322 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK 
[t remained for Professor John Bates Clark to recognize this 
principle as “a universal law of economic variation,” and to dis- 
cover that the theory of rent is based on a “partial application of 
a comprehensive principle.” In his hands a fuller application 
of the principle to production affords a comprehensive principle of 
distribution,—the marginal productivity principle. The prin- 
ciple, which enabled the classical economists to determine eco- 
nomic rent as a differential, is used by Professor Clark to deter- 
mine the specific contributions of labor and of capital, and to 
formulate economic laws which determine directly the functional 
shares of the capitalist and of the laborer. 
The entrepreneur’s share, on the other hand, is commonly 
described as a “residuum”—what is left—and it belongs to the 
entrepreneur as residuary legatee simply because “it is left.” 
It is given a distinctive name, profit, but it is ascribed to no dis- 
tinctive function which the entrepreneur, and he alone, performs. 
The universal expectation on the part of those who assume the 
role of entrepreneur that there will be something left, after the 
other claimants have received their shares, would seemingly 
indicate one of three things: either, first, that the organized busi- 
ness unit as such is in itself a productive factor, and therefore 
justifies the entrepreneur’s expectation of income, or second, that 
the assumption of the entrepreneur function places the business 
man in a strategic position which enables him “as universal pay- 
master” to exact a toll from the shares of the other claimants, 
and possibly from the consuming public, or finally, that the entre- 
preneur function involves both of the above-mentioned possi- 
bilities. 
The logical inconsistency of the profit-residual theory has been 
noted by Professor Hollander, who at the close of an able and 
suggestive historical and critical review of The Residual Claimant 
Theory of Distribution, says significantly :? 
It thus appears that one last step remains to be taken before eco- 
nomic theory will have completed a full cycle in its development. 
Landlord, capitalist, laborer, and entrepreneur have each in turn been 
elevated to the position of residuary legatee; and landlord, capitalist, 
and laborer have in turn been reduced to the status of coordinate 
claimant. The entrepreneur is now in possession. But, if the progress 
of economic thought affords any instruction, surely the conjecture may 
t “The Residual Claimant Theory of Distribution,” Quarterly Journal of 
Economics, Vol. XVII, p. 279.