Economic essays

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

Collection:: Economics Books

A FUNCTIONAL THEORY OF ECONOMIC PROFIT 323 be hazarded that his tenure is limited, and that the theory of profit will eventually be coordinated with the general principle of distri- bution to which it now forms a nominal but illogical exception. It may be added that the task which the writer of this paper has set himself is to present a functional theory of profit which shall coordinate with the marginal productivity principle of distribution. It frequently occurs, in the current literature of the theory of distribution, that the writer, apparently without being conscious of it, shifts his point of view when he turns to take up the subject of economic profit. The shares of the landlord, the laborer, and the capitalist have been treated, perhaps, theoretically as eco- nomic shares, determined by a single principle, rather than prac- tically as contract shares determined by bargaining with the employer; when, however, the consideration of the entrepreneur’s share is reached, the theoretical standpoint is unconsciously abandoned for the practical. The result is not a functional theory of economic profit, coordinating with the functional theories of economic rent, wages, and interest, but, rather, an explanation of the nature and sources of the employer’s income under actual conditions. This income is represented as practically determined, at least partially, in a negative way by skillful bar- gaining with the landlord, the capitalist, and the laborer. Professor Carver's treatment of profit, in his work on The Distribution of Wealth, affords an illustration in point. The laws of economic rent, wages, and interest are based by Professor Carver upon the principle of marginal productivity,—“a part of the general law of diminishing returns.” * This principle theo- retically determines the marginal products respectively of land, of labor, and of capital, and, accordingly, eliminates “profits altogether by including all incomes under the other three heads.” * “But,” continues Professor Carver, now abandoning the theoretical for the practical point of view, “this would not be quite true for several reasons.” His explanation follows:® Si) In the first place, the actual amounts which the business man pays for the hire of these agents of production are only approximately equal to their marginal products, and the closeness of that approxi- ' The Distribution of Wealth, p. 220. * Ibid. p. 259. Ibid., pp. 259-262.

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