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

Structure type:: Chapter

Title:: A functional theory of economic profit / Charles A. Tuttle

Collection:: Economics Books

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.

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