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

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.

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