Q.—: Profits (p. 421)

The most powerful impulse to fresh discussion of the nature of profits was given by the late General Walker, in the emphasis laid by him on “the function of the entrepreneur,” and his view that “profits are a species of the same genus as rent,” and “do not form a part of the price of manufactured products”; Edition: current; Page: [995] see his Wages Question (1876), ch. 14, and Political Economy (1883). In this discussion it has become usual to distinguish more sharply than the earlier writers between Interest and “pure” or “net” Profits; and there is now a large literature on both these topics. As to Interest, much influence has been exerted by the doctrine of the Austrian writer, Böhm-Bawerk, which explains interest as “a premium on present as against future things”; see Böhm-Bawerk, Capital and Interest (Eng. trans. 1890), and Positive Theory of Capital (Eng. trans. 1891). Of the writings this has called forth it may be sufficient to refer to Pierson, Principles of Economics (Eng. trans. 1902), part i. ch. 4, § 5, and to Cassel, The Nature and Necessity of Interest (1903).

On Profit, recent writings are largely influenced by the conceptions of (1) a “quasi-rent,” (2) “the marginal entrepreneur,” and (3) “long and short periods.” The present state of the discussion may be seen in Marshall, Principles, bk. vi. chs. 6–8; Clark, Essentials of Economic Theory (1907), pp. 117 seq.; Seager, Introduction to Economics (3rd ed. 1906), ch. 10; and in Conrad's Grundriss, § 84, and Gide's Cours, pp. 674 seq. The treatment of the subject by Schmoller, Grundriss, §§ 231–2 (Principes, vol. iv.), will be found illuminating. The “tendency” of profits and wages to an equality has been commented upon frequently by Cliffe Leslie, as in his articles on The Political Economy of Adam Smith and On the Philosophical Method of Political Economy, reprinted in his Essays (1879).