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.