A FUNCTIONAL THEORY OF ECONOMIC PROFIT 333 
economic factors involved are owned respectively by the laborer, 
the capitalist, and the entrepreneur. Our immediate problem 
therefore is to “disentangle” this joint product into three func- 
tional shares, namely wages, interest and profit. 
It should be noted, before proceeding with our analysis, that 
organization, which capital at first made a possibility, and finally 
a necessity, appears to be the dominant factor. So essential has 
organization become that labor and capital, if they are to have 
a part in socialized production at all, must find places in organ- 
ized relationship to each other in some business unit. While these 
business units are organized and directed as going concerns by 
labor, they are owned by entrepreneurs. This becomes the central 
fact in our analysis; for it is the property right in the organiza- 
tion as such on which rests both the dominance of the entre- 
preneur in modern industry and his right to a distinctive func- 
tional share of the joint product. 
The business unit may now be characterized as a complex of 
socialized economic opportunities for portions of capital and for 
portions of labor. These organization opportunities may be 
designated, for lack of a better term, as “artificial,” in order to 
distinguish them from natural opportunities (those connected 
with land). These opportunities, whether for portions of labor 
or for portions of capital, are evidently varied in quality. 
Diversity in the quality of the organization opportunities in which 
separate “units of labor” and separate “units of capital” must be 
placed for effective team work is an attribute of the very nature 
of organization. There are “many members, but one body.” 
This diversity of opportunity may be brought into clearer per- 
spective by application of the principle of diminishing produc- 
tivity. 
At this point in our analysis it should be noted, for the sake of 
clearness, that the business unit, viewed as a complex of economic 
opportunities, comprises in static industry two distinct, though 
interrelated, groups of such opportunities. These may be desig- 
nated respectively as the labor-group and the capital-group. 
“Units of labor” introduced into the business unit would be placed 
in opportunities for labor, and correspondingly “units of capital” 
into those for capital. 
To proceed now with our analysis, if we assume, as does Pro- 
fessor Clark, that the capital at the disposal of the organizer of