easily borne loss, if each person carries only one of his own eggs and one belonging to each of the rest, the total to be redistributed at the end of the journey to market or after sale.

:

It is noticeable that in Professor Clark's nomenclature this risk is borne by the capitalist. "The hazard of business falls on the capitalist.' "Business repays men not only for their labours, but their fears." But this repayment is "not a part of mercantile profit" it is realised by the capitalist "as such." Admitting a real remuneration for risk, while giving a different name to the recipient from that which others have preferred, Professor Clark is perhaps not committed to the paradox which Mr. Hawley would affix upon the conception of the entrepreneur with vanishing profits, our fourth species.*

"To eliminate profit, wholly static conditions must be more absolute. . . . There must be a cessation of all variations due to the changeableness of the environment due to fire, lightning, hail. We must imagine industrial society in the static condition as an automatic machine, . . . working without friction in an absolutely unchangeable environment." 1

This idea of perfect tranquillity is certainly inappropriate to the troubled world in which we live. "Things are always finding their level," like a fluctuating and, in nautical phrase," confused" sea. The oscillating character of the waves is quite consistent with a gradual change of level, as when the tide is flowing. It is a legitimate conception, familiar in statistics, to regard a phenomenon as hovering about an average, even though that average is known to be changing. Let the great tidologist calculate the dynamics of the flow, but let him not convey the impression that but for the action of this flow there would be the level of the proverbial mill-pond. Very probably, however, Professor Clark would recognise the continuance of risk not involving secular progress, due to unpredictable weather or credit cycles, for example, but would regard the remuneration for undergoing such risk as accruing to the " capitalist as such" rather than, with Mangoldt and others, as a part of the entrepreneur's gain. With regard to other elements of remuneration it is more doubtful whether Professor Clark would accept Mangoldt's statements as to the permanence of the entrepreneur's gain,-statements which read with their context, and attention being paid to Mangoldt's terminology, deserve much consideration.

* See the appended note (p. 59), referring to the observations on Risk in Mr. Keynes' Probability.

1 Quarterly Journal of Economics, Vol. XV. (1900) p. 91. .

We must suppose the existence of undertaker's gain [Unternehmergewinn],-otherwise what object has the entrepreneur to increase his business? (substance of p. 50).

The undertaker's gain (Unternehmergewinn) is "not simply something transitory," but a "permanent species of income " (p. 51).

"The undertaker's remuneration [Unternehmerlohn] preserves its position, though in a limited form " (p. 105. Cf. p. 169). Perhaps Professor Clark would be satisfied with the "limited form" of the remuneration and the disappearance of certain other elements.

It is always pleasant to believe that one's differences with high authorities are only verbal. This satisfaction may now be enjoyed with respect to M. Walras's doctrine that the entrepreneur makes neither gain nor loss. Professor Pareto 1 has made it clear that, as the object of the entrepreneur is to procure the greatest amount of satisfaction, so his income is not to be considered as nil, in the ordinary sense of the term. Rightly interpreted, the doctrine that "the entrepreneur makes neither gain nor loss," taken in connection with the "coefficients of production," appears to cover all the conditions of equilibrium, both those which are involved in what Cairnes called "industrial competition" and those which would be satisfied even if we made abstraction of the tendency to equal advantages in different occupations.2 But, while we accept the ideas, we are not bound to adhere to the words of a master; and the expression in question may be objected to on several grounds which will repay examination. It is violently contrary to usage; it lends itself to a dangerous equivoque; and it has led distinguished economists to paradoxical conclusions.

No amount of authority and explanation can make it other than a strange use of language to describe a man who is making a large income, and striving to make it larger, as “making neither gain nor loss." There is an oddity about the phrase which recalls the use of "gratis" by Sir Murtagh's lady in Castle Rackrent: "My lady was very charitable in her own way. She had a charity school for poor children where they were taught to read and write gratis, and where they were kept well to spinning gratis for my lady in return."

A more serious objection is that the term "making neither

1 Cours d'Économie Politique, passages referring to "entrepreneur." [But see II. 378 and 469.]

2 Cp. above, p. 18.

gain nor loss" has to be used in two different senses almost in the same breath. It is a sufficiently difficult lesson for the plain man to learn that the maximum of income which the entrepreneur aims at realising is zero. But the difficulty is doubled when he comes to learn-as he must in dealing with a maximum problem that the increment to that income due to the last increment of any factor of production is also zero. There is apt

to arise a confusion between conditions belonging to the total and to the marginal quantity, an ambiguity of a kind which has before now proved detrimental in economics.1 A hasty reader of Professor Walras might suppose that it was intended to affirm that the entrepreneur made neither gain nor loss at the margin: whereas the meaning is, rather, that nothing remains to be distributed-on an average and apart from oscillations— after that the entrepreneur has paid a normal salary to himself.2

