THE ENTREPRENEUR AND THE SUPPLY OF CAPITAL 15 
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In economic doctrine from Smith to Mill, it was assumed that 
the capitalist was the owner of the product and that all over the 
cost of land and labor accrued to him as a capitalist. Profits 
varied, according to Smith, with the extra labor and unusual 
hazard involved in the particular commitment. The surplus over 
the cost of land and labor and the normal rate of profits was 
conceived as a recompense for the risk and extra labor of man- 
agement in a particular trade. And always it was the capitalist 
who took these risks and who paid for the extra labor of man- 
agement. All capitalists were conceived as profit-takers. Profit 
was thus a composite return in which the chief element was cap- 
ital. Such other elements as made up profit were supposed to 
come to the capitalist as a form of addition naturally accruing. 
There are here and there references to loan interest as distin- 
guished from profits, but this distinction assumed no great 
importance. 
This conception of the relation of profits to capital was a 
natural and correct one in a country in which banking was as yet 
only slightly developed, the corporate form of business slightly 
used; and in which the typical form of investment was agricul- 
ture. Unfortunately, we know little of the capitalism of the 
early nineteenth century, but such glimpses as we get lead to 
the opinion that an undertaker had to rely almost exclusively 
on his own resources or take in a partner with capital.’ If a 
man was to get profits, he must have capital and the amount of 
profits was proportional to capital. 
The conception of profits as a composite of interest, payment 
for risk, earnings of ordinary labor in the employment of capital, 
and fortuitous gain remained almost unchanged until the late 
eighties. Perhaps the most important divergence from this con- 
ception among the masters of the science * was that of Senior, 
! The “sleeping” partnership was not indigenous to the English common 
law. The earlier development in French economics of the idea of the 
undertaker as a receiver of the earnings of management may have been due 
to the wide use of the commenda and similar legal forms of enterprise, 
under which the manager was able to obtain capital. 
? My colleague, Professor J. H. Hollander, has called my attention to 
an early attempt to introduce the French concept of the entrepreneur into 
English economic theory by George Ramsay in An Essay on the Dis- 
tribution of Wealth, Edinburgh, 1836. Ramsay, however, held the 
Ricardian view as to the causes of gross profits, and therefore was able to 
set aside only a small field for the entrepreneur. The book made no 
impression on the current of economic thought.