334 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK 
the business unit is a fixed amount, and then introduce suc- 
cessively “units of labor,” the principle of diminishing produc- 
tivity would be seen in operation. The increment of product 
resulting from each succeeding unit in the procession would be a 
smaller one, and this would continue until the final unit of labor 
is placed. As Professor Clark says:* 
he law of final productivity applies to every mill, shop, or mine 
eparately considered. If its capital remains fixed in amount, units 
f labor produce less and less as they become more numerous. 
ere we get a glimpse of the varied quality of the eh 
or labor within the business unit, ranging all the way from the 
best, where the product is large, to the poorest, where the product 
s small, or conceivably vanishes altogether. 
‘In the static state that we have assumed, competition works 
ithout let or hindrance,” * and accordingly the marginal oppor- 
unity for equal “units of labor” within the business unit becomes 
djusted. It varies with the relative number of units to be 
laced. Whatever its quality, it is here that labor’s product is 
ree from admixture with other elements. The entire product is 
pecifically labor’s product. This is what determines the rate of 
ages. At the margin all labor is tested. Here lies the best free 
pportunity still open to labor, and likewise the poorest oppor- 
unity that any labor is compelled to accept. Labor here receives 
ts entire product. 
t becomes at once evident, if our analysis is correct, that the 
arger product resulting from “units of labor” placed in the 
imited number of supra-marginal labor opportunities within i 
usiness unit, is not entirely labor’s contribution. It is clearly 
ivided into two parts by the marginal principle. Equal “units 
of labor” are equally productive. Labor’s product in all supra- 
arginal labor opportunities within the business unit is measured 
y what it can produce in a marginal opportunity. The differ- 
ntial is clearly to be attributed to the exceptional quality of the 
portunity in which the labor is placed. 
he logical conclusion follows. In view of the fact that all 
abor opportunities within the business unit are owned by the 
ntrepreneur the differential clearly belongs to him and con- 
titutes his functional share. It thus becomes an item in his 
nctional income,—namely economic profit. The principle of 
Essentials of Economic Theory, 1907, p. 14 
bid., p. 143.