ELASTICITY OF SUPPLY AS A DETERMINANT OF DISTRIBUTION 113 
important of these are: (1) the complications introduced by con- 
sidering more than two factors of production, (2) the complica- 
tions introduced by considering more than one commodity, (3) 
the influence which is exercised by the relative amounts of labor, 
capital and land rent embodied in the commodities and services 
which are consumed by the recipients of interest, wages, and 
rent, (4) the influence of the relative elasticity of demand for 
these commodities and services. Each of these forces will now 
be briefly considered and their influence evaluated. 
1. The complications introduced by considering more than two 
factors of production. We have hitherto been considering in a 
very simplified manner only two factors which we have at times 
labelled labor and capital. But there is, of course, land and 
natural resources which is a third factor. Most modern theorists 
following Francis A. Walker also set up a fourth factor, namely 
management. It is difficult to recognize this, however, as a 
distinct economic category or to regard its payment, profits, as 
any unified return. The management of an enterprise would seem 
to fall under the category of labor and the wages of management 
to be indeed but a species of wages. The work of management 
undoubtedly calls for talents of a high order. Such talents may 
be so rare that there is competitive bidding for them, which makes 
the returns received partake of the nature of rent, in the sense 
that a surplus is paid over the cost of furnishing the service. 
Management also bears the risk but this more and more can be 
settled on actuarial basis. It is, moreover, doubtful whether 
taking business as a whole, the payments for risk bearing are 
greater than the losses incurred. There remain residual profits 
and these have been more resorted to by economists as a catch- 
all to accommodate returns which cannot be attributed to land, 
capital, labor, than as a reward for a separate type of service. 
They result from dynamic changes in production which are not 
immediately distributed to the factors and from changes in 
the demand schedules of commodities, which for a space give 
creat rewards to some. They arise from the failure of the fac- 
tors to move with the speed and intelligence which ordi- 
narily ascribed to them by economists. Residual profits, there- 
fore, accrue because of friction and time lags rather than as 
* On this point, see Knight, Risk, Uncertainty and Profit; Hardy, Risk 
and Risk-bearing.