332 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK 
On the assumption that there are in reality but two distinctive 
factors,—namely capital and labor,—and but {wo static incomes, 
namely interest and wages,—Professor Clark employs the prin- 
ciple of marginal productivity to determine each of these incomes 
both directly and differentially. When labor is applied in succes- 
sive units to a fixed amount of capital, the margin for labor 
determines directly the rate of wages and the differential is 
interest “as a whole.” When, on the other hand, capital is 
applied in successive units to a fixed labor force, the margin for 
capital determines directly the rate of interest and the differential 
is wages “as a whole.” While Mr. George, therefore, recognizes 
but a single margin, namely a natural one (connected with land) 
which determines directly both wages and interest and differ- 
entially the rent of land “as a whole”; Professor Clark, on the 
other hand, distinguishes two margins,—namely one for labor 
and another for capital. While with Mr. George, therefore, wages 
and interest must rise or fall together as rent falls or rises; with 
Professor Clark, wages may rise as interest falls and vice versa. 
Although Professor Clark recognizes in static industry but two 
distinctive factors and but two distinctive functional shares, the 
analysis of the business unit by the present writer * distinguishes 
four such factors and four such shares. The Ricardian law of rent 
is here regarded, not as “an obstacle to scientific progress,” but 
rather as the earliest application of a scientific principle which, 
as Professor Clark discovered and expressly says, is capable of 
affording a true theory of distribution. The writer believes that 
this principle, which has served to determine and separately 
identify as a differential the functional share of the landlord, is 
capable of rendering service likewise in determining the functional 
shares, respectively, of the laborer, the capitalist, and the entre- 
preneur.. 
It is clear, then, that the traditional application of the Ricar- 
dian principle, which determines as a differential the landowner’s 
functional share “as a whole,” also determines directly the joint 
product “as a whole” of the three remaining economic factors. 
This has been wrested by organized effort from the best natural 
opportunities which are still free (marginal opportunities). The 
1 “The Entrepreneur-Function in Economic Literature,” Journal of Polit- 
ical Economy, Vol. XXXV (August, 1927, pp. 501-521) ; “The Function of 
the Entrepreneur,” American Economic Review, Vol. XVII, pp. 13-25.