[1156] “But as it is clearly a surplus, the labour having been previously paid for by average wages, and that surplus the spontaneous gift of nature, we have thought it most convenient to term it rent.” (Quoted by Cannan, Production and Distribution, p. 198.)
[1157] In an article entitled The Source of Business Profit.
[1158] Walker is one of the first of the English-speaking economists to make this distinction and to employ the term “profit” in a narrow sense, distinguishing it from interest on the one hand and wages on the other. He even went so far as to subtract the wages of superintendence and direction because this work of supervision could be delegated to others (Wages Question, 2nd ed., 1891, pp. 230, etc.), while the special function performed by the entrepreneur, namely, the adaptation of supply to demand, requires special remuneration, which he proposes to call profit. It is a little odd that a writer who seemed completely isolated should be shown, after all, to share the views of other economists. Walker declares that save his own father, Amasa Walker, he knew of no economist who had distinguished between capitalist and entrepreneur. But J. B. Say had already made the same distinction, which had been adopted by all Continental economists even as far back as the beginning of the nineteenth century.
[1159] This is how Walker summarises his duties: “To furnish also technical skill, commercial knowledge, and powers of administration; to assume responsibilities and provide against contingencies; to shape and direct production, and to organise and control the industrial machinery.” (The Wages Question, p. 245.)
[1160] Walker, Quarterly Journal of Economics, April 1887, p. 278.
[1161] Hermann, Untersuchungen, p. 206; for J. B. Say cf. supra, [p. 113].
[1162] Pantaleoni (Economia pura, Part III, chap. 4) seems to be the only economist who accepts Walker’s theory without any reservation.
[1163] For his criticism of Walker see the Quarterly Journal of Economics, 1887, p. 479, and the Principles, 4th edition, p. 705, note. In conformity with English tradition, Marshall includes within profits any interest upon such capital as the entrepreneur possesses.
[1164] Pantaleoni makes the same distinction: “Profits,” says he, “may be the result of superior ability acquired either by assiduous study or prolonged preparation. In that case we are dealing, not with a kind of rent, but with a species of profit which may be very remunerative but which is nevertheless amenable to a very different law from that which generally regulates the investment of capital.” (Economia pura, Part III, chap. 4.) On the other hand, Pantaleoni refuses to recognise the existence of an element of insurance against risk as an item in profits, because, as he points out, if the premium has been carefully reckoned up and compared with the risk, “it ought on an average to be equal to it at the end of a certain number of years, so that the net rent would become equal to zero.” (Ibid.)
[1165] Cf. Distribution of Wealth (1899) and Essentials of Economic Theory (1908).