[195-1] At first, usually imperfect enterprises in which the shop-instruments, etc., are kept ready for present orders; and then complete or perfect enterprises. (v. Mangoldt, Volkswirthschaftslehre, 255.)
[195-2] v. Mangoldt, Lehre vom Unternehmergewinn, 1855, 49 ff. The same author shows, in his Volkswirthschaftslehre, that it is better for the general good that the risk should be borne by the producer than by the consumer. In the case of the taking of orders, there is danger only of a technic failure, but in enterprise proper, there is possible also an economic miscarriage of the work, even when successful from a technic point of view. But in the case of the undertaker (man of enterprise), responsibility is much more of an incentive, production much more steady, and therefore much better able to exhaust all means of help. Consumers are much more certain in their steps, as regards price, etc., since they find what they want ready made.
[195-3] Thus John Stuart Mill, Principles, II, ch. 15, 4, teaches with a certain amount of emphasis that the "gross profits of stock" are different not so much in the different branches in which capital is employed, as according to the personal capacity of the capitalist himself or of his agents. There are scarcely two producers who produce at precisely the same cost, even when their products are equal in quality, and equally cheap. Nor are there two who turn over their capital in precisely the same time. These "gross profits" uniformly fall into three classes: reward for abstinence, indemnity for risk, remuneration for the labor and skill required for superintendence. Mill complains that there is in English no expression corresponding to the French profit de l'entrepreneur. [The translator has taken the liberty to use the expression "undertaker's profit," for what the French call the profit de l'entrepreneur, and the Germans Unternehmerlohn, spite of its funereal associations, and because Mill himself employed it, although he recognized that it was not in good usage.—Tr.] (II, ch. 15, 1) Adam Smith had the true doctrine in germ (Wealth of Nat., I, ch. 6), but those who came after him did little to develop it. Compare Ricardo, Principles, ch. 6. 21. Read, Political Economy, 1829, 262 ff., and Senior, Outlines, 130 seq., were the first to divide profit into two parts: interest-rent (Zinsrente) and industrial gain. Similarly, Sismondi, N. P., IV, ch. 6. According to A. Walker, Science of Wealth, 1867, 253, 285, "profits are wages received by the employer."
[195-4] Hufeland, Grundlegung, I, 290 ff.; Schön, Nat-Oek., 87, 112 ff.; Riedel, Nat-Oek., II, 7 ff.; von Thünen, Der isolirte Staat, II, 1 80 ff.; v. Mangoldt, Unternehmergewinn, 34 ff. The latter divides the undertaker's profit (profit de l'entrepreneur) into the following parts:
A. Indemnity for risk. If this be only an indemnity exactly corresponding to the risk, it cannot be looked upon at all as net income, but only as an indemnification for capital. If individual undertakers, favored by fortune, receive a much larger indemnification than is necessary to cover their losses, such indemnification is not income either, but an extraordinary profit not unlike a lottery-gain, unless it be called, perhaps, the reward of extraordinary courage (Eiselen), i. e., wages. If, lastly, the indemnity is uniformly somewhat larger than the risk, in order to compensate for the continual feeling that one is running a risk, it must be remembered that all remuneration for present sacrifice, made directly for the sake of production, is wont to be embraced under the name of wages.
B. Wages and interest for the labor and capital utilized only in one's own production, and which cannot be let. v. Mangoldt himself admits, that, in the long run, only certain qualified labor belongs to this category.
C. Undertaker's rent (Unternekmerrente) depending on the rarity of undertakers (men of enterprise) compared with the demand. This, therefore, is not a third component part, but only one which adds to the other two, Storch, Handbuch, I, 180, and Rau, Lehrbuch, I, § 237 ff., consider the profit of the undertaker as an admixture of wages and interest. Professor J. Miscszewicz has given expression to an interesting thought in opposition to myself: that credit is a fourth factor of production (natural forces, labor and capital being the other three) produced by the three older factors, as capital by the two oldest. The undertaker's profit he then considers the product of this fourth factor, corresponding to rent, interest and wages.
[195-5] Compare Canard, Principes, ch. 3; J. B. Say, Traité, II, ch. 7, Cours pratique, V, 1-2, 7-9, distinguishes three branches of income: rent, interest and the profits of industry; and he divides the latter again into the profits of the savant, the undertaker and workmen, (v. Jacob, Grundsätze der Nat.-Oek., § 292; Lotz, Handbuch, I, 471; Schmalz, Staatswirthschaftslehre, I, 116; Nebenius, Oeff. Credit, I, Aufl., 466.)
[195-6] I need only call attention to the influence that the mere name of a general sometimes exerts over the achievements and sometimes even over the composition of his army (Wallenstein!); and how important it sometimes is to keep his death a secret. And so the mere name of a minister of finance may facilitate loans, etc.
[195-7] It is sufficient to mention the different positions occupied by the shareholders and preferred creditors of a joint-stock company.