Evidently, this work of the pecuniary magnate bears a great resemblance to the creation of intangible assets under the ordinary competitive system. This is, no doubt, the point of its nearest relation to the current capitalistic enterprise. But, as has already been indicated above, it cannot be said that the magnate's peculiar work is the creation of intangible, or other assets, although there is commonly some recapitalisation involved in his manœuvers, and although his gains commonly come as assets, i.e., in the capitalised form. Nor can it, as has also been indicated above, be said that the wealth which serves him as the means of his peculiar enterprise stands in the relation of assets to this enterprise or to the gains in question, since this wealth already stands in an exhaustive relation as assets to some corporate enterprise in ordinary business and to the corresponding items of interest and dividends. It may, of course, be contended that the present state of things on this higher plane of enterprise is transient and transitional only, and that in the settled condition which may conceivably supervene, the magnate's relation to business at large will be capitalised in some form of intangible assets, after the manner in which the monopoly advantage of an ordinary "trust" is now capitalised. But this is at the best only a surmise, guided by inapplicable generalisations drawn from a past situation in which this higher enterprise has not engrossed the pecuniary initiative and played the ruling part.
FOOTNOTES:
[1] Reprinted by permission from The Quarterly Journal of Economics, Vol. XXIII, Nov., 1908.
[2] See this Journal for August, 1908.
[3] For the connection between prices and prosperity, hard times, unemployment, etc., see The Theory of Business Enterprise, chap. vii (pp. 185-252, especially 196-212).
[4] By "perversion" is here meant such disposition of the industrial forces as entails a net waste or detriment to the community's livelihood.
[5] Should the connection at this point with the main argument of the paper as set forth in the earlier section seem doubtful or obscure, it may be called to mind that these dubious enterprises in dissipation are cases of investment for a profit, and that the "capital goods" engaged are invested wealth yielding an income, but that they yield an income only on the fulfillment of two conditions: (a) the possession and employment of these capital goods enables their holder to turn to account the common stock of technological proficiency, in those bearings in which it may be of use in his enterprise; and (b) the limited amount of wealth available for the purpose enables their holder to "engross" the usufruct of such a fraction of the common stock of technological proficiency, in the degree determined by this limitation of the amount available. In so far, these enterprises are like any other industrial enterprise; but beyond this they have the peculiarity that they do not, or need not, even ostensibly, turn the current knowledge and use of ways and means to "productive" account for the community at large, but simply take their stand on the (institutionally sacred) "accomplished fact" of invested wealth. They have less of the fog of apology about them than the common run of business enterprise.
[6] This statement may not seem clear without indicating in a more concrete manner some terms in which to measure the relative differential advantage and disadvantage which so emerge in such a case of prerogative or privilege. Where, as in the earlier, non-pecuniary phases of culture, no price test is applicable, the statement in the text may be taken to mean that the differential disadvantage at the cost of which the differential benefit in question is gained is greater than the beneficiary would be willing to undergo in order to procure this benefit.
[7] A doubt has been offered as to the applicability of this characterization to such intangible assets as a patent right and other items of the same class. The doubt seems to arise from a misapprehension of the analysis and of its intention. It should be remarked that there is no intention to condemn or disapprove any of the items here spoken of as intangible assets. The patent right may be justifiable or it may not: there is no call to discuss that question here. Other intangible assets are in the same case in this respect.
Further, as to the character of a patent right considered as an asset. The invention or innovation covered by the patent right is a contribution to the common stock of technological proficiency. It may be (immediately) serviceable to the community at large, or it may not;—e.g., a cash register, a bank-check punch, a streetcar fare register; a burglar-proof safe, and the like are of no immediate service to the community at large, but serve only a pecuniary use to their users. But, whether the innovation is useful or not, the patent right, as an asset, has no (immediate) usefulness at large, since its essence is the restriction of the usufruct of the innovation to the patentee. Immediately and directly the patent right must be considered a detriment to the community at large, since its purport is to prevent the community from making use of the patented innovation, whatever may be its ulterior beneficial effects or its ethical justification.