The implication that the remuneration of entrepreneur labour may be treated like that of any other labour presents some difficulty. It is the one obscure topic in Professor Barone's brilliant studies on Distribution. His observations deserve to be quoted at some length. He first (in a note on p. 132) announces as true in a particular case, what is here regarded as true in general, that "there must be left to the entrepreneur's profit (profitto dell' impresa) the differentiating character of residual claimant'; and nothing else can be said but that profit is formed by the difference between the entire product and the remunerations of the various factors corresponding to (ragguagliate) their respective marginal productivities." But Professor Barone regards this enunciation as only provisional. He promises to show in a later section that “with the increase in the number of the competing entrepreneurs the profit of the undertaking tends to lose more and more the character of residual claimant, and tends to conform to that of the law of marginal productivity." In the later section he says:—

"If on the market there is only one entrepreneur, Titius, and if he does not monopolise the product, that is, if he in the

1 Mill's hesitation between equal sacrifice and least sacrifice as the criteria of taxation may seem due to a confusion of this kind, as pointed out by the present writer in the ECONOMIC JOURNAL, 1897. (Cp. Mathematical Psychics, p. 118.) Mill's ambiguity had already been noticed by Professor Carver in his article on "The Ethical Basis of Distribution" in the Annals of the American Academy for 1895, p. 95.

2 Cp. Pareto, Cours, Art. 87, "his salary as director of the enterprise being comprised in the expenses of production"; and the similar expressions of Professor Barone, quoted below.

3 Giornale degli Economisti, February, 1896.

management of his business arranges [fa in modo di] to obtain not indeed the greatest monopoly profit, but the greatest profit obtainable in a regime of free competition, his profit will be [a surplus indicated by a figure which is not here reproduced]. But, if there is an entrepreneur Caius capable of entering into competition with the preceding, . . . the profit of Titius will be reduced below what he had when he was alone on the market. And, if there is a third employer also capable of entering into competition with the first two, the profit of Titius will be reduced. still more. The more the number of employers increases, the more there is a necessary tendency to a limiting state in which all the employers who continue to produce have a remuneration which, like that of any other labour, satisfies the condition that the marginal disutility [penosità] of the same labour [medesimo] shall be equal to the marginal utility of the returns which that labour procures, and not more than this. And, since it is this equality which characterises the return to labour, it follows (ne viene) as a legitimate consequence that in this limiting state the remuneration of the entrepreneur may be treated like the remuneration of any other species of labour."

The fact that wages are usually paid in advance is not to the point, as Professor Barone very properly observes. He proceeds :

"These considerations seem to me to prove to demonstration how profound and correct is Walras's conception of an entrepreneur who under the conditions postulated makes neither gain nor loss after having paid himself (or others, it is indifferent which) the remuneration of the labour of direction and conduct of production. And, if it is no wonder that this conception should not be comprehended by economists who have really very vague ideas of quantity, it is absolutely astounding that the conception should have been also made the subject of criticism by other economists to whom the notions of quantity are quite familiar. . . . I frankly must confess myself absolutely incapable of understanding how any difficulty whatever can arise as to the validity [literally, the affirmation] of this conception, which is indeed most simple."

Having called once more attention to the abstract character of the conditions, Professor Barone reiterates:

"In such conditions the law of marginal productivity extends to the remuneration of the entrepreneur; and, after having remunerated all the factors (the work of the entrepreneur included) in proportion to their marginal productivity [with a

?

discount corresponding to the time elapsing between the service and the product], there remains no undistributed residue."

If there could be any doubt about the meaning of this thesis, it would be removed by the unequivocal language of symbols employed in the Appendix,1 where, by way of illustration, the labour of the entrepreneur is expressed by the total number of hours of work that he devotes to the business.

Upon this it may be remarked that the last state of Titius, after Caius and the rest have entered as competitors, seems identical with the case of " extinct " monopoly which was above 2 adduced, in order to exhibit the motives of the entrepreneur. As there appears, both before and after the competitors have entered the remuneration of the entrepreneurs, in Professor Barone's phrase, "satisfies the condition that the marginal disutility of the labour shall be equal to the marginal utility of the return which that labour procures." But neither before nor after the competitors have entered is there any reason for regarding the remuneration of the entrepreneur as the product of the number of doses (e. g. hours worked) and the marginal productivity of a dose (multiplied by a coefficient depending on the length of the productive process 3). It is only with respect to factors of production which are articles of exchange that the proposed law of remuneration, the "law of marginal productivity," is fulfilled in a regime of competition. Thus, in our typical example of black men assisting white men to catch seals, what the black man gets in a perfect market is an amount of seal equal to the number of units of service which he supplies, multiplied by the quantity of seal for the sake of which he is just induced to offer an additional unit of service, the unit employed being a small quantity. Likewise, what the white man gets in exchange is an amount of service equal to the amount of seal which he distributes to the black man, multiplied by the quantity of service for the sake of which he is just induced to offer an additional unit of produce. If the amount of service rendered may be taken as the measure of the black man's labour (or of some other factor of production supplied by him), the proposed law holds good for his share of the distributed produce. But, as the amount of produce given by the white man in exchange for services cannot

1 Loc. cit.

2 Above, p. 19.

3 Cp. note 2 to p. 19 above; but remark that the correction proposed by Professor Barone for the effect of time is not identical with Professor Marshall's accumulation of price.

Above, p. 14.