin, as most present-day economists do, with Profes- 
sor Clark’s definition of the undertaker as the owner of the 
product—profits are the remains of the whole receipts of the 
undertaking over and above the cost of the land, labor, including 
labor of management, and capital used. Profits are made up of 
various economic categories into which it is not necessary here 
to inquire more particularly, especially since they are of hetero- 
geneous kind and have never been adequately analyzed. The 
argument to be hereafter set forth is to the effect that under 
certain conditions this remainder as a totality falls to capital, 
under other conditions to labor management and under still 
other conditions to “active” or risk-taking capital. Whether it 
falls to one or the other depends chiefly on the kind and amount 
of capital required and the capital market prevailing at a given 
time or in a given industry. The present functional theories of 
profits tend to obscure the fact of these variations and to bring 
the theory of profits into a uniformity which is not in accord 
with the existing economic world