Economic essays

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Monograph

Identifikator:: 1753623200

URN:: urn:nbn:de:zbw-retromon-136107

Document type:: Monograph

Title:: Economic essays

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1927

Scope:: viii, 368 S.; Ill., graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Document type:: Monograph

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Title:: The enterpreneur and the supply of capital / George E. Barnett

Collection:: Economics Books

16 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK who raised the question whether the term “profit” should not be applied to the combination of wages of management and interest, leaving the “mere labor” of employing capital to be remunerated by wages. “This would make it necessary to subdivide capital- ists into two classes, the inactive and the active: the first receiv- ing mere interest, the second obtaining profit.” * The chief illus- tration which he used was that of a bill broker making £4,000 a year net by employing £400,000 of other people’s money. He decides on the whole that “the inconveniences occasioned by a departure from an established nomenclature and an established classification are so great that we do not think that they will be compensated by the nearer approach to precision.” The con- ception of the identity of capitalist and undertaker persisted.” IT By the latter part of the nineteenth century, banking and other credit facilities had increased so greatly that a large part of the capital used in industry and commerce was borrowed capital. From 1851 to 1872, according to the best available estimates, the loans and discounts of English banks doubled. A similar expan- sion occurred in the United States. Freedom of incorporation had been obtained in both countries. The scale on which industry and commerce was carried on was as yet relatively small. The proportion of fixed capital to circulating capital was in most industries low. Under these conditions, the possessor of business ability was able to secure funds for the conduct of business on the basis of managerial ability.* 1 Senior, N. W., Political Economy, 1854, p. 133. It is interesting to note that the term “active” capitalist occurs twice in economic theory. Senior, as indicated above, uses it in the sense of a capitalist who receives more than ordinary interest and wages by reason of his skill and intelligence. Professor F. A. Fetter defines active capitalists as “risk takers getting non-contractual capital-incomes, whom we call enterprisers” (Fetter, F. A, Economic Principles, Vol. 1, p. 319). 2 J. S. Mill says, “The control of the operations of industry usually belongs to the person who supplies the whole or the greatest part of the funds by which they are carried on. . . .” (Principles, 5th ed., 1868, p. 496.) 3 As early as 1870 in the introductory chapter of Lombard Street, Bagehot said, “English trade is carried on upon borrowed capital to an extent of which few foreigners have an idea, and none of our ancestors could have conceived. In every district small traders have arisen who discount their bills largely, and with the capital so borrowed harass and press upon the old capitalist. . . . In modern English business, owing to the certainty of obtaining loans on discount of bills or otherwise at a moderate rate of interest, there is steady bounty on trading with borrowed capital, and a constant discouragement to confine yourself solely or mainly to your own capital.”

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