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 discover
 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 principle,
 which enabled the classical economists to determine economic
 rent as a differential, is used by Professor Clark to determine
 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 distinctive
 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 business
 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 paymaster”
 to exact a toll from the shares of the other claimants,
and possibly from the consuming public, or finally, that the entrepreneur
 function involves both of the above-mentioned possibilities.

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 economic
 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